In Focus

Profiting On Panties?!

For me, one of the most enjoyable aspects of investing is at the very beginning, finding prospective stocks to research. What could be better than having the mall as your laboratory? It's so simple - I just open my eyes and the whole world seems to be one big stock supermarket. Once I begin the research, I inevitably learn something about a company that I already know and love. Now I have so much more to talk about at kiddie birthday parties than just potty training and preschools!

Let's use Victoria's Secret as an example. I'm lovin' this company right now (or I should say my husband is!). After being pregnant or nursing for the better part of the past three years, I have finally replaced all of my nursing bras and stretched out underwear. Yes, I was too cheap to buy more than 2 pairs of maternity underpants. (Uh oh. I hope Soap Opera Digest doesn't print that!) Now don't get me wrong, I'm no sex kitten. Are you kidding? With a double A chest? My point being that this company seems to have something for everybody and every body. If you're not interested in their lingerie, you could simply wear their sexy scents! For my birthday, I received their pear-scented bath products. incredible! Shopping there is easy too. If you'd like to be a bit more discreet when you buy the leopard-print teddy, you can shop online at www.VictoriasSecret.com or through their oh-so-famous Victoria's Secret Catalogue. It mails out more than 350 million copies, though I must admit, I think my husband spends more time looking through it than I do.

I discovered that Victoria's Secret is a publicly traded company under the name Intimate Brands Inc. (NYSE: IBI). My first surprise was that not only does IBI have 894 Victoria's Secret stores, but they also own 1250 Bath & Body Works (another store I frequent!) and the White Barn Candle Co. which was launched in October, 1999. They are the largest retailer of lingerie and bath products. We Chicks like those top dogs! The even bigger surprise is the fact that Intimate Brands is 84.2% owned by Limited Inc. (another publicly traded company, NYSE: LTD). That's a pretty major stake! Now, any mall-going Chick has to be familiar with that company. But did ya know that not only does LTD own their namesake stores, but also Express (a cool place to shop as of late), Lerner New York, Lane Bryant and Structure. And get this, in the past several years, Limited has sold or spun off stakes in Brylane Inc., Too Inc. (as in Limited Too for the young, hip Chicks!), Abercrombie and Fitch Co. and, of course, Intimate Brands. See what ya learn when you do just a little investigating?

At this point, I feel as though my cup runneth over with "buy what ya know" possibilities. And to think it all started with my affection for my new cotton briefs! I still need to run those good ole numbers, though. What can I say? I may be an actress, but I scored higher in math than English on my SATs. I just love simple equations that you can plug into a calculator! Their numbers aren't quite as beautiful as their models, but close. I don't know why I should be surprised. After all, when the Victoria Secret website was launched, orders came in from 37 countries, in the first six hours! This puppy is global! They sport a gross margin of 39%, and a net margin of 8.7%. As with so many other companies I investigate, their cash vs. long term debt ratio is lower than we'd like. They have .18 as much cash as they do debt. Although this ratio isn't great, they're certainly handling their cash flow quite well with a flow ratio of 1.00.

One reason I can think of for the low funds of is due to their Fashion Show Webcast earlier this year from Cannes, France. The show cost $10 million dollars to produce, but keep in mind it was the most watched fashion show in history -- with more than two million viewers. This year's show boasted fewer technical glitches than last year's and featured online shopping on the same screen. In fact, in the 60 days following the webcast, 4 million people were reported to have visited the site. I'd sure love to know the gender ratio, wouldn't you?

Recently, the company has relaunched their highly successful lingerie collection, Body by Victoria, featuring a new strapless bra (I must get one!). It has been the strongest launch results in brand history. not only lifting ta-tas, but earnings as well! They have also experienced a huge response to their Dream Angels prestige fragrance collection. (Not sure I can get into this one, but I'm sure the men go out and buy it for their sweeties after seeing the commercial!) Which brings me to another point: brand awareness. Just ask your husband if he's ever even heard of Olga or Maidenform. And for what other company would he happily carry around a pink and white pinstriped shopping bag? With the recent arrival of Gap Body, it'll be interesting how the competition plays out. Personally, I don't think Victoria's Secret needs to worry. But then again, since we Chicks already own the Gap, perhaps I should hope otherwise!

I'm not sure if IBI is yet a contender for the Chicks' portfolio. Although their stock has other little perks, such as the fact that they pay a dividend and have a direct investment program called appropriately, the IBInvest Direct Online Stock Purchase Program. In sum, I really like this company, but I'll pose one nagging question. If you like Victoria's Secret (IBI) and you like the Limited (LTD) and its subsidiaries, why not just buy shares in LTD since they have a 84.2% stake in IBI? That way, in effect, you can really own both for the price of one. What can I say? I'm a Chick always looking for a bargain!