LIMITED BRANDS - Inc.

2003
Dustin Nadeau, Donatas Sumyla,
David Deprey and Jaime Rodriguez
Bus 411, April 2006
 Case-Study Overview
• Existing Condition • Analysis
– Limited Brands overview – SWOT Matrix
– Industry overview – SPACE
• History, Key Facts, Goals and – BCG
Objectives and Stock Information
• Limited Brands Proposed Vision – IE matrix
and Mission – Grand Strategy Matrix
• External opportunities and threats – QSPM
– CPM • Possible strategies: Matrix
– EFE Analysis
• Financial Ratios • Decisions
• Internal strengths and – Strategic implementation
weaknesses
– IFE – Long-term and short-term
Actions
• Evaluation Procedure
• Current Update
 Limited Brands Overview
• Founded in 1963 by Leslie H. Wexner, Limited Brands, Inc. is a
specialty retail business in the U.S.
• Headquartered in Columbus, Ohio
• Sells women’s intimate apparel, personal care and beauty
products, and women’s and men’s apparel
• 3 segments:
– Victoria’s Secret (women’s intimate and other apparel,
beauty products, and accessories through retail stores,
catalogue, and e-commerce)
– Bath & Body Works (personal, care, beauty, and home
fragrance products)
– Apparel
• Express stores, which offer women’s and men’s apparel,
sportswear, and accessories
• Limited stores, a mall-based specialty store retailer of
sportswear for women
Limited Brands Overview
 Limited Brands Overview
• Limited Brands is committed to building a family of the world’s best brands
to create sustained growth of shareholder value by focusing its time, talent,
and capital on the highest return opportunities.
• At first - a multi-divisional, largely apparel-based, popular-priced retailer
• Over the past ten years Limited brands has reinvented itself completely,
becoming a predominantly a personal care, beauty and lingerie company
(Victoria’s Secret and Bath & Body Works)
• Limited Brands in the past has:
1. Re-visioned the business
2. Sorted the portfolio of businesses, and
3. Re-thought its talent
• Now they are:
1. Turning to offense, and
2. Applying its specialty retailing skills to deliver high-value, branded, consumer
packaged goods through channels of distribution it controls – stores and direct.
 Key facts (2003)
• Sector: Services
• Industry: Apparel Stores
• Full Time Employees: 18,000 (2002)
• 3,911 Stores (2003)
• Net sales 2003 $8.934M
• Operating income $963M
 History
• 1963 The Limited opens its first store in Kingsdale Mall in Columbus, Ohio
• 1969 The Limited's first public stock offering is issued over-the-counter.
47,600 shares are offered at $7.25 per share
• 1982 Victoria's Secret store and catalogue are purchased for $1 million.
• 1985 One Henri Bendel store is acquired for $10M
• 1988 25 Abercrombie & Fitch stores and one catalogue are acquired for $46
million
• 1990 Bath & Body Works opens first store in Boston.
• 1995 Initial Public Offering of Intimate Brands, Inc. establishes it as a fully
independent company.
• 1998 50 Bath & Body Works Home stores are converted to The White Barn
Candle Co. stores to begin a home fragrance brand test.
• 1998 The Limited, Inc. completes split-off of Abercrombie & Fitch.
Victoria's Secret launches e-commerce site www.victoriassecret.com
which has been profitable since day one.
• 1999 The White Barn Candle Co. is launched by raising an old-fashioned
barn in New York City's Bryant Park.
 History
• 2000 Intimate Beauty Corporation and Shiseido Co., Ltd. form joint venture
to develop, market and sell new lines of prestige beauty products for sale in
free-standing stores.

• 2001 Sale of Lane Bryant

Integration of Structure into the Express brand as Express Men’s

• 2002 Recombination of Intimate Brands and The Limited, Inc.

The Limited, Inc. changes name to Limited Brands to further
emphasize the Company’s commitment to building a family of the world’s
best fashion brands
Sale of Lerner New York/New York & Company

• 2003 Sales of remaining interest in Alliance Data Systems

Named the world's most admired specialty retailer by FORTUNE
magazine
Our Brands
• Victoria's Secret Stores
• Victoria's Secret Direct
(Catalogue/E-commerce)
• Victoria's Secret Beauty
• First six stores opened in 1990
• Remodeled in 2002 (wood shelving, red-
checked fabric, country atmosphere)
• Website launched in 2002
(www.BathandBodyWorks.com)
• Two new brands in 2003 - "Aromatherapy"
and "True Blue Spa"
• 1,639 stores
 Apparel Division
Limited Stores
– Flagship division of the organization
– No online presence (351 stores)
– Focuses on fashion-conscious women who want a “sexy,
sophisticated style”
Express Stores
- Offers cutting-edge style
- Still making the transition to a dual-
gender brand through remodeling
- 1,031 stores are located primarily in
shopping malls
 Other Retail Businesses
• Henri Bendel
– Offers the best in clothing and accessories from international
designers
– Products for “higher income 30-something women”
– The only upscale LB store

