Edit Metric
|
||||||||||||||||||||
Details
|
||||||||||||||
Limited Brands (LTD)Stock (Consumer Products Industry, Retail Industry, Apparel Stores Industry, Fashion Industry Industry)
 Limited Brands (NYSE: LTD) is one of the largest specialty retailers in the United States, operating 2,926 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 80% of the company's $10.1 billion of net sales in fiscal 2007.[2] The U.S. economy's struggles worked against Limited's selling efforts in 2007; net sales fell 5% from 2006, and comparable store sales decreased 2%.[3] In 2007 Limited Brands divested 75% of its ownership interest in its two apparel brands: Express and The Limited.[4] These two brands accounted for 21% of net sales in 2006, but earned just a 1.2% operating margin.[5] Divesting these two under-performing brands will allow the company to focus on its higher margin Bath & Body Works and Victoria's Secret labels. In the U.S. the company is hoping to grow Victoria's Secret direct sales (through online and catalog orders) while emphasizing the popular Pink line by increasing floor space at its retail stores.[6] Meanwhile, it is expanding its international reach with the acquisition of Canadian retailer La Senza and the opening of Bath & Body Works stores in Canada in fiscal 2008.[7][8] Outside of Canada the company is researching potential markets in Europe and Japan.[9][10] However, long-term growth plans have been trimmed since the subprime lending crisis in the summer of 2007 and the ensuing credit crunch have made financing expansion more difficult and helped stifle consumer spending. Same store sales company-wide fell 2% in 2007[11] and continued to fall in early 2008, decreasing 8% through the first quarter of 2008, 6% in May 2008, 19% in June 2008 and 7% in July 2008 across all the company's operations.[12][13][14]
[edit] Business OverviewLimited Brands owns and operates several retail chains: Victoria's Secret, Bath & Body Works, C.O. Bigelow, White Barn Candle Co. and La Senza. In 2007 Limited Brands divested 75% of its ownership interest in its Apparel business which included the Express and The Limited retail chains. In FY07 net sales fell 5% to $10.1 billion from the $10.6 billion peak achieved in 2006.[15] The company has a fairly high gross margin for retail, 35.0% in 2007 which was down from a high of 37.6% in 2006. However, SG&A expenses decreased in 2007, a result of lower incentive compensation and marketing expenditures, keeping the company's operating margin constant at 11.0% in 2006 and 2007.[16] 
[edit] Victoria's Secret (55% of Sales, 70% of Operating Income)The Victoria's Secret segment includes results from Victoria's Secret stores and online operations as well as operations of the La Senza brand.
 [edit] Bath & Body Works (25% of Sales, 30% of Operating Income)
[edit] Other (12% of Sales, -23% of Operating Income)The Other segment includes results from corporate functions, Mast (an apparel importer that is a primary supplier of Victoria's Secret), 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. [edit] Henri BendelHenri Bendel is an upscale brand founded in 1896 and later acquired by the Limited Brands. There are a total of two stores (one in Manhattan and one in Columbus, Ohio) which sell personal care products, clothing, and accessories at a higher price point. Net sales for the two Henri Bendel stores totaled $42 million for 2006 and same store sales grew 2% in 2007[23]. Limited Brands plans on opening 3 new Henri Bendel stores in 2008[24], but long-term expansion for Henri Bendel is uncertain, as its product line is sold in established Bath & Body Works stores. [edit] Divestiture of Apparel BusinessIn 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. The company 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.[25] The company 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)".[26] [edit] Trends and Forces[edit] International Expansion: Looking for Growth Opportunities AbroadAs 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. At the end of the first quarter of 2008, Limited Brands operated 318 La Senza locations and plans on expanding that number to 326 by the end of the year.[27] The company's expansion abroad will continue with the launch of Bath & Body Works in Canada in 2008, with 6 locations scheduled to open by the end of FY08 and another 4 scheduled for the spring of 2009.[28] Through the La Senza brand and the first 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, the company 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.[29][30] [edit] Weakness in Domestic Economy Hurting SalesAfter the subprime lending crisis in the summer of 2007 the macroeconomy in the U.S. has exhibited weak performance, and as such consumers have cut back on their discretionary spending, particularly on non-necessity goods. Both Victoria's Secret and Bath & Body Works sell products to consumers that are mostly frivolous fashion and beauty items that are subject to being cut out of consumers' spending habits during times of economic distress. Due to the economic uncertainty in the U.S. consumers have shied away from the Limited Brands' stores as same store sales fell 2% company-wide in 2007. Limited Brands' struggle has continued in the first quarter of 2008 as same store sales fell 7% and 11% at Victoria's Secret and Bath & Body Works, respectively, to result in an 8% decline in company-wide same store sales. The outlook for the economy is still uncertain and it is unlikely that consumer spending will pick up, and subsequently sales of lingerie and beauty care products, until the picture brightens. [edit] Expanding Offerings at Victoria's Secret: Pink, Swimwear and VSXAs the number one lingerie brand in the U.S., Limited Brands is trying to increase sales at Victoria's Secret by branching out from the brand's traditional comfort zone with new lines:
[edit] CompetitionDue 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 to 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 their retail chains like 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 515 stores in 14 countries throughout the world, with about 126 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: As well as other retailers of lingerie:
Victoria's Secret, specifically the Pink line, also faces competition from up-and-coming lingerie and loungewear brands: The Bath & Body Works segment competes with a variety of retailers, from cosmetics boutiques to candle shops and home and bath care retailers:
 Limited Brands2004 Data 2005 Data 2006 Data 2007 Data 2008 Data Most Recent Data Available [edit] References
|
The Shelf
|
Edit
History
Bookmark
