LIMITED BRANDS INC. $26 (New York symbol LTD; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 400.0 million; Market cap: $10.4 billion; WSSF Rating: Average) operates around 3,800 stores in three main groups: apparel (The Limited, Express and Henri Bendel); lingerie (Victoria’s Secret and La Senza); and personal care products (Bath & Body Works and White Barn Candle Co.).

In the past few years, most of the company’s growth has come from its specialty operations. In fact, these businesses now account for 80% of the company’s sales, while traditional apparel provides the other 20%.

The company recently reorganized its apparel operations to focus on younger shoppers. This strategy seems to be working. In its first fiscal quarter ended May 5, 2007, same-store sales at the apparel chains rose 5% compared with just a 1% gain in the year-earlier quarter. Same-store sales rose 2% at Victoria’s Secret (compared with an 8% gain a year earlier), and 5% at Bath & Body Works (compared with a 4% gain a year earlier).

Limited Brands has now agreed to sell 67% of its Express chain for $548 million ($425 million after-tax) to private investors. To put that in perspective, it earned $0.13 a share (total $52.9 million) in the three months ended May 5, 2007.

The company is also considering selling its Limited stores. These sales would let Limited Brands focus on improving profits at its lingerie and bath products operations, which face less competition from large department stores. These businesses are also less sensitive to fickle fashion trends.

The stock dropped after the company cut its profit forecast for fiscal 2008, from $1.82 a share to $1.60. It now trades at 16.3 times the new estimate.

Limited Brands could make little progress in the next few months while it restructures its remaining businesses. But the company has a long history of expanding sales per store. The $0.60 dividend seems safe, and yields 2.3%.

Limited Brands is a buy.