Limited Brands to sell most of Express

Limited Brands Inc. took steps Tuesday to shed its underperforming apparel brands and instead focus on what most of its customers want -- sexy undergarments and bath and beauty products.

The company said it planned to sell 67% of its Express stores to San Francisco-based private equity firm Golden Gate Capital for $548 million and sharply cut its earnings estimates for the first quarter and full year.

Limited Brands said it would focus on maximizing its two best-performing names -- Victoria’s Secret and Bath & Body Works. It also said it would explore strategic options for its Limited Stores unit.

The news, announced during regular trading, sent its shares down 4.5%, or $1.23, to $26.18.

The company best known for the Victoria’s Secret lingerie chain said after-tax cash proceeds from the deal, expected to close no later than July 6, would be about $425 million. That includes a $117-million debt-financed dividend from Express.

“This is good for investors,” Morningstar analyst Brady Lemos said. “Apparel has been a major drag on the business for quite a while, and there was really no growth opportunity left.”

Speculation about a possible sale of Limited’s apparel brands has been rampant on Wall Street for several months, sending the company’s shares up nearly 8% since mid-March.

A sale would allow Limited to focus its resources on its Victoria’s Secret and Bath & Body Works chains, which account for nearly $8 billion in annual sales, or about 70% of the company’s total.

The apparel brands, by contrast, have been dogged by intense competition and eroding store traffic.

Limited’s apparel business includes 658 Express stores and 260 Limited stores. The company has been closing poorly performing apparel stores and converting Express stores to offer apparel for both men and women.

Over the last decade, Columbus, Ohio-based Limited Brands has sold other apparel brands, including Abercrombie & Fitch, Tween Brands and Lane Bryant, to focus on its more profitable lingerie and personal care and beauty businesses.

The company is growing its Pink brand within Victoria’s Secret, and last year acquired the La Senza lingerie chain.

Limited cut its first-quarter earnings forecast to a range of 12 to 14 cents a share, below a forecast given in February of 25 to 28 cents. The outlook was cut because of disappointing sales and merchandise profit margins at each of the company’s brands, particularly Victoria’s Secret.