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limited brands annual report 1999_full

  1. 1. the lımıted inc THE LIMITED INC ANNUAL REPORT 1999 1999 annual report to shareholders THELIMTEDINC.AN UALREPORT19
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  4. 4. the limited inc 1999 annual report 06 letter from the chairman 10 structure 16 express 22 lane bryant 28 lerner new york 33 the limited 38 henri bendel 40 what others are saying… 42 intimate brands victoria’s secret bath & body works white barn candle company 59 philanthropy 60 operating results and year-end position 63 financial table of contents 82 company information 9 9 A R LT D 0 5
  5. 5. letter from chairman the Dear Partner – As you know, for the past several years we’ve been involved in a sweeping strategic reconfiguration. Moving from specialty fundamentals” of the businesses. At the same time, we made businesses to brands. Creating a Center organization led by major strategic decisions like the closing of Cacique, the talented specialists who are able to add value across multiple creation of Intimate Brands, Inc. (IBI), the spin-offs of disciplines and businesses. Adding real design skill in every Abercrombie & Fitch, Limited Too, Galyan’s, and Alliance brand, not only to create original, differentiated design, but as Data Systems. Strategic and tactical decisions, designed to important, to establish consistent, vivid, sharply defined narrow our focus and create shareholder value. customer experience across brands. Our strategies are working. This annual report is evidence of We moved deliberately, impacting all areas of the business, the progress of our move to brands and brand management. often simultaneously. We built teams, within and across the For the first time, I’ve included a variety of comments from brands, to address business issues and opportunities. We The New York Times, Merrill Lynch, Bear Stearns, and other consciously distorted our allocations of time and money in the financial reporters and analysts whose job it is to review these service of our most promising people, ideas, and businesses. sorts of things. They see the change. And we built our capacity to embrace a world of increasing change, while deepening our disciplined capacity to “nail the We hope you can, too. 0 6 LT D A R 9 9 99 9AA RLT DD09 9 R LT 7
  6. 6. “To sustain our brands, Even a cursory glance through this report tells you we’re getting traction. The to “move the needle”? Are they distorting in our history. Period. It’s only appropriate. moving in the right direction, with every difference in the photography alone is dramatic. There is more separation in our their time against those critical few things Best brands demand best talent. brand now positioned for growth. we need to be able brand positions today than at any time in our history. Photographs don’t define a that produce the biggest wins? to count on a reliable brand position. They reflect it. The best ones, often, don’t even need a logo. By the way, if you’re reading this as a Plus, our 84% stake in Intimate Brands supply chain for our When the merchandise is well designed, and the marketing position well defined, One critical brand-supporting initiative is prospective new associate, let me be gives us the added participation of two of globally sourced the finished photo becomes an extension of the whole. Branding. inventory management. And here, we may equally clear: We will continue to seek out, the most powerful brands, of any kind, products. With good have made our most dramatic progress in promote, and hire, the best and brightest, anywhere. They are, of course, Bath & Body We’re getting there. the past year, with, I’m convinced, even while continuously raising the bar for all Works and Victoria’s Secret. And their business processes, more improvement to come. Under CFO associates. If that sounds appealing, join continued superb performance – profits, we can make sure that In fact, our current brand positions are the strongest and most precise in our Ann Hailey’s leadership, inventories are us. There is much to do. in 1999, once again grew at a greater pace product is on time history. Vivid. Well edited. Tightly defined. No cannibalization. leaner, better planned, in earlier, out ear- than revenues – gives us a healthy base the and delivered at the lier, with better turns, higher profits, and Speaking of talent, I’m very happy to have apparel brands can only add to. planned cost.” Yes, you can see it in the photographs. Most important, you can see it in the lower markdowns. Ann’s contributions Len Schlesinger managing Human results. In fact, 1999 was our best year, reach far beyond a “controller” mentality. Resources. I’ve known Len for six years, as Would