Motley Fool  Sep 1  Comment 
Despite strong revenue growth, L Brands stock tanked after the company's recent earnings release. Here’s why the bears are right.
Motley Fool  Aug 29  Comment 
The Victoria’s Secret parent company could be a classic dividend trap.
Yahoo  Aug 25  Comment 
L Brands' Victoria's Secret is breaking its brand image and losing pricing power, according to Jefferies. Pink is now more promotional than core Victoria's Secret. Victoria's Secret owner L Brands is breaking its brand image by selling cheap...
Benzinga  Aug 24  Comment 
Victoria’s Secret's struggles continue to make L Brands (NYSE: LB) a wait-and-see story, according to Morgan Stanley.  The Analyst  Morgan Stanley’s Kimberly Greenberger downgraded L Brands from Overweight to Equal-Weight...
Channel News Asia  Aug 23  Comment 
Shares of L Brands Inc hit their seven-year low on Thursday after the parent of Victoria's Secret cut its full-year earnings forecast, blaming falling demand for its Pink line of lingerie.
Clusterstock  Aug 23  Comment 
L Brands beat on both the top and bottom lines. The retailer cut its full-year guidance for a second time this year. The CEO of Victoria's Secret Pink will retire and be replaced by a leader from Bath & Body Works. Shares are down 9% in...
MarketWatch  Aug 22  Comment 
Shares of L Brands Inc. fell 4% in the extended session Wednesday after the parent company of Victoria's Secret, Bath & Body Works and other brands reported second-quarter earnings above expectations but cut its profit outlook for the year. L...
Clusterstock  Aug 21  Comment 
Victoria's Secret is losing an estimated $800 million in profits, according to  RBC Capital Markets analyst Brian  Tunick. Wall Street appears to be assigning "little to negative value" to the franchise, he said.  Bath & Body Works...
Clusterstock  Aug 20  Comment 
L Brands' Victoria's Secret is breaking its brand image and losing pricing power, according to Jefferies. Pink is now more promotional than core Victoria's Secret. Watch L Brands trade in real-time here. Victoria's Secret owner L...


Limited Brands (NYSE: LTD) is one of the largest specialty retailers in the United States, operating 2,968 stores throughout North America.[1] Two well-known brands, Bath & Body Works and Victoria's Secret, are LTD's strongest businesses, bringing in a total of 84% of LTD's net sales.[2]

LTD is expanding its international reach with the acquisition of Canadian retailer La Senza and the opening of Bath & Body Works and Victoria Secret stores in Canada. Outside of Canada LTD is researching potential markets in Europe and Japan.[3][4] Bath & Body Works, one of the main revenue sources for Limited, is also exploring an industry trend of "ethical skin care." This means there is a surging popularity of products that claim to have not been animal-tested and contains sustainable materials. This moral component to the products serve as an extra incentive to consumers, which is very important now that customers are more reluctant to shop than they have been previously.

Business Overview

Business Growth

FY 2010 Results (ended January 29, 2011)

  • Net income increased 79.6% to $805 million.
  • Revenue increased 11.4% to $9.61 billion.

Business Segments

Limited Brands currently reports sales through three segments: Victoria's Secret, Bath & Body Works and Other.

Victoria's Secret (62% of Net Sales, 67% of Operating Income[5])

The Victoria's Secret segment includes results from Victoria's Secret stores and online operations as well as operations of the La Senza brand.

  • Victoria's Secret is best known for its lingerie and also for the models and fashion shows that exhibit this underwear. The brand also sells women's clothing, fragrances, and other personal care and beauty products. Victoria's Secret products are purchased primarily through retail stores, online, and through the Victoria's Secret catalog. [6]
  • La Senza was the number one lingerie brand in Canada when it was acquired by Limited Brands in January 2007. La Senza is now a brand sold in Victoria's Secret store in addition to standalone La Senza stores.[7] With the acquisition of La Senza, Limited Brands hopes to gain valuable experience with international retailing in the lingerie and beauty care market which will help LTD expand further internationally.

Bath & Body Works (27% of Net Sales, 41% of Operating Income[8])

  • Bath & Body Works is a popular retail store selling personal care and beauty products such as lotions, fragrances, and hair products, as well as home accessories. Bath & Body Works also operates C.O. Bigelow and White Barn Candle Company stores and sells products from these two brands in B&BW locations stores as well. C.O. Bigelow's personal care products are very similar to those of Bath & Body Works but are marketed primarily through a quaint, upscale "apothecary" brand image. White Barn Candle Co., on the other hand, focuses more on home accessories, such as fragrance candles and room sprays. Merchandise from Henri Bendel, another one of Limited Brands' holdings, is also sold here.

