nc  96
limited
contents



the limited inc 1996 annual report


                   2 chairman’s letter

                   8 introduction...
chairman’s letter




  “the strategic plan
                   set in motion
  in ’95...is having
          an impact
    ...
leslie h. wexner, chairman
@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@...
WOMEN’S BRANDS
                                                                                                           ...
chairman’s letter


      Now, along with the Support Marketing                                                           ...
and his team clearly understand their brand,
                                                                             ...
brands




     brands
    are built,
        money is
     made, wealth
      is created,
     sell
     on the
       si...
INTIMATE BRANDS


 victoria’s
     secret
catalogue
abercrombie
 & fitch
WOMEN’S BRANDS


  express
EMERGING BRANDS


 galyan’s trading
company
EMERGING BRANDS


  limited too
INTIMATE BRANDS


 victoria’s
secret
  stores
WOMEN’S BRANDS


 limited
stores
WOMEN’S BRANDS


  henri bendel
WOMEN’S BRANDS


  lane bryant
WOMEN’S BRANDS


 lerner
new york
INTIMATE BRANDS


   cacique
INTIMATE BRANDS


   bath & body works
brands


                                                                                             with Abercrombie & F...
of distinctive heart logo items such as lingerie,
EMERGING BRANDS
limited too                                         home...
limited brands annual report 1996_full
limited brands annual report 1996_full
limited brands annual report 1996_full
limited brands annual report 1996_full
limited brands annual report 1996_full
limited brands annual report 1996_full
limited brands annual report 1996_full
limited brands annual report 1996_full
limited brands annual report 1996_full
limited brands annual report 1996_full
limited brands annual report 1996_full
limited brands annual report 1996_full
limited brands annual report 1996_full
limited brands annual report 1996_full
limited brands annual report 1996_full
limited brands annual report 1996_full
limited brands annual report 1996_full
limited brands annual report 1996_full
limited brands annual report 1996_full
limited brands annual report 1996_full
limited brands annual report 1996_full
limited brands annual report 1996_full
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limited brands annual report 1996_full

