Limited Slashes Profit Forecast, Agrees to Sell Express Unit
Limited Brands slashed its profit forecast for the first quarter of 2007 and full year and announced plans to sell a majority interest in its Express clothing unit and explore strategic options for its Limited Stores apparel chain.
Shares of Limited , which were halted for trading ahead of the announcement, fell sharply after trading resumed.
The company, based in Columbus, Ohio, cut its first-quarter earnings forecast to between 12 cents and 14 cents a share, below its intitial expectation for profits of 25 cents to 28 cents and the 25 cents it earned last year. The decline was driven by lower-than-anticipated sales and merchandise margins at each of its brands, particularly Victoria's Secret, the company said.
Limited now expects 2007 earnings of $1.55 a share to $1.65 a share, down from its initial guidance of $1.75 to $1.90. The estimate doesn't include any impact from the Express transaction or potential options for Limited Stores, the company said in a press release.
The retailer said it would sell a 67% stake in Express to affiliates of Golden Gate Capital for $548 million in cash. The company estimated that after-tax proceeds will approximate $425 million. Bank of America Securities advised the company on the transaction, which is expected to close by July 6.
"Our strategic agenda focuses on growth in the intimate apparel, and personal care and beauty segments of our business," said Leslie H. Wexner, the company's chief executive officer, in a statement. "The new ownership structure for Express will provide it with the resources, leadership focus and capital to maximize its potential."
Wexner also said that the company intends to return excess cash to shareholders and will aso perform a complete review of its expenses "with a view to a resizing and realignment that is appropriate for the size and complexity of our new enterprise structure."
Jay Margolis will serve as Express' chief executive officer. The unit, which has 631 stores and had net sales of $1.7 billion in 2006, will continue to operate under the same brand name.
The company said it didn't set a timetable for reviewing its options for the Limited chain, which has 253 store locations and had net sales of $493 million in 2006.
The company will release its first-quarter results on May 23 after the market close.