Other (11% of Net Sales, -8% of Operating Income [9])

The Other segment includes results from corporate functions, Mast (an apparel production and sourcing company that serves Victoria's Secret, La Senza and third-party customers), Beauty Avenues (a personal care sourcing company serving both Victoria's Secret and Bath & Body Works) and Henri Bendel. Henri Bendel is the only component of the Other segment that operates its own stores.

Henri Bendel

Henri Bendel is an upscale brand founded in 1896 and later acquired by the Limited Brands. These stores sell personal care products and accessories at a higher price point. Bendel used to sell apparel as well but due to slumping sales Limited has decided to end the apparel business and focus on accesories.

Divestiture of Apparel Business

In the summer of 2007, Limited Brands shed its underperforming women's and men's apparel businesses, Express and The Limited,, selling each brand to a different private equity firm, in order to focus more on its higher-profit Victoria's Secret and Bath & Body Works chains. LTD gained $302 million from the sale of Express to Golden Gate Capital, while it lost $72 million on the sale of The Limited to Sun Capital Partners.[10] LTD divested 75% of its ownership interest in each of the two brands, meaning that it still owns 25% of each brands and thus reports results from the two brands as "Other Income (Loss)".[11]

Trends and Forces

International Expansion: Looking for Growth Opportunities Abroad

As the Victoria's Secret and Bath & Body Works reach their full potential in the U.S. market, Limited Brands is eyeing international expansion for their two major brands. This process began with the acquisition of La Senza, a specialty lingerie retailer based in Canada. La Senza is now a part of the Victoria's Secret business, with branded merchandise shared between stores in the U.S. and Canada. [12]. LTD's expansion abroad continued with the launch of Bath & Body Works in Canada and franchise locations in the Middle East.[12] Through the La Senza brand and the Canadian Bath & Body Works stores, Limited Brands plans on gaining experience and knowledge in the retailing market abroad, which will help it in its efforts to expand into other international markets. Apart from Canada, it is currently researching other international markets, including Europe and Japan, and looking for partners with experience in these markets to join in launching the Victoria's Secret and Bath & Body Works brands abroad.[13][14]

Bath & Body Works Caters to "Ethical Skin Care"

Individuals and entire corporations have become more conscious of the effects the products they use and produce have on the environment at large and there is an increased focus on sustainable materials and products that have not been tested on animals. In addition to environmental consciousness, more products are being formulated without potentially harmful ingredients such as parabens and petroleum. This trend of "ethical products" presents a new marketing opportunity for cosmetics and skin care companies. Consumers like feeling that they are helping the environment and promoting sustainable resources. Originally the domain of niche brands, ethical, fair-trade products have become more popular in lines such as Clarins, Bath & Body Works and Jack Black.[15] Bath & Body Works is one retailer that has taken advantage of ethical products by making the idea part of its ethos. LTD does not test its products on animals and uses natural ingredients such as jojoba and tea tree oil, avoiding synthetic products.

Increases in Commodity Prices Will Raise Clothing Retailer Prices

Cotton consumption exceeded cotton production for the fifth year in the row, making cotton prices increase by 80.5% from last year.[16] [17] Natural disasters also severely damaged crops in many large cotton producer countries, such as China, India, and Pakistan. This led to decreases in cotton exports from these countries and increases in cotton imports as these countries sought to supplement their supply of cotton. [18][19] With limited cotton supplies and rising prices, retailers will either have to absorb these higher material costs, restructure the composition of their clothing to have less cotton, or pass these higher costs to its consumers. Higher clothing prices or lower quality clothing could discourage consumer spending, resulting in decreased net sales. However, adult or teen clothing retailers may not be too adversely affected as their clothing (which is usually 30-40% cotton based) has more flexibility in their composition and thus, costs. In addition, raising commodity prices in other areas will also raise costs for retailers. While premium price and established brands may be able to pass their higher costs to their consumers, value based companies may not fare as well and may suffer from lower profit margins.[16]


