Victoria's Secret is Limited's crown jewel. The store chain has a strong brand with celebrity exposure, it operates in the extremely high margin lingerie business, and it sports an economic moat for its trouble. Victoria's Secret should continue to be a prototypical brand as LTD looks to expand its offerings with new store concepts. The decision to sell off the namesake Limited store chain was a big message that LTD management is less concerned with convention than they are with performance -- investors should be very happy about that.
It doesn't hurt that management and investors are one in the same. Founder Leslie Wexner and his wife Abigail own a massive chunk of outstanding shares, keeping incentives skewed towards owners over than management. With LTD trading at a substantial discount to the rest of the sector right now, this stock looks like a solid retail opportunity this month...
Bed Bath & Beyond
Last up is Bed Bath & Beyond (BBBY - Get Report), another name that's trading at a considerable discount to the retail sector as a whole right now. BBBY spent most of the last two years rallying, only to get a couple of major price haircuts earlier this year on guidance updates. While those declines were rough, they also over-corrected for the multi-year climb that shares had been enjoying. As a result, this stock looks like a bargain with a price-to-earnings ratio of 13 -- and a forward P/E that's teetering on the edge of single digits.Bed Bath & Beyond's namesake housewares stores sport a nice balance between luxury spending on kegerators and massage chairs and non-discretionary spending on sheets, pots, and pans. Newer store concepts like Buy Buy Baby and Christmas Tree Shops are expanding the firm's core focus, and they provide one of the biggest opportunities for top line expansion right now. One of the most impressive things about BBBY is the fact that it's managed to build its 1,000-store empire with no debt. Instead, the firm has historically used its own cash to build new stores, a strategy that avoided the super-expansionary downfall of many rivals during the recession and left the company with a spotless balance sheet. As a result, BBBY has the ability to generate a mountain of cash just by cutting down on CapEx for a while. That cash machine should help cut any concerns that investors have about this stock's next rally leg.
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