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Limited Brands Presentation Limited Brands Presentation Presentation Transcript

  • Dustin Nadeau, Donatas Sumyla, David Deprey and Jaime Rodriguez Bus 411, April 2006 LIMITED BRANDS - Inc. 2003
  • Case-Study Overview
    • Existing Condition
      • Limited Brands overview
      • Industry overview
    • History, Key Facts, Goals and Objectives and Stock Information
    • Limited Brands Proposed Vision and Mission
    • External opportunities and threats
      • CPM
      • EFE
    • Financial Ratios
    • Internal strengths and weaknesses
      • IFE
    • Analysis
      • SWOT Matrix
      • SPACE
      • BCG
      • IE matrix
      • Grand Strategy Matrix
      • QSPM
    • Possible strategies: Matrix Analysis
    • Decisions
      • Strategic implementation
      • 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 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)
    • 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 20 th 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 :
    • 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
  • 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 :
    • 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
  • Key Ratios Evolution (1999-2003)
  • Overall Key Ratios (2006)
  • SWOT Analysis
  • 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 Cash-Cow Stars Dogs Question marks
  • 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, 10 th Ed.
  • Thank you!
    • Questions?
    • Comments?