Due to the diversity of its holdings, Limited Brands competes with a variety of other retailers and fashion companies. Few companies own brands and operations in both lingerie/intimate apparel and home and beauty care retailing, but one such competitor exists in luxury conglomerate LVMH Moet Hennessy L.V. (LVMUY), which has operations in wines and other alcoholic drinks, apparel, cosmetics, retailing, and jewelry. LVMH Moet Hennessy L.V. (LVMUY) is primarily a source of competition for Limited Brands because it owns fashion lines such as DKNY that compete with Victoria's Secret as well as the beauty care chain Sephora which competes with Bath & Body Works. However, it is difficult to compare Limited Brands to LVMH Moet Hennessy L.V. (LVMUY) because the former doesn't break out their sales for their fashion lines and retail chains, such as Sephora. Sephora is a beauty-retail chain that sells both third-party and private label brands of beauty care products ranging from makeup and haircare to bath products. Sephora operates over 986 stores in 23 countries throughout the world as of 2010, with 254 of those stores in North America, making its retail footprint significantly smaller than Limited Brands' Bath & Body Works brand.

Beyond LVMH Moet Hennessy L.V. (LVMUY) each of Limited Brands' major operations competes with other apparel and retail companies.

In the Victoria's Secret brand Limited Brands owns the leading brand of lingerie in the U.S. Competitors include:

Companies that produce other brands of lingerie:

  • Hanesbrands (HBI) owns brands such as Hanes, Wonderbra and Playtex. Though the company is primarily focused on undergarments, it does own apparel brands Champion and Outer Banks, which serve both men and women and offer casual and business apparel respectively. Hanesbrands sells mostly women's underwear though Hanes caters to men and women. Also, Hanesbrands is not in the cosmetics or skincare industries. HBI is a manufacturer and wholesaler of apparel--it's goods are sold in department stores such as Macy's Inc. (M) and J.C. Penney (JCP), opening it up to a wider customer base than Victoria's Secret.

Victoria's Secret, specifically the Pink line, also faces competition from up-and-coming lingerie and loungewear brands:

  • American Eagles' Aerie was opened in 2006, and since then the brand has grown from 3 to 137 in 2010 . The rapid growth, especially during a recession, is evidence of Aerie's appeal amongst consumers. However, it is still a new brand and thus much smaller than Limited Brands. In addition, since it is still new not much can be said of the line's staying power, although signs so far are optimistic.
  • Abercrombie's Gilly Hicks is another relatively new underwear line geared towards young women. At the end of fiscal 2010, Gilly Hicks had only 16 operating stores, though the line also has a website. As with Aerie, Gilly Hicks' relative newness in relation to competitor Victoria's Secret makes comparisons difficult, however Gilly Hicks has demonstrated staying power. It's revenues increased from $230 thousand in 2007 to $17 million in 2008 and $26 million in 2009. In addition, it can take advantage of Abercrombie & Fitch's already strong brand image and attract consumers who already shop at A & F.

The Bath & Body Works segment competes with a variety of retailers, from cosmetics boutiques to candle shops and home and bath care retailers:


  1. https://materials.proxyvote.com/Approved/532716/20110328/CMBO_86861/HTML2/limited_brands-2011_0119.htm
  2. LTD 2009 Annual Report p.56
  3. Limited Brands (LTD) First Quarter 2008 Financial Packet
  4. Limited Brands, Inc. 1Q08 (Qtr End 5/3/08) Earnings Call Transcript
  5. LTD 2009 Annual Report p.24
  6. LTD 2009 Annual Report p.24
  7. LTD 2009 Annual Report p.2
  8. LTD 2009 Annual Report p.24
  9. LTD 2009 Annual Report p.24
  10. Limited Brands (LTD) Annual Report 2007
  11. Limited Brands (LTD) Annual Report 2007
  12. 12.0 12.1 https://materials.proxyvote.com/Approved/532716/20110328/CMBO_86861/HTML2/limited_brands-2011_0103.htm
  13. Limited Brands (LTD) First Quarter 2008 Financial Packet
  14. Limited Brands, Inc. 1Q08 (Qtr End 5/3/08) Earnings Call Transcript
  15. “Extreme ethical” emerges as new cosmetics trend
  16. 16.0 16.1 http://seekingalpha.com/article/238731-more-evidence-of-inflation-retailers-report-escalating-commodity-prices
  17. Gap, Wal-Mart Clothing Costs Rise on ‘Terrifying’ Cotton Prices
  18. http://www.thegovmonitor.com/world_news/asia/recession-drought-hail-reduce-cotton-acreage-in-china-12256.html
  19. CNN Money - Cotton Shortage Could Inflate Clothing Prices
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