you call all this a turnaround? “When I think about overall, since moving to the brand strategy. She’s a financial partner to the brands, a confidant, a friend, and a board mem- Certainly others have. I think of it as a 1999, it brings to mind Approaching $10 billion in sales and with penetrating insights into how they ber. He is, without question, one of the healthy beginning to a retail/brand success a quote by coach Joe nearing one billion in operating profits. can grow. foremost authorities on organizational story that will sustain itself for years to come. A 43% earnings increase. Good progress. issues in America. Paterno, ‘The will to Another major area of concentration is This year’s improved result wasn’t an acci- win is important, but I want to talk about that earnings increase our “Must Win” stores program. Led by In October, he elected to join the business dent. It was budgeted and planned. It is an the will to prepare is a minute. Andrea Weiss, it involves every brand in as Executive Vice President, Organization, indication that the deliberate steps we’ve vital.’ In the Stores the enterprise. The idea is to focus on the Leadership, and Human Resources. Clearly, taken are working. I’m confident these Operations group, I’ve said that, since 1995, we have been in- best stores in each brand and, simply, do his decision is a strong endorsement of the steps are the right ones, and our improved volved in a sweeping strategic reorganization. whatever it takes to dramatically increase direction we’ve taken, and the potential that results are just beginning. Additionally, we’ve begun to prepare performance. When it works, and it is lies ahead. now that we’re starting to get traction, I to win through our Jane O’Dell In 1999, I added a few tactical objectives. already beginning to in several brands, it feel comfortable shifting more to offense, Vice President, International Trade ‘Must Win’ stores ini- can set the standard for all stores, while Since he’s gotten here, he’s leapt our talent pressing the advantages we have, and con- and Customs Compliance tiative. The year 2000 LIMITED DISTRIBUTION SERVICES The first, because results do matter, was to unlocking huge additional profitability. So agenda ahead by years. Moving, seemingly, centrating on growing the brands. That’s is when the rubber make more money. much so, I’m demanding it become a pri- in ten directions at once. His impact has the exciting part, growing brands. Using the entire arsenal of tools at our dispos- oritized performance objective for every been immediate, dramatic, effective, and al, from stores, to e-commerce, to catalogue, to get to the future. It’s exciting. meets the road.” I wanted to keep the double-digit momen- CEO, CFO, head designer, store executive, much appreciated by all. And it’s fun. tum going in IBI, and have every fashion and marketing manager. Everyone. brand profitable in fall ’99. My personal goal Len is helping to make what has always As you well know, we’ve made a lot of promises over the past five years. Promises Last, and maybe most important, is talent. been a very good place to work, a great was a minimum of a 40% increase in earnings. about shifting to brands, building the talent, developing capability, narrowing place to be. And he’s just one of many, our focus, improving performance, and creating shareholder value. Promises And we exceeded it. Without talent, nothing gets done. And many executives and associates whose that all of us here, collectively, made. To which I will only humbly add, promises our stated mission, to build a family of the impact is being felt at every level. made, promises kept. I want to thank my associate partners for all of the extra My personal goal for 2000? Do it again. world’s best fashion brands, requires effort it took to fulfill those promises. superb talent at every level. This is a changed business. Sincerely, We set and aligned the priorities of the enterprise, concentrating on doing a few So, if you’re a shareholder, let me be clear: Dramatically changed. Changed for the things well. And only a few. What is each Over the past three years, The Limited, better. Changed in virtually every way. Leslie H. Wexner brand best at? How can they win? Does Inc. has promoted and hired more top tal- One where every brand position gets Theo Killion Vice President of Human Resources Chairman and everyone know? Who are our best people? ent, in more disciplines, making more stronger, more focused, and, hopefully, Stores Operations Chief Executive Officer THE LIMITED, INC. Are we giving them the tools and measures significant contributions, than at any time more profitable every quarter. We’re 0 8 LT D A R 9 9 9 9 A R LT D 0 9