  1. 1. nc 96 limited
  2. 2. contents the limited inc 1996 annual report 2 chairman’s letter 8 introduction to brands 22 victoria’s secret catalogue 22 abercrombie & fitch 22 express 22 galyan’s trading company 23 limited too 23 victoria’s secret stores 23 limited stores 24 henri bendel 24 structure 24 lane bryant 24 lerner new york 25 cacique 25 bath & body works 25 support businesses 26 introduction to financials 27 financial summary 28 management’s discussion and analysis 34 consolidated financial statements 37 notes to consolidated financial statements 43 company information
  3. 3. chairman’s letter “the strategic plan set in motion in ’95...is having an impact at every level” DEAR PARTNER efore I sat down to write this letter, I solid sales and earnings growth. Abercrombie That’s my model. And my acid test for all our B re-read my copy of last year’s report. & Fitch had an outstanding year. Lerner New operating businesses. I wanted to check something: Did I say York, Structure and Limited Too also made I told you last year we would continue to what I meant? Did we do what I said? significant progress. close underperforming stores, and we have. How does it all look, twelve months Unfortunately, a few businesses did not We closed 135 in ’96, and we expect to match down the road? fare as well. Express, in particular, had a very or exceed that number this year. In fact, since In 1995, I talked about the ways in which poor year. So poor, in fact, that its perfor- 1995 we have closed 213 stores. we were fundamentally reinventing the bus- mance impacted the total progress made in Years ago, in our annual reports, I used to iness: sweeping change, greater discipline, other divisions. comment about never having closed a store. I’m more centralization and a plan to build Express’ problems are fixable. And, later in over it. The world changes. No more so than brands, not just businesses. this letter, I’ll address the initiatives already in fashion. And we have to recognize what Looking back now, nearly a year later, I’d underway to get Express back on track. works, including real estate, and get on with it. say that, to a large degree, we did exactly what By now it’s been reported that The Limited, building brands I was very clear with the operating busi- we set out to do in 1996. The strategic business Inc.’s 1996 sales totaled $8.6 billion, with nesses this year: the number and duration of plan that we set in motion in ’95, a plan that operating income of $636 million. In March, our price promotions were damaging the essentially reinvented our core businesses and the Company repurchased 85 million shares brands. It had to stop. Brands are not built operations, is working. It’s having an impact through self-tender. Additionally, our Board through price promotions. Brands are built, at virtually every level, within the operating voted to increase the Company’s annual div- money is made, wealth is created, on the sell businesses, and in the support group. idend by 20% to $.48 per share. side, not the buy side. This is never more true We’ve rethought production, quality, pric- In 1996, we also completed another suc- than in fashion brands. ing, marketing, recruiting and brand build- cessful initial public offering, Abercrombie Throughout the year, as competitors ing. I’ve rethought my own role, the skills I & Fitch. The net proceeds from the 16% sale bounced from one special offer to the next, need from myself and those who support me. of Abercrombie & Fitch yielded $118 million. my direction to operating presidents stayed I’ve asked every member of my support group Most important, the business achieved a 62% consistent: Keep your powder dry. Preserve to look hard at their own efforts. What’s work- increase in net income in the fourth quarter, your brand equity. Don’t overreact. ing. What isn’t. And what they have to do to its first as a public company. Abercrombie is The strategy worked. And, it’s still work- get us to next. clearly a very profitable business. It is also an ing. As a direct result, many of our businesses Nearly all of our businesses made signifi- exceedingly powerful lifestyle brand that res- have shown healthy margin and profit gains. cant progress. The Intimate Brands group, in onates to an entire generation of young people. Victoria’s Secret Stores may be the best particular Victoria’s Secret Stores and Bath When I refer to apparel brands with a clear example. In the past, there might have been & Body Works, had an excellent year, with and vivid personality, think Abercrombie. 2 the limited inc 1996 annual report
  4. 4. leslie h. wexner, chairman
