[Financial analysis of Victoria's Secret Brand]

by

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Limited Brands

Introduction

Formerly called 'The Limited", Limited Brands operates more than 3,700 stores in the United States (Limited Brands Annual Report 2004). Its apparel segment includes The Limited Stores and Express. Its intimate products business, Victoria's Secret (lingerie stores, catalogs and online business), accounts for more than half of the company's revenues. Its personal care product business includes Bath & Body Works, Henri Bendel (also sells apparel) and White Barn Candle Co. (candles and fragrances). The company also encompasses a wholly-owned subsidiary, apparel maker Mast Industries. Limited Brands is closely controlled by founder and Chief Executive Officer Leslie Wexner, whose family owns about 17% of the company (Hoover's Online).

The company is currently organized into three groups: apparel, which includes Express and The Limited Stores; beauty and personal care, which includes Bath & Body Works; and lingerie, which includes Victoria's Secret.

Victoria's Secret is a company American who designs lingerie and other products of beauty women. In the year 2005 the company achieved sales revenue of more than 2,400 million dollars through its 900 stores in the United States.

Some of its LTD's brands include Victoria's Secret in the lingerie business and Bath & Body Works in the personal care segment. Despite fewer promotional discounts than offered in Y 2009, Limited reported a 10% Y-Y increase in comparable store sales during Q-3 in Y 2010, that trend continued into November.

Business Growth

Financial Year 2010 Results (ended January 29, 2011)

Net income increased 79.6% to $805 million.

Revenue increased 11.4% to $9.61 billion.

Key Financials

(In USD as of 07/30/2011)

Income Statement

Revenue

10,114m

Net Income

910m

EPS from Continuing Operations

2.77

EPS - Net Income - Diluted

2.77

Revenue per Share

33.16

Balance Sheet

Total Assets

6,500m

Total Liabilities

5,875m

Shareholders' Equity

625m

Total Assets per Share

21.59

Net Assets per Share

2.08

Cash Flows

Cash from Operations

1,323m

Cash from Investing

-166m

Cash from Financing

-1,428m

Capital Expenditures

326m

Cash Flow per Share

4.20

Company Financials

Ratios

Exchange rate used is that of the Year End reported date

Profitability Ratios

01/29/2011

01/30/2010

ROA % (Net)

11.85

6.35

ROE % (Net)

44.12

22.15

ROI % (Operating)

28.96

17.8

EBITDA Margin %

19.18

14.63

Calculated Tax Rate %

35.65

31.51

Revenue per Employee

99,890

93,982

Liquidity Ratios

01/29/2011

01/30/2010

Quick Ratio

0.9

1.52

Current Ratio

1.72

2.46

Net Current Assets % TA

16.87

26.88

Debt Management

01/29/2011

01/30/2010

LT Debt to Equity

1.7

1.25

Total Debt to Equity

1.7

1.25

Interest Coverage

6.23

3.66

Asset Management

01/29/2011

01/30/2010

Total Asset Turnover

1.42

1.22

Receivables Turnover

42.75

38.05

Inventory Turnover

5.78

5.05

Accounts Payable Turnover

18.66

17.63

Accrued Expenses Turnover

25.91

25.88

Property Plant & Equip Turnover

5.78

4.74

Cash & Equivalents Turnover

6.57

5.82

Per Share

01/29/2011

01/30/2010

Cash Flow per Share

3.99

3.66

Book Value per Share

4.6

6.76

Victoria's Secret a Large Driver

On the heels of a steady decline in Victoria's Secret US store revenue per square foot (RPSF) between 2006 and 2009, we project a 7% increase in 2010 and a nearly 3% annual growth rate between 2010 and 2013. Should increased consumer spending spur a 5% RPSF growth rate, there could be 2.5% upside to our $30.63 price estimate, still leaving the stock below market ...