• aura science
– LB owns 51% with Japanese cosmetics company
Shiseido
– The product line consists
of different beauty products
 Support Businesses
• Limited Logistics Services
• Limited Real Estate
• Limited Design Services
• Limited Brand and Creative Services
• Limited Technology Services
• Mast Industries
Limited Brands, Inc. Stock (LTD)
Information
• Index Membership:
– S&P 100
– S&P 500
– S&P 1500 Super Comp
• Company Type - Public (NYSE: LTD)
• Fiscal Year-End – January
• First IPO: 47,600 stocks @ $7.25 (1969)
• Shares Outstanding: 523M (2003)
• Stock Price:
– Dec. 2003: 18$
– April 20th 2006: 25$
Stock Price Performance
 Industry Overview:
Outlet Centers
• The world's largest owner and operator of outlet centers is
Baltimore-based Prime Retail Inc. With 50 centers in 26 states, the
company operates outlet shopping space of nearly 14 million
square feet.
• Among the most significant finding is the identification of this market
as the fastest-growing segment of the retail industry.
• Nation's outlet centers generates close to $ 500 million in sales tax
revenues every year.
• 65 percent of outlet shoppers are married and 74 percent are
female.
• Baby boomers, ranging in age from 25 to 54, make up a large
percentage of outlet center shoppers.
• Outlet shoppers:
– 60 percent, report household income between $ 25,000 and $ 75,000
– 23 percent report incomes of less than $ 25,000
– 16 percent boasted incomes of more than $ 75,000.
Stock Info compared to Industry
Compare to Industry (Nov 2002)
 Annual Report Statements
“Our brands are about innovation - about
next.”
Les Wexner (2002 Annual Report)
“With every major initiative, I ask myself the
same question: ‘Is the light worth the
candle?’ That is, are the potential rewards
commensurate with the effort? Across a
number of significant efforts this year, the
light was very bright indeed.”
Les Wexner (2003 Annual Report)
Leslie Wexner, CEO and Chairman
 Goals & Objectives

• Aggressively sort our portfolio and

financially restructure our business
through spins, splits, sell-offs, and store
closings
• With obtained cash from above actions,
continue building our brand recognition
• Our principle goal – increase shareholders
value through a family of the world’s best
fashion brands
 Vision Statement
• Build a “family of the world’s best fashion
brands” (Book, 2004)
• To build a Company of powerful and
differentiated retail brands that maintain
and strengthen our position
as the world’s dominant
specialty retailer
(Website, 2006)
 Company Values
What are the four company values?
– Doing What is Right
for associates, customers and investors
– Being Inclusive
in our thoughts and behaviors
– Working for the Greater Good
of the enterprise and the communities in
which we operate
– Pursuing Excellence
in all we do
 Mission Statement
• Create sustained growth of shareholder value by
focusing its time, talent, and capital on the
highest return opportunities (Book, 2004)
• Limited Brands is committed to building a family
of the world's best fashion brands
offering captivating customer
experiences that drive long-term
loyalty and deliver sustained
growth for our shareholders
(Website, 2006)
 External Opportunities and
Threats
OPPORTUNITIES: THREATS:
- Current 31M of people ages 12-19 is expected - Large numbers of female baby boomer
to increase to a record 34M by 2010 consumers began staying away from the stores
- Teens ages 12-19 spent approx. $200B in entirely or purchasing fewer clothing items
2002 with 1/3 of this spending in fashion because of lack of products offered
- Female baby boomers needs are not fully - Female baby boomers place retirement
satisfied by retailers and manufacturers of savings, college tuition, and mortgages at a
women’s apparel higher priority than spending on apparel
- General e-commerce sales were up 25% in - Slow U.S. economy growth in 2003
2002 with spending at $35.9B, which indicates - Household debt increase to $9B by fall 2003
that shoppers are willing to make purchases - The gap between rich and poor continues to
online grow
- Increase in time-conscious type of online - Industry is risky because in order to gain
consumers because of busy lifestyles competitive advantage you may have to take
- Increasing acceptance of the casual workplace gambles (prediction of future trends)
trend - Competitive sector nationally, regionally, and
- Federal tax cuts might encourage more locally represented by the department and
consumer spending specialty stores and mail-order catalogue
-Increase Internet advertising and sales businesses
-Disruption of foreign suppliers
-Increasing transportation cost caused by
escalating fuel prices
EFE Matrix
2006 Annual ranking of America's
largest corporations:
Specialty Retailers
Direct Competitors Comparison
(2006)