  5. 5. @@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@?e@@@@@@@@ @@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@?e@@@@@@@@ ?h@@ @@ ?h@@ @@ ?h@@ @@ ?h@@ @@ @@ ?h@@ ?h@@ @@ chairman’s letter @@ @@ key @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ Women’s Brands @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ ANNUAL GROWTH @@ @@ Emerging Brands @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ Intimate Brands @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ sales selling square feet @@ @@ @@ @@ @@ @@ @@ @@ @@ Abercrombie & Fitch @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ @@ ($ in millions) (in thousands) g@@ @@? g@@ @@? g@@ @@? g@@ @@? g@@ g@@ @@? @@? @@@@@@@@ @@@@@@@@? @@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@? @@@@@@@@ @@@@@@@@? @@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@?e@@@@@@@@e?@@@@@@@@? 1995 1994 1995 1994 1996 1996 4,282 18,780 4,294 19,235 4,318 19,247 1,031 835 3,572 729 3,146 2,997 2,420 2,517 2,108 5,047 4,230 3,419 335 1,006 235 166 541 792 Total $7,321 Total $7,881 Total 27,403 Total 25,627 Total $8,645 Total 28,405 number of stores operating income ($ in millions) 1995 1994 1995 1994 1996 1996 244 64 54 3,038 68 3,093 149 203 3,087 859 458 812 386 676 338 1,609 1,293 1,037 46 24 127 14 100 67 Total $613 Total $799 Total 5,298 Total 4,867 Total $636 Total 5,633 OPERATING RESULTS as many as a dozen price promotions in a Vic- (Thousands except per share amounts) 1996 1995 1994 toria’s Secret store on any given day. No more. $8,644,791 $7,881,437 $7,320,792 net sales Now, Victoria’s Secret is known for fashion, $636,067 $613,349 $798,989 operating income innovation and image. It has become the dom- $118,178 $649,467 — gain on sale of subsidiary stock inant lingerie brand in the world. It is a brand $434,208 $961,511 $448,343 net income that sells for what it is, not where it’s priced. net income as a percentage Still, we must recognize that great fashion q 3.7% q 4.0% 6.1% of sales $1.54 $2.68 $1.25 brands are more than a steady stream of new net income per share net income per share products or lack of promotional sale signage. (excluding gain on Great brands elicit an emotionally powerful $1.12 $.87 $1.25 sale of subsidiary stock) response from the consumer. They are sustain- $.40 $.40 $.36 dividends per share able. And customers remain loyal to them. YEAR-END POSITION Clearly we’ve demonstrated in the past that we know how to strike that chord: seeing mar- (Thousands except financial ratios) 1996 1995 1994 ket niches that hadn’t existed before, as in the $4,120,002 $5,266,563 $4,570,077 total assets case of Victoria’s Secret; or finding a new rea- $638,204 $2,018,960 $1,750,111 working capital son to shop in a market where others couldn’t 1.7 3.5 3.2 current ratio $650,000 $650,000 $650,000 see, or seize the opportunity, as with Bath & long-term debt 34% 20% 24% debt-to-equity ratio Body Works. $1,922,582 $3,201,041 $2,760,956 shareholders’ equity To a large degree, those businesses started return on average with my intuition, my sense of a market void, 17% shareholders’ equity q16% q10% and how to fill it. In truth, I daydreamed about the possibility of a Limited-type men’s q Excludes the effect on net income of the gain on sale of subsidiary stock of $118,178 in 1996 and $649,467 in 1995. 4 the limited inc 1996 annual report
  6. 6. WOMEN’S BRANDS business nearly ten years before the first 1996 % of total sales sales per average Structure store opened, and saw the very large selling square foot (in millions) void for a younger women’s business easily 1996 1995 1994 1996 1995 1994 49% five years before we opened the first Express $4,282 $4,294 $4,318 $298 $323 $336 Express in Chicago’s Water Tower Place. 49% 54% 59% $169 $155 $152 Lerner New York $228 $231 $249 Lane Bryant I believe we have demonstrated that we can 1996 $209 $198 $197 % of total operating Limited Stores invent businesses that are not only powerful income (in millions) $904 $1,002 $904 Henri Bendel brands, but ones that have great commercial $225 $223 $224 10% Total 1996 1995 1994 potential. My criterion is simple: if it can’t be $64 q $54 $244 10% 9% 31% at least a $1 billion stand-alone business in the U.S. market, we shouldn’t be in it. Which is, q 1995 includes a special and nonrecurring charge of $48 million, primarily for store closings and downsizings. by the way, the reason we recently made the EMERGING BRANDS decision to sell Penhaligon’s, a quality business that, I believed, did not match this criterion. 