Victoria's Sexy Secret
Andrés is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Limited Brands (NYSE: LTD) is the parent company of brands like Victoria's Secret and Bath & Body Works among others. The company has a very interesting brand position, and management has been able to deliver solid results through different economic scenarios. Rising dividends, strong operating performance and a very influential brand are some of the aspects that make this company worth some attention from long-term investors looking for a position in specialty retailers.
Limited Brands is showing some positive trends in comparable store sales, something that cannot be said about most specialty retailers. Comparable store sales for fiscal 2011 climbed 10%, and both January and February of 2012 are showing a strong performance with comparable stores sales increases of 9% and 8%, respectively. This data is much better than what other companies in the industry have reported, and it reflects positively on the company's marketing strategy and brand differentiation.
Victoria's Secret is the main brand for the company, making approximately 70% of sales. This concept has been working pretty well through the years, and has a very strong positioning. Victoria's Secret offers products with different styles and a considerable variety of price tags, so it works for an ample spectrum of women from different socioeconomic backgrounds and with different ages, body sizes and personal styles.
The company's pink line, targeted toward younger women, competes against brands like Aerie from American Eagle (NYSE: AEO) or Gilly Hicks from Abercrombie (NYSE: ANF). The Gap (NYSE: GPS) competes in the low-price segment, but doesn't have the same differentiated image as the other companies. Among adult women, however, Victoria's Secret holds a unique position.
American Eagle has done quite a good job with Aerie, focusing on a style that is more on the sweet side and not as sexy as Victoria's Secret -- the company has gained some traction in intimate apparel for young women. Abercrombie and The Gap really don´t seem to be strong enough to compete -- both companies have seen dismal sales in the last months and their brand power has been eroding lately.
The fact that Victoria's Secret is a widely accepted brand also helps men when trying to buy something for their partners. If you know a certain brand has considerable acceptance among women, you have already solved a big part of the problem. Speaking about men and Victoria's Secret, I bet complaints about excessive shopping are more much more frequent in other items than in intimate apparel.
Limited Brands has a very solid long term track record through different economic scenarios. The company managed to report positive results in years like 2009 in which many specialty retailers suffered through the recession. The company increased dividends in the last quarter by a 25% and currently yields above 2.1% in. The US markets may be a bit saturated, but there are many opportunities for international expansion left.
Everybody loves Victoria's Secret products; maybe this stock should get some love too.
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