  7. 7. STRUCTURE, the leading men’s- only specialty retailer in the country, designs and sells classically inspired sportswear with a rugged fashion appeal for men in their 20’s and 30’s. 1 0 LT D A R 9 9 9 9 A R LT D 1 1
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  9. 9. “This past year has been spectacular. It is amazing to have so many people so quickly get behind new ideas and new ways of working, at every level. We have an attentive and vibrant retail audience, and our customers are all over our new ideas as fast as we can get them in the stores. This is what makes every day exciting. We have a lot of fun.” We’ve been involved in a number of BRAND BUILDING INITIATIVES STRUCTURE cut its operating loss by was down significantly throughout the 75% in 1999, the largest dollar improve- fall season, and the focus was on getting AND STRATEGIES that have impacted all areas of the business and ment among the apparel brands. This in and out of seasons earlier. improvement was primarily driven by The result was dramatically lower the progress of our brands. A summary of 1999 follows. higher gross margin, a result of disci- carryover inventory and higher gross plined inventory management. margins. Best at Pants “Must Win” Stores Program Structure continued to focus its efforts Structure has identified 110 “Must Win” on providing the most complete offering branded stores for peak performance. of casual fashion and basic pants for Stores have been reorganized to focus Andrew Maag men. In 1999, Structure launched the on the “Must Win” strategy, a priority Vice President, Design “X” pant, a proprietary line of draw- for 2000. STRUCTURE string pants. Over one million pairs of “X” pants were sold in 1999, and addi- Talent tional styles will be introduced in 2000. Structure hired David Lawn as EVP, General Merchandise Manager, and also reorganized merchandising and hired a new Merchandise Manager for the Disciplined Inventory Management “Best at Pants” category. Under the direction of Andrew Maag, VP, Design, Structure significantly altered its the design department reorganized, hiring senior designers in knits, inventory management strategy in sweaters, and accessories, and added additional talent in pants. 1999. Inventory per square foot at cost 1 4 LT D A R 9 9 9 9 A R LT D 1 5
  10. 10. From every angle, EXPRESS is a fashion leader. International, innovative, sexy, strong. A modern women’s brand that delivers runway style, virtu- ally as it heads down the runway. Great design. Well priced. That’s Express. 1 6 LT D A R 9 9 9 9 A R LT D 1 7
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  12. 12. “Our #1 objective was to ‘win at’ denim in the fall season. Through distortion of time and talent, we succeeded in helping that department achieve the strongest volume and margin results in the history of Express.” EXPRESS, our most profitable apparel nationwide. Express will continue to brand, improved operating income in invest in denim and underwear in 2000. 1999 and delivered a 5% comparable store sales increase on top of a 16% Brand Top Stores in Top Markets gain in 1998. As of year-end 1999, Express had recol- ored and remodeled over 300 critical Fashion stores to brand-right design. These 300 Express has developed a unique fashion stores included the top ten markets and pyramid to ensure an appropriate mix all the “Must Win” locations. Conversion Heidi Popadych Director, Store Planning and of fashion basics, current fashion, and drove incremental volume and above- Allocation fast fashion merchandise. The mix hurdle returns. EXPRESS builds a foundation for sustained sales growth and increased margin opportu- Fit and Quality Standards nity. The biggest merchandising suc- 1999 saw major improvements in fit and quality standards. Express reviewed cesses in 1999 were denim, woven its vendor base and made consolidations and improvements as needed. A pants, and activewear. In addition, an manufacturing manual instituting brand standards across the board was underwear campaign was launched established. 2 0 LT D A R 9 9 9 9 A R LT D 2 1
  13. 13. Hot fashion, star power, sizzling brands. LANE BRYANT’s sportswear line, Venezia Jeans Clothing Co., and sexy new intimates line, Cacique, set the standard in hip fashion for women size 14+. 2 2 LT D A R 9 9 9 9 A R LT D 2 3