1996 % of total sales sales per average selling square foot (in millions) nce we recognize a market opportunity, O and develop a brand to fill it, we put 1996 1995 1994 1996 1995 1994 12% $1,031 $835 $729 $321 $308 $351 the full force of the businesses’ market- Structure 12% 11% 10% $277 $273 $282 Limited Too ing, merchandising, sourcing, store $293 $184 N/A Galyan’s Trading 1996 design, finance and distribution skills (since 7/2/95) % of total operating income (in millions) $306 $288 $332 Total behind it. And, once the concept has been test- 1996 1995 1994 11% ed, refined, and its potential proven, we move. $68 q $149 q $203 In fact, no one moves faster. Example? We took 11% 24% 25% nearly two years to open our first hundred q 1995and 1994 include 100% of WFNNB’s operating income before interest expense and 1995 includes the gain from Bath & Body Works stores. The last hundred the sale of a 60% interest in WFNNB, partially offset by special and nonrecurring charges. opened in just forty-five days. Invent the con- cept. Prove its worth. Move forward fast. INTIMATE BRANDS Clearly, this ability to spot holes in the 1996 % of total sales sales per average market, and develop concepts to fill them, is selling square foot (in millions) one of our primary skills. Still, it became clear 1996 1995 1994 1996 1995 1994 35% $2,997 $2,517 $2,108 to me that, if we were to reach our true growth Victoria’s Secret $458 $459 $479 35% 32% 29% Stores potential, these branding skills had to be Bath & Body $684 $710 $705 rationalized and documented. An articulated Works 1996 % of total operating $240 $225 $278 income (in millions) Cacique core process, a way to build vivid brands, $494 $482 $486 Total 1996 1995 1994 with every detail spelled out. It’s not as sim- 72% q $458 $386 $338 ple as it might appear. I don’t believe that 72% 63% 42% any multibranded apparel company, certainly q 1996 includes a $12 million special and nonrecurring charge in connection with the sale of Penhaligon’s in early 1997. not one of our size, had ever done it before. The skills required to build powerful retail & ABERCROMBIE FITCH brands have, I believe, unique aspects that 1996 % of total sales sales per average can’t be generalized. So we’ve begun docu- selling square foot (in millions) menting the process over the past several 1996 1995 1994 1996 1995 1994 4% months, and we are using it rigidly to improve $335 $235 $166 Abercrombie and ensure brand execution. $373 $354 $350 4% 3% 2% & Fitch This is a major effort, and a fundamen- 1996 % of total operating tal change in the way we do business. It rec- income (in millions) ognizes that brand management is a core 1996 1995 1994 7% competency and a standardized, centralized $46 $24 $14 7% 4% 2% process. One that takes constant vigilance. One that is executed at the highest level. the limited inc 1996 annual report 5
  7. 7. chairman’s letter Now, along with the Support Marketing quality through lost sales. Part of that, cer- In order to ensure Express’ rapid reemer- Group, typically, I have monthly brand meet- tainly, could be attributed to rapid growth, gence as a powerfully competitive young ings with the individual operating businesses. but it’s no excuse. brand, Michael Weiss left his position, as Vice The President, the Marketing Director, the This is a large business with an enormous Chairman and leader of the women’s busi- CFO, the Head Merchant and Designer all base of supply. By 1995, our businesses in nesses, to return to Express as its President. attend. There’s agreement, and alignment, total were using more than 1,600 factories ichael is a superb merchant, with a M around the core elements of the brand; ele- to manufacture the clothes that went into great eye, and a passionate leader who ments that are, basically, written in stone. our stores and catalogues. The sheer numbers has demonstrated his ability to achieve It’s a powerful tool. A terrific way to edit out alone worked against any possibility of con- consistently strong sales and profits. inconsistencies in the brand. A method of sistent quality. He took Express from virtually zero separation, and definition. That had to change. Now, the Presidents of in 1982 to sales of $1.4 billion in 1993, mak- The system shows every sign of working, each business are directly responsible, and ing it our largest, most profitable business. and working well. There’s much less possibil- accountable, for the quality of their gar- So, when Express lost its way, Michael and ity for one or two people to interpret or mis- ments. Vendor and factory lists are being I talked about what to do, and mutually interpret direction. No one goes off on their drastically reduced, and individual merchants agreed he should go back to his home and own flight of fancy. The core of the brand is no longer have the power to make signifi- first love, Express. rigidly defined. And it’s up to the operating cant sourcing decisions. Quality is a brand Frankly, I don’t think I’ve seen him happi- president to execute the direction. Flawlessly. issue. One the Presidents must take personal er in years. And, I believe, Express associates responsibility