Limited Brands (LTD) is in the market today issuing $750MM of guaranteed senior unsecured debt in 10-year and 12-year maturities. The use of proceeds (emphasis mine):
We intend to use the net proceeds of the offering, after deducting underwriting discounts and commission and estimated offering expenses, for share repurchases and general corporate purposes, including capital expenditures and dividends.
Recall that December 1, 2011, the company paid a special dividend of $2/sh or $615MM.
Reach back a year earlier and on November 17, 2010, the company announced that its Board of Directors has declared a special dividend of $3 per share and has authorized a $200 million share repurchase program.
And a little further back on March 15, 2010, the company announced that its Board of Directors has declared a special dividend of $1 per share and has authorized a $200 million share repurchase program.
This leads me to believe that the company is going to announce a special dividend and increase the share repurchases. It doesn't hurt that CEO Les Wexner owns 53.2 million shares, which is a 16.5 percent stake in the company, and makes him the largest shareholder.
This comes on top of the same-store sales release today stating:
The company reported a comparable store sales increase of 7 percent for the fourth quarter ended Jan. 28, 2012, compared to the fourth quarter ended Jan. 29, 2011. The company reported net sales of $3.515 billion for the fourth quarter ended Jan. 28, 2012, compared to sales of $3.456 billion last year.
The company reported a comparable store sales increase of 10 percent for the 52 weeks ended Jan. 28, 2012, compared to the 52 weeks ended Jan. 29, 2011. The company reported net sales of $10.364 billion for the 52 weeks ended Jan. 28, 2012, compared to sales of $9.613 billion last year.
Again going back to the December 1 release:
Returning value to our shareholders is paramount for us. Our earnings growth and disciplined management of the business have resulted in significant free cash flow and a very strong cash and liquidity position. Going forward, we are confident in the growth opportunities for our business, which will allow us to continue to return excess cash to shareholders through a combination of ongoing regular dividends, share repurchases and special dividends.
After today's release and saying earnings will be near the top end of the forecast range, the company seems confident that it will continue to grow cash flow and earnings. Look for the special dividend and continued growth. While the P/E of 15x is not cheap, the growth and potential special dividend make this company sexy.
Disclosure: I am long LTD.