Cramer Spoke Too Soon on Limited

On today’s STOP TRADING on CNBC, Jim Cramer said that Limited (LTD-NYSE) will go up.  The CEO doesn’t rest on his laurels and that could be a $30.00 play.  He thinks there is value to unlock.  He spoke before he got to really look at the news.  Shares are down 5% at $26.00 on the day.  The company is unlocking shareholder value, but it also issued a warning.

Limited has re-opened after announcing its news: The company is selling 67% of the ownership in its Express brand for some $548 million, with total after tax cash proceeds coming in at $425 million.  It is exploring strategic alternatives for its Limited Stores business.  These bits of news would have been welcomed on their own, but the company warned on earnings as well: The Company stated that it now expects 2007 first quarter earnings to be $0.12 to $0.14, versus its initial guidance of $0.25 to $0.28, and $0.25 last year and therefore estimates 2007 second quarter earnings per share to be $0.20 to $0.24 compared to $0.28 per share last year.  For the full year 2007, the Company now expects earnings per share of $1.55 to $1.65, versus its initial guidance of $1.75 to $1.90.  Most of this is being blamed on weakness at Victoria’s Secret.

Cramer might be right longer-term, but he didn’t anticipate that earnings warning.  Making a call before you know what the news is just proved yet again to be a dangerous game.  The good news is that shares were halted so there was no way those comments could have impacted traders.  This is part of the problem in believing that all "unlocking value" is without risks.

Jon C. Ogg
May 15, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.