for. and customers are already responding to his fixing express After years of consistent growth and solid In the past year, Limited Stores served as clear and steady direction to recapture this profits, 1996 was, by any standard, a very poor the pilot for a detailed new sourcing strategy. brand’s market segment. year at Express, with a particularly disappoint- Their major manufacturers went from sixty The lessons learned at Express were, and ing fourth quarter. to twenty; fit and quality control were tightly are, painful. Much of it could have been In hindsight, the problems seem obvious. regulated; and it’s begun to make an impact. avoided had we kept them “on brand.” Had The brand had abandoned its core customer, Customers don’t notice these changes over- we taken action sooner. central position and brand disciplines. night. But they do notice. I’m confident that The centralized brand management pro- Instead of being a current, young, inter- Limited Stores’ quality disciplines, married to cess described earlier could, I believe, have national fashion brand, Express lost their a well-articulated brand strategy, are already prevented many of Express’ recent perfor- “fixing express… is our top short-term priority” focus and began to think of their customer helping them regain their position as a signifi- mance issues. It is now in use. I have no in- in generalized terms—somewhere between cant brand in the women’s sportswear category. tention of repeating Express ’96. eighteen and forty years of age. Without rig- consistent quality is a must importance of design What do you call fashion that doesn’t fit? The businesses have gotten too big, and the id disciplines, and edit points, in place, the A markdown. world has gotten too small, for us to be suc- fashion floundered, the clothes got boring, Yes, we are in the fashion business, but cessful by merely imitating the best of what’s the customer said “no.” implicit in that is a consistent level of quality happening in the fashion world at large. Let me make this plain: fixing Express, and and fit. In the past, as you may know, that Great brands have a powerfully consistent fixing it quickly, is our top short-term prior- wasn’t always true. And clearly, in some in- view, an edit point, that makes them not only ity. I am determined that it again become the stances, we paid the price for inconsistent recognizable, but desirable, to customers. significant contributor it must be. 6 the limited inc 1996 annual report
  8. 8. and his team clearly understand their brand, and, more important, their customer. Aber- crombie & Fitch’s fashion sensibility, coupled with an intense customer intimacy and near- flawless execution of everything from outside graphics to garment labels, hang tags and photography, makes it one of the great emerg- ing retail brands. There is so much potential in our business- es. So much opportunity for growth and in- creased profitability. Lane Bryant is another good example. Uniquely suited to serve the 40% of American women who are size 14 or above, I believe Lane Bryant has the potential to double in size. I also see great potential at Limited Too, where Mike Rayden became President less than a year ago, and immediately began to de- liver consistent, double-digit increases in com- parable store sales. Going into ’97, Limited Too is on a roll. And a big part of their success Too often, our businesses have copied each They then reinforce that position through the is sound, fundamental business leadership. other, with the only distinguishing feature Annual Victoria’s Secret Spring Fashion Show, That, too, is the case at Structure, where being price point. which has become major news international- a dramatic brand redefinition over the past No more. ly. And, as their product introductions have twelve months has brought significant pay- Designers, and full-blown design teams, are become more sophisticated, their margins have back. Structure is realizing their market now at work in nearly all of our businesses, increased. Clearly a brand-driven strategy. potential in the success of a number of core helping to differentiate by designing fashion ictoria’s Secret Catalogue also intro- businesses. I believe that these successes will V around tightly defined brand positions. Good duced profitable, brand-enhancing new certainly lead to powerful brand wins across for now. Even better for the long run. books this year. The oversized, special multiple categories. Take Lerner New York. When Richard edition Christmas Dreams and Fan- When I reflect on the businesses today, Crystal became President, he hired one of the tasies catalogue was a significant profit I can honestly say I don’t believe we’ve ever fashion industry’s best designers, Charlotte producer, and