Limited's Diet Plan Slow to Take Shape

Limited (LTD Quote) is shrinking, but it still has a ways to go.

The apparel retailer agreed Tuesday to sell its women's clothing chain Lane Bryant as part of an ongoing effort to whittle its focus down to a handful of core brands. Analysts like the trend but say Limited needs to do more, quickly to focus on its winning properties.

Limited said Tuesday that it sold the 653-store Lane Bryant chain to Charming Shoppes (CHRS Quote), a specialty retailer based in Bensalem, Pa., which operates the Fashion Bug chain, for $280 million in cash and $55 million in stock.

Limited has seen its shares stagnate as it struggles with falling same-store sales. For some time, analysts have said the company, based in Columbus, Ohio, needs to focus on fewer brands. Limited is a majority shareholder in Intimate Brands (IBI Quote), the parent of Victoria's Secret, and operates more than 2,700 clothing stores under the names Express, Lerner New York, Limited Stores, Structure and Henri Bendel.

Shares in Limited, which are down about 10% on the year, dropped a penny to $15.73, while Charming Shoppes gained 35 cents to $6.21.

"Although longtime Limited bulls will be encouraged by these further restructuring initiatives and could push the stock up a point or so due to the increasing likelihood that further restructuring efforts will follow, we do not believe it is worth buying," wrote Jefferies analyst Donald Trott in a research note published Tuesday. (Trott kept his hold rating on the stock, and his firm does not have an underwriting relationship with the company).

Another analyst, Janet Kloppenburg at Robertson Stephens, kept her market perform rating -- which in analyst lingo means don't buy the stock -- but said that further deals could make the stock attractive.

"Longer term, as Limited's sale or spinoff of noncore divisions enables the company to post improved profitability in the core apparel and Intimate Brands businesses, we could become constructive on the stock," she writes. (Her firm doesn't have a banking relationship with Limited.)

The company began the year by reporting disappointing same-store sales during the key holiday season, followed by the exit of the top executive at men's chain Structure. In February, the company announced a host of initiatives, including executive changes, its intention to shed Lane Bryant and the decision to fold Structure into Express to create to one store for both men and women, as opposed to selling Structure, which many analysts had predicted would happen.

"It's all part of making Express a bigger and better brand," says Anthony Hebron, a spokesman at Limited.

Investors, however, are reserving judgment.