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  15. 15. “We have worked very hard to relentlessly focus on our ‘best at’ businesses of sweaters and knit tops. Both businesses have com- pletely transitioned to teams of specialists, through MPR. Today, we have the best talents in these businesses. Merchants, designers, production, and plan- ning are working hand- in-hand to achieve common goals. We are delivering better fashion, in a timely manner, at great value to our customers, and we are very proud of it.” (MPR). A Vice President of Product LANE BRYANT is the dominant specialty Development, Karen Tweedie, was hired. retailer in the plus-size market. In 1999, Leveraging talent resources in design Lane Bryant achieved a comparable and production allows Lane Bryant to store sales increase of 5% and deliv- be first to market in delivering fashion ered more profit to the bottom line to its customer. through improved gross margin. Fleet Reconfiguration Intimate Apparel A combination of opening new stores, In February 2000, Lane Bryant held the remodels, and store closings resulted in first lingerie fashion show for plus-size productivity increases and a better- women, featuring a number of celebrity branded fleet in 1999. In 2000, Lane models. The show generated great Bryant will open approximately 25 new excitement and publicity for the inti- strip center locations, a real estate mate apparel line, which was launched Mary Kwan format that has proven to be very nationwide. Lane Bryant achieved Executive Vice President successful for the brand. double-digit comparable store sales in General Merchandise Manager for Sportswear, Ready-to-Wear and intimate apparel for the past two years, Accessories Communicating with the Customer and will continue to invest in the LANE BRYANT One million new names were added to Cacique intimate apparel line in 2000. the customer database as a result of celebrity model campaigns, New York fashion shows, print advertising, Talent direct mail prospecting, the Web site, and the recently introduced quar- In 1999, Lane Bryant continued the roll- terly magalogue. out of Merchandise Process Redesign 2 6 LT D A R 9 9 9 9 A R LT D 2 7
  16. 16. Under the New York & Company brand, LERNER NEW YORK has redefined competitively priced fashion. Modern, city hip, energetic, NY&CO is fashion with an attitude. 2 8 LT D A R 9 9 9 9 A R LT D 2 9
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  18. 18. “This past year was one “This year, after seven of the most rewarding years with Lerner New for me since joining the York, I was excited to company in 1991. We be promoted to manage were challenged by our the Staten Island store, leaders to be the best the #1 volume store in again, to align our- our chain. I was also selves as a team and proud of the fact that to focus on our #1 my entire management priority—the customer. team at Steinway Street Through the empower- was promoted behind ment and education of me, knowing that I had our people, we were hired and trained each able to significantly associate in that store.” impact our business and share many wins together. In addition to being a shareholder of The Limited, Inc., I am thankful for the per- LERNER NEW YORK turned in a 12% under the NY&CO brand. Lerner New York sonal satisfaction I increase in comparable store sales in will continue to clearly communicate the have enjoyed and the Virtual Stretch Program THE LIMITED cut its operating loss in 1999, the highest of the apparel brands. brand’s fashion key items in windows, The Virtual Stretch System is a collection half in 1999, a result of a 5% increase in Gross margin and operating profit also outfits, and advertising. The “WOW!” professional growth I of related separates for the Modern comparable store sales, significantly improved dramatically. promotional strategy, which is the peri- have experienced as a American Woman, including jackets, improved gross margin, and expense odic promotion of fashion-right key Debbie Cavello sales leader.” skirts, pants, and tops with a decidedly savings resulting from the closure of Build the NY&CO Brand items, reinforced the brand promise of “Must Win” Store Manager chic feel. Virtual Stretch represented over 100 unproductive stores. The NY&CO store design, which debuted fashion-quality-value and drove total Staten Island over 20% of sales volume in 1999 and is at the Lloyd Center in Portland, Oregon store traffic. LERNER NEW YORK projected to increase significantly in Continued Focus on “Must Win” Stores and the Mall of Georgia, near Atlanta, 2000. Remarkable for a category that did Program created a new environment that conveys Successfully Execute the “Must Win” Stores Program not exist in 1998. Our “Must Win” program includes 140 the energy and excitement of the brand. Lerner New York’s focus will be on increasing productivity through invento- locations and will represent 50–55% of New, bolder brand imaging, including ry priority and enhanced marketing to ensure this group of stores leads the Continued Focus on Fit and Quality Upgrades sales. The Limited held weekly sales powerful photography and dynamic win- brand. Lerner New York will also focus on customer service; having stores The