hopefully a model for the fu- had a stronger group of leaders. They are Neuville, to lead his design team. Together ture that reinforces the aspiration of the good business executives and passionate re- they are delivering exciting, budget-conscious brand. Victoria’s Secret has great momentum, tailers who complement their businesses and fashion to a very wide audience. And they’re in both Stores and Catalogue, with substan- their organizations. They are energized, getting results. tial room for growth. and badly want to win, as do I. With every I’ve often thought that if soaps were super- passing day, I am more confident that the recognizing the winners I said earlier that several of our businesses models, Bath & Body Works might be the direction we’ve taken over the past two years, had excellent years, and they should be re- most famous brand in the world. BBW is sol- and the disciplines and structures we’ve put cognized for their efforts. idly managed, and went through another year into place, are exactly what our Presidents and Victoria’s Secret dominates the lingerie cat- of extraordinary growth. Their position, sim- this business need to succeed. egory with powerful new product introduc- ple Midwestern values, strikes a powerful chord We are determined to build a Company tions like the Miracle Bra, Second Skin Satin, with a large number of people domestically of powerful, differentiated retail brands that Perfect Silhouette and, most recently, Angels. and will, we believe, worldwide. A precise maintain and strengthen our position as the They support these launches with dynamic, position, consistently executed. And, again, a world’s dominant specialty retailer. brand-consistent television advertising, which brand with much potential in front of them. LESLIE H. WEXNER extends their reach and cements their position I’ve already talked about Abercrombie & chairman as the world’s most glamorous lingerie brand. Fitch, but I do want to say that Mike Jeffries the limited inc 1996 annual report 7
  9. 9. brands brands are built, money is made, wealth is created, sell on the side, not the buyside
  10. 10. INTIMATE BRANDS victoria’s secret catalogue
  11. 11. abercrombie & fitch
  12. 12. WOMEN’S BRANDS express
  13. 13. EMERGING BRANDS galyan’s trading company
  14. 14. EMERGING BRANDS limited too
  15. 15. INTIMATE BRANDS victoria’s secret stores
  16. 16. WOMEN’S BRANDS limited stores
  17. 17. WOMEN’S BRANDS henri bendel
  18. 18. WOMEN’S BRANDS lane bryant
  19. 19. WOMEN’S BRANDS lerner new york
  20. 20. INTIMATE BRANDS cacique
  21. 21. INTIMATE BRANDS bath & body works
  22. 22. brands with Abercrombie & Fitch becoming a pub- INTIMATE BRANDS victoria’s secret licly traded New York Stock Exchange com- catalogue pany on September 26, 1996. The industry-leading catalogue of women’s We are carrying our strong momentum intimate and fashion apparel. into 1997. We will continue to gain share of Sales in 1996 were below our expecta- the huge women’s apparel market by broad- tions—up just 3%. However, we concentrated ening existing merchandise categories and upon two important indicators of growth. enriching the brand with newness, excite- First, we focused on sales-per-page produc- ment and therefore increasing productivity. tivity, the catalogue equivalent of same-store We will open twenty-eight new stores in 1997, sales; and we strove to improve the response consistent with our disciplined growth rate. rate to our offering. Sales generated by our specialty books, “Swim,” “Country” and “City,” WOMEN’S BRANDS express increased significantly and now account for A lifestyle brand offering hot new interna- just under 20% of our total. In particular, our tional fashion to young women. “Swim” specialty books have one of the high- 1996 was very disappointing for Express, est profit contribution margins. with a significant earnings decline. The all- Sales-per-page productivity will be an important fourth quarter was particularly important focus as we continue to dev- lackluster. We are now aggressively returning elop and refine our circulation mod- Express to its youthful roots. The ones that els. We will further develop the made it the hottest fashion growth business shoes, personal care and accessories of the past ten years. categories, which increased in the Express is targeted to young women in previous year, as well as our cloth- their early twenties. It is young and spirited, ing sales, specifically sportswear, fashions of good taste and quality, with a in part through the hiring and large potential customer base. We expect the assimilation of in-house de- Fall ’97 assortment to reflect the reposition- sign and production teams. ing of the Express brand. The establishment of a Japanese phone center will help