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Limited Shedding Its Clothes

The retailer slashes guidance and says it will sell a majority stake in Express and potentially Limited.
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Updated from 3:51 p.m. EDT

Limited Brands

(LTD)

reached a deal to sell a majority stake in its Express apparel brand and said it is exploring options for its Limited women's clothing chain.

The Columbus, Ohio, retailer also slashed its first-quarter earnings estimate, citing weak sales and lower margins. Shares slid 4.5% Tuesday to close at $26.18.

Limited plans to sell 67% of Express to Golden Gate Capital for $548 million. With the move to sell Express and potentially Limited, the company would be left to focus on its Victoria's Secret lingerie brand and its Bath and Body Works beauty business.

"The new Limited Brands will look much different," Martyn Redgrave, chief administrative officer and executive vice president, said in a prerecorded message about the move. "Virtually all our revenue will be generated from our highly profitable, high-return intimate apparel and personal care and beauty businesses."

The company also said it has no timetable on completing the exploration of strategic options for the Limited chain, which like Express has been hit by ongoing sales declines. A sale or spinoff of the chains has been frequently circulated on Wall Street

as a possibility.

Express, a trendy mall-based chain, had 2006 sales of $1.7 billion, and it currently has 631 locations. Limited, meanwhile, had sales of $493 million in the latest fiscal year, with 253 locations.

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Redgrave said the company is still seeking to take advantage of the growth of Express through the remaining stake. He said Limited is "encouraged by the progress and improved performance of Express."

Limited previously was the parent to several apparel chains that have since been spun off, including

Abercrombie

(ANF) - Get Abercrombie & Fitch Co. Class A Report

and the company now known as

Tween Brands

(TWB)

.

While the company will now have a new focus on Victoria's Secret, Limited may be having having trouble with that chain as well. Limited said it now expects earnings of 12 cents to 14 cents a share for the first quarter, well below its prior view of 25 cents to 28 cents. The company attributed the guidance cut to lower-than-anticipated sales and merchandise margins at each of its brands, particularly Victoria's Secret.

Analysts polled by Thomson Financial expected earnings of 22 cents a share for the quarter.

The company also said these trends will continue in the second quarter, and it forecast EPS of 20 cents to 24 cents for the period. Wall Street expected earnings of 29 cents a share.