Limited’s goal is to double the pants meetings with all regional and district dow and point-of-sale displays, focused that provide brand-appropriate customer service that highlights ease of business in 2000. Quality upgrades are managers and “Must Win” sales man- on fashion. Direct mail programs included self-service and friendly, speedy transactions for busy customers. specifically directed toward consistent fit agers which focused on reviewing aggressive, focused prospecting to and quality in pants. To accomplish this results, developing strategies, and increase the customer base. Develop Flexible Manufacturing Capability goal, a manual of manufacturing stan- driving sales. The main objective is to A long-term global sourcing strategy supports the brand requirements of dards has been implemented to which all create a sales culture that validates the Fashion fashion, quality, value, and flexibility and provides a framework for supply sourcing partners must adhere. brand and generates customer loyalty. Lerner New York’s merchandising team chain management. The development of “chase” scenarios for key items and Lisa Dunaway For 1999, the “Must Win” program of President Richard Crystal, VP of categories ensures a quick reaction to shifting trends and business needs. “Must Win” Store Manager resulted in a double-digit comparable Design Charlotte Neuville, and GMM Increased partnership with key suppliers will ensure a better understand- Las Vegas store sales spread between the “Must Jackie Corso produced an exciting, ing of business needs on both sides. THE LIMITED Win” stores and the balance of the chain. focused merchandise assortment 3 2 LT D A R 9 9 9 9 A R LT D 3 3
  19. 19. THE LIMITED brand designs sophisticated sports- wear for the Modern American Woman, who wants accessible feminine fashion at a great value. 3 4 LT D A R 9 9 9 9 A R LT D 3 5
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  21. 21. HENRI BENDEL’s Fifth Avenue store, a premier destination Windows One of Manhattan’s most beautiful and and New York City landmark, produced a comparable Henri Bendel’s windows featured unique, enticing displays, store sales increase of 7% in 1999. including interactive and live-action windows, and guest window designers. fashionable shopping environments, Merchandising Henri Bendel continued to redirect and strengthen its Events HENRI BENDEL’s Fifth Avenue store is a merchandising strategy to reflect its target customer. Henri Bendel also increased the visibility of the store through high-profile on-site events, including: InStyle Henri Bendel also focused on young and emerging designer Beauty Issue parties; Little Black Dress party with Vogue; talent to separate itself from the competition. mecca for modern, sophisticated, higher- Cruel Intentions movie premiere; Catherine boutique launch party with Manhattan File; Trudie Styler book sign- Advertising ing party with Harper’s Bazaar ; Girls’ Nite event series; Henri Bendel increased the visibility of the store through income, thirty-something women from all regional buys in targeted high-profile advertising vehicles, and the Möet & Chandon Designer Debut party in conjunc- including InStyle, Harper's Bazaar, and Vogue, and also tion with Seventh On Sixth. In addition to enticing targeted over the world. increased its presence in New York magazine. potential customers to the store, these events generated press coverage and created positive energy and “buzz.” 3 8 LT D A R 9 9 9 9 A R LT D 3 9
  22. 22. “Lane Bryant has had “LTD has narrowed its What others are saying... business scope substan- one of the most striking tially in the past five years “4Q/99 Results Blow “The Limited’s credibility with investors turnarounds in retailing from 12 retail businesses Away Expectations.” has increased dramatically over the to five. Simultaneously past two years, as the company has .…Congratulations on a Thomas Filandro, J.P. Morgan, 2/23/00 the company has made made good on its promise to increase shareholder value by having spun off the transition to central- stunning show!”Tobé Abercrombie & Fitch and Limited Too; Report, 2/17/00 ized functions of fully sold off noncore assets; and utilized integrated design, pro- cash to repurchase shares.” duction, and merchant “This new design team has given the Lerner [New York] store chain a strong point Richard Baum, Credit Suisse First Boston, 9/22/99 teams. These initiatives of view, as well as a consistency of product offerings.”Barbara Wyckoff, Buckingham Research, 11/8/99 have created a ‘best “In what is turning out to be the practices’ platform for “It’s 6 p.m. on a weeknight and the Express store on Madison Avenue is turnaround story of the year, each business and have crowded with twenty-something shoppers fawning over the embroidered Limited, Inc., whose subsid- enabled division leaders jeans and ankle-length skirts. ‘I was walking by and the stuff in the window to focus more clearly on iaries include Express, Lane caught my eye,’ said Missy Patel. ‘I’m shocked at how cool everything is. brand positioning.” Bryant and Lerner [New York] I haven’t shopped here in years.’ Yes, this is the same Express that only Thomas Filandro, J.P. Morgan, 11/24/99 three years ago fashion watchers and Wall Street analysts were calling and which owns [over] 80% of an almost-dead retail chain.” Associated Press/Chicago Tribune, 8/15/99 Intimate Brands, parent of Victoria’s Secret, posted an impressive companywide gain of 12%.”The New York Times, 9/3/99 “Clearly, throughout the past two years, Limited has built a powerhouse team of proven retail executives from Banana Republic, Estée Lauder, J. Crew, “The Limited remains committed to increasing shareholder value, including an Liz Claiborne, Macy’s, Talbot’s, Pillsbury, etc. And now it appears that the ongoing commitment to improving the apparel business.”Mark Friedman, Merrill Lynch, 2/22/00 fruits of the labor of putting together these top executives has paid off.” Steve Kernkruat, Bear Stearns, 2/23/00 “…a dramatic rethinking of strategy at the company….The first “Inventory Religion Pays Off.” is a new focus on shareholder value…”Dana Eisman Cohen, Donaldson, Lufkin & Jenrette, 8/19/99 Harry Ikenson, Chase H&Q, 2/22/00 4 0 LT D A R 9 9 9 9 A R LT D 4 1
  23. 23. The Limited, Inc. owns approximately 84% of INTIMATE BRANDS, Inc. (NYSE:IBI). IBI is the leading specialty retailer of lingerie and personal care products, sold through the Victoria’s Secret, Bath & Body Works, and White Barn Candle Company brands. Because of the relationship between The Limited, Inc. and Intimate Brands, Inc., one that gives Limited, Inc. shareholders a stake in this dynamic business, I thought you might want to read my letter from the IBI annual report. Dear Partner – With all the talk about technology, the Web, clicks vs. bricks, Finally, a major reason for a lot of people to log on to the Web. etc., it’s interesting to note what Adweek named the Internet A big audience. Real content. It was, perhaps, the most tangible marketing event of 1999: February’s Victoria’s Secret Fashion demonstration, yet, of what the Internet could be. And the Show. And why not? reason it was such a success? The power of the brand. The glob- al impact of Victoria’s Secret made the event come alive in a way 1.5 million people watched the show live on the Web. 500 mil- nothing else could. And Victoria’s Secret is just part of the com- lion hits during the week. The number one most visited site for pelling brand story that is your company, Intimate Brands. the month. The biggest live Web event. Ever. The Webcast was a prelude to another very good year. In a Technology meets fashion. And the results are astonishing. string of continuing good years. With 21% earnings per 4 2 LT D A R 9 9 9 9 A R LT D 4 3
  24. 24. VICTORIA’S SECRET is the world’s most recognized brand of elegant intimate apparel and personal care products for women. Victoria’s Secret is available through stores, catalogue, and online at 4 4 LT D A R 9 9 9 9 A R LT D 4 5
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  26. 26. share growth, on $4.5 billion in volume. progress. Powerful performance. So, the obvious question, Then, so is White Barn Candle Company. Good. That was the goal. “Embracing the new role when confronted with numbers like these, is “just how White Barn began as a sub-brand in Bath & of merchant has meant At IBI, we place a premium on growth. And we’ve delivered much soap and shampoo can you sell?” My answer is Body Works. Candles and home fragrance We’ve worked diligently to integrate every moving from a product sustainable, predictable growth, by every metric. billions. Billions and billions. Because, it isn’t just about under the White Barn label. A way to test the aspect of the brand, ensuring the sum of development role, to soap and shampoo. It’s about body care. And cosmetics. And market potential for a separate business. the whole is greater than the parts. a new analytical role, Victoria’s Secret and Bath & Body Works show the kind of aromatherapy. It’s about home fragrance, candles, and that allowed me to strong, sustained performance that virtually defines the anti-bacterial products. Bath & Body Works for women. And And it worked. Today, across every channel, stores, cata- rigorously test and model for growth brands. With profit, once again, increasing children. And men. It touches, or can touch, virtually every logue, and e-commerce, there are tight as a percentage of sales. segment of