develop that market, EMERGING BRANDS galyan’s as we also plan entry into other trading company international markets. The “coolest” destination in retailing for sports abercrombie enthusiasts and “wannabes” of all ages. & fitch In our first full year within The Limited, Quality, casual, classic American sports- Inc., we exceeded our financial goals and sales wear brand, targeted to the young, hip expectations while adding three new stores, customer. averaging nearly 100,000 square feet each— We met our 1996 financial goals by achiev- two in the Minneapolis/St. Paul area, and ing a higher operating income rate through the third in Kansas City. volume growth and merchandise margin. We expect the momentum to continue in With our eighteenth consecutive quarter of 1997, as we plan to open two to three new bottom-line profit improvement, we suc- stores, including our third in the Minneapo- cessfully rolled out new merchandise and lis area and our second in Columbus. The categories consistent with our powerful life- prototype Columbus store will introduce an style brand. Additionally in 1996, we met exciting interactive concept. In addition, our goal of opening twenty-nine stores. Our we will open a new, state-of-the-art Distri- successes led to an Initial Public Offering, bution Center in Indianapolis this Spring. 22 the limited inc 1996 annual report
  23. 23. of distinctive heart logo items such as lingerie, EMERGING BRANDS limited too home accessories and gifts, and a rollout of The complete American casual lifestyle store the Special Occasion line of luxurious, gift- for girls to age fourteen. able items. We expect to continue the rapid In 1996, we began to develop branded growth of Victoria’s Secret Bath & Fragrance apparel using an in-house design team; nar- by improving sales force productivity and rowed our base of suppliers and vendors to broadening assortment and presentation. We ensure high quality standards; and focused on plan to open sixty-five new stores, and re- fashion basics. By delivering positive compa- model another twenty-five, in 1997. rable store sales and increasing merchandising margin, we returned to profitability in the WOMEN’S BRANDS limited stores Fall season. Casual American lifestyle fash- We expect to continue the profitability mo- ion for women in their twenties mentum in 1997 by improving sales produc- and thirties who desire great fash- tivity through an expanded assortment of ion and comfort. products for girls only, by developing a com- The year 1996 was marked by prehensive, proprietary assortment of Amer- comparable store increases of 3%, sig- ican casual apparel, lifestyle, loungewear, and nificant profit improvement and sub- Girl Care products—thus becoming the stantial merchandise margin pro- leading destination for fashion-aware girls. gress. We did this by continuing to build on our strength in sports- INTIMATE BRANDS victoria’s wear tops; and by beginning to secret stores develop a consistency in “look” The most successful brand of elegant inti- and quality as Limited Stores re- mate apparel, foundations and related prod- vamped its entire product dev- ucts for women. elopment process to include Victoria’s Secret Stores achieved a 13% complete in-house design and growth in sales in 1996 and increased oper- production teams. ating profit by over 14%. Core product cate- We believe comparable store gory efforts included the continued success sales gains and improved mer- of the “underware” line of basic cotton sepa- chandise margin will result rates. Perfect Silhouette, a unique seamless from the efforts of our in- bra, was launched during the year, and quick- house design, production ly became one of the fastest-selling bras in and merchandising teams Victoria’s Secret history. Victoria’s Secret Bath in 1997. These teams will & Fragrance is becoming an increasingly sig- also build a substantial nificant part of the business, as sales and prof- active business that en- its accelerated in 1996. Solid progress was also compasses all aspects of made in developing the VS hosiery business. sportswear and outerwear, We believe 1997 offers significant oppor- and we will continue to tunities to build brand equity and increase source through focused, gross margins by delivering fashion right strategic vendor alli- merchandise and integrating design and ances. Increasing our production capabilities. Reflective of our goal bench strength in key to dominate the bra business, one new bra positions throughout the launch is planned for 1997. Other brand Company—both in the home office and extensions include a further expansion of in the field—is another important objective the “underware” assortment, a Signature line for the year.

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