LIMITED BRANDS - Inc.2003: Dustin Nadeau, Donatas Sumyla, David Deprey and Jaime Rodriguez
Bus 411, April 2006 LIMITED BRANDS - Inc. 2003 Case-Study Overview: Case-Study Overview Existing Condition
Limited Brands overview
History, Key Facts, Goals and Objectives and Stock Information
Limited Brands Proposed Vision and Mission
External opportunities and threats
Internal strengths and weaknesses
Grand Strategy Matrix
Possible strategies: Matrix Analysis
Long-term and short-term Actions
Limited Brands Overview : 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
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)
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 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:
Re-visioned the business
Sorted the portfolio of businesses, and
Re-thought its talent
Now they are:
Turning to offense, and
Applying its specialty retailing skills to deliver high-value, branded, consumer packaged goods through channels of distribution it controls – stores and direct.
Limited Brands Overview Key facts (2003): 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: 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: 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: Our Brands Slide11: Victoria's Secret Stores
Victoria's Secret Direct
Victoria's Secret Beauty Slide12: 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: 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”
- 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: 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
LB owns 51% with Japanese cosmetics company Shiseido
The product line consists
of different beauty products Support Businesses: 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: Limited Brands, Inc. Stock (LTD) Information
S&P 1500 Super Comp
Company Type - Public (NYSE: LTD)
Fiscal Year-End – January
First IPO: 47,600 stocks @ $7.25 (1969)
Shares Outstanding: 523M (2003)
Dec. 2003: 18$
April 20th 2006: 25$
Stock Price Performance: Stock Price Performance Industry Overview: Outlet Centers: 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.
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: Stock Info compared to Industry Compare to Industry (Nov 2002): Compare to Industry (Nov 2002) Annual Report Statements: 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: Leslie Wexner, CEO and Chairman Goals & Objectives: 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: 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
Company Values: 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: 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: External Opportunities and Threats
Current 31M of people ages 12-19 is expected to increase to a record 34M by 2010
Teens ages 12-19 spent approx. $200B in 2002 with 1/3 of this spending in fashion
Female baby boomers needs are not fully satisfied by retailers and manufacturers of women’s apparel
General e-commerce sales were up 25% in 2002 with spending at $35.9B, which indicates that shoppers are willing to make purchases online
Increase in time-conscious type of online consumers because of busy lifestyles
Increasing acceptance of the casual workplace trend
Federal tax cuts might encourage more consumer spending
Increase Internet advertising and sales THREATS:
Large numbers of female baby boomer consumers began staying away from the stores entirely or purchasing fewer clothing items because of lack of products offered
Female baby boomers place retirement savings, college tuition, and mortgages at a higher priority than spending on apparel
Slow U.S. economy growth in 2003
Household debt increase to $9B by fall 2003
The gap between rich and poor continues to grow
Industry is risky because in order to gain competitive advantage you may have to take gambles (prediction of future trends)
Competitive sector nationally, regionally, and locally represented by the department and specialty stores and mail-order catalogue businesses
Disruption of foreign suppliers
Increasing transportation cost caused by escalating fuel prices EFE Matrix: EFE Matrix 2006 Annual ranking of America's largest corporations: Specialty Retailers: 2006 Annual ranking of America's largest corporations: Specialty Retailers Direct Competitors Comparison (2006): 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): Competitive Profile Matrix (CPM) Internal strengths and weaknesses: Internal strengths and weaknesses STRENGTHS:
Defined company philosophy which implies continuous innovations
Strong brand recognition
Victoria’s Secret performance
Healthy financial position
Flexible changing strategies
Fast adaptation to emergent trends, markets, and environments
Brand building as a model
Location of distribution center
Effective computerized system WEAKNESSES:
Increased debt results in lower profits and decline in cash flow
Reduce in selling square footage of Apparel business group
Large amount of suppliers (2,500) which means difficulties to ensure consistent quality and time of delivery
Uncertainty of consumer acceptance of the Company’s products
Reliance on foreign sources of production
Locating stores in close proximity in malls IFE Matrix: IFE Matrix Key Ratios Evolution (1999-2003): Key Ratios Evolution (1999-2003) Overall Key Ratios (2006) : Overall Key Ratios (2006) SWOT Analysis: SWOT Analysis SPACE Matrix: SPACE Matrix * Y axis: - Financial Strength: +6
- Environmental Stability: -2 => Y coordinate: STRATEGY: AGRESSIVE
* X axis: - Competitive Advantage: - 4 => X coordinate:
- Industry Strength: + 5 * Y axis: - Financial Strength: +6
- Environmental Stability: -2 => Y coordinate: STRATEGY: AGRESSIVE
* X axis: - Competitive Advantage: - 4 => X coordinate:
- Industry Strength: + 5 BCG Matrix : BCG Matrix Cash-Cow Stars Dogs Question marks IE Matrix: IE Matrix The Grand Strategy Matrix: The Grand Strategy Matrix Potential Strategies:
Matrix Analysis: Matrix Analysis QSPM: QSPM Decisions: Decisions Primary: Long-term Divestiture of the Apparel business group
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?: 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: 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: Evaluations Apparel’s quarterly financial reports
Sales and profits reports based on individual Apparel stores
Frequent divestiture management team’s meetings
Annual survey to assure our brand image is not damaged Update: 2004-2006: 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
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.
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: 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.limitedbrands (Investor Relations)
Strategic Management Concepts and Cases; Fred R. David, 10th Ed.
Thank you!: Thank you! Questions?