personal care products that a family can buy. It’s So we began to test the concept of White brand standards with no shortcuts, no validate my market- not about soap. It’s about lifestyle. And about a powerful Barn Candle Company stores. And that’s compromise. Products are launched at place instincts. My Still, the potential of Intimate Brands is, I believe, far emotional connection to the brand. worked too. the same time, in the same way, with the new role includes three greater than even what we’ve achieved to date. same quality, at the same price. Same, disciplines: competitive Bath & Body Works has earned credibility as a brand, crucial By year-end, we’ll have 125 White Barn same, same. Today, we think of ourselves intelligence, client Because, this is a business about “next.” The next soap. The to the success of personal care products. More important, Candle Company stores and, within the as a 360-degree brand. One position. One intimacy, and fashion next bra. The next fragrance. The next big thing. it’s earned the loyalty of its customers, who chose BBW next three years, 275. We believe there voice. Anytime. Anyplace. Worldwide. radar. Using these tools, Christmas gift baskets eight million times last holiday sea- can be a White Barn virtually everywhere Period. The end. I was able to identify a So, what’s next? son, while stuffing tens of millions more BBW products into there is a BBW. With similar productivity, significant opportunity gift boxes or Christmas stockings. margin characteristics, and potential Forty-seven weeks of national television in Let’s start with Bath & Body Works. Let me remind you, this sales growth. Clearly, a wonderful busi- 2000. Over 100 pages of national magazine in cotton foundations. business began about ten years ago. We initially believed When you think enough of a brand to choose it for family ness. Clearly, just the beginning. advertising. 36 billion catalogue pages. Teaming with design, stores could average about $500,000 each, or $500 million and friends, that’s customer loyalty. A powerful, pervasive The Victoria’s Secret brand is in front of directing our team, in annual sales on a thousand-store base. brand. And, by the way, customer loyalty can be measured in Now, to Victoria’s Secret. millions of customers every day, making a and partnering with financial terms. Both in margin. And in footfall. To be clear, multitude of positive impressions. Victoria’s Secret We were a little off. I believe that wherever there is footfall, from malls to strip Five years ago, Victoria’s Secret Stores Catalogue, we delivered centers, to smaller cities to airports, even to hospitals, Bath and Catalogue ran two very independent We believe that Victoria’s Secret, already the outstanding results.” In the past fall season alone, Bath & Body Works’ sales & Body Works can perform profitably. I now believe the businesses. Little coordination of styles dominant lingerie brand in America, has approached $1 billion. Just six months. And, in the aggre- domestic potential for BBW exceeds 2,000 stores. And or marketing. Little effort to interact or the potential, with its abundant credibility gate, we have sold over $5 billion in personal care products. that’s not all. connect on their shared brand. and momentum, to be the global lingerie Amazing growth. Amazing success. A wonderful brand. brand. There appears to be no upper limit. We know there are also multiple distribution channels for Each a good business, but, beyond Why? I believe the key is that, from its inception, the BBW BBW. We’ve tested a catalogue, or magalogue, that we believe sharing a name, no brand connection, or Victoria’s Secret Stores led the way with team has approached the business as a completely inte- is a brand-right business extension. And it works. Doing brand standards. another excellent year. The VSS team has grated brand. Everyone, and everything, connects to their business, while driving customers to stores, and advertising fully integrated top-tier design, produc- integrated brand approach. The brand evokes a strong emo- the brand. An excellent vehicle. All that’s changed. Victoria’s Secret has tion, merchant, and marketing talent, and tional response. It is delivered with quality and consistency. made enormous strides. In sales. Profit their results have been impressive. It gets trial and repeat purchase. The entire team “lives the So, we’ll continue to refine and expand our magalogue this margin. Customer awareness. And brand Sustained product launches like Body by brand,” brainstorming new products, talking to customers, year, and then establish a brand-right e-commerce Web site integration. Victoria, the Miracle Bra, Angels, Body Kristine Bokariza-Martin testing, refining. in the next 12 to