LTD = Limited Brands Inc

GPS = Gap Inc.
TJX = TJX Companies Inc.
Industry = Apparel Stores (Source: http://finance.yahoo.com)
Competitive Profile Matrix (CPM)
 Internal strengths and weaknesses
STRENGTHS: WEAKNESSES:
• Defined company philosophy • Increased debt results in lower
which implies continuous profits and decline in cash flow
innovations • Reduce in selling square footage
• Strong brand recognition of Apparel business group
• Victoria’s Secret performance • Large amount of suppliers (2,500)
which means difficulties to ensure
• Healthy financial position consistent quality and time of
• Flexible changing strategies delivery
• Fast adaptation to emergent • Uncertainty of consumer
trends, markets, and acceptance of the Company’s
environments products
• Brand building as a model • Reliance on foreign sources of
• Location of distribution center production
• Locating stores in close proximity
• Effective computerized system in malls
IFE Matrix
Key Ratios Evolution
(1999-2003)
Overall Key Ratios (2006)
SWOT Analysis
 SPACE Matrix
* Y axis: - Financial Strength: +6
- Environmental Stability: -2 => Y coordinate: STRATEGY:
STRATEGY: AGRESSIVE
AGRESSIVE
* X axis: - Competitive Advantage: -4 => X coordinate:
- Industry Strength: +5
 BCG Matrix

Victoria's Secret
BCG MATRIX Bath & Body Works
40

Industry Sales Growth Rate (%) (Y)

Stars Question marks
30

20

10

0
1 0.8 0.6 0.4 0.2 0
-10

-20

-30
Cash-Cow Dogs
-40

Relative Market Share (X)

IE Matrix
The Grand Strategy Matrix

Potential
Strategies:
Market development
Market penetration
Product development
Horizontal integration
Divestiture
Matrix Analysis
QSPM
 Decisions

• Primary: Long-term Divestiture of the

Apparel business group
• Alternative:
– Horizontal Integration by acquiring small and
emerging competitors in the lingerie and body
care areas
– Product development by introducing new
product lines based on best categories’
performance
 Why Divestiture?
• Competition is fierce
• Industry is risky
• Our top two business groups show
significantly better annual results and are
gaining larger market share
• Apparel segment does not fit with the
company’s philosophy
 Implementation
Actions:
– Short term: First year
• Shut down unprofitable Apparel stores
• Establish closing-down sales in order to get rid of inventory
• Use earned cash for product development and horizontal integration
• Open up to 15 new Victoria’s Secrets and Bath & Body Works stores in most
profitable areas
• Establish a management team which will focus especially on tracing the
divestiture process
• Provide precise information to the media, stockholders, and customers with
the reasons of our decision and future procedures
– Long-term: Next 5 years
• Look for potential buyers
• Contact specialized companies which would professionally manage the
divestiture process
• Use the generated cash to decrease debt and to carry out further
investments
 Evaluations
• Apparel’s quarterly financial reports
• Sales and profits reports based on individual
Apparel stores
• Frequent divestiture management team’s meetings
• Evaluation reports
• Annual survey to assure our brand image is not
damaged
 Update: 2004-2006
• 2004
– Predominantly became a personal care, beauty, and lingerie company, over 70%
of sales from these areas (Victoria’s Secret and Bath and Body Works)
– C.O. Bigelow rapidly becoming known as, “The best specialty beauty store in the
world.”
– Victoria’s total U.S. sales is almost as large as the entire lingerie market 10 years
ago.
– Victoria has 5 of the top 20 prestige women’s fragrances sold in the U.S.
– New division of Victoria is introduced, “PINK.” Will become the second largest
lingerie brand in the U.S., behind Victoria’s
• 2005:
– Reorganization into three business groups: lingerie, beauty and personal care,
and apparel.
– Victoria’s introduces IPEX wireless bra which is claimed to be the most
supportive ever, provides the most coverage, and minimal padding.
• 2006
– Bath and Body Works is now open 24/7 to suit all of their customers’ needs.
– Introduced the Infinity Edge push up bra which has become the most comfortable
push up bra offered.
 References
• http://finance.yahoo.com
• Limited Brands Inc. Annual Reports
• Annual ranking of America's largest corporations, Magazine: Fortune 500
(2006): cnn.money.com
• www.hoovers.com
• www.bigcharts.com
• www.limitedbrands (Investor Relations)
• www.businessweek.com
• Strategic Management Concepts and Cases; Fred R. David, 10th Ed.
 Thank you!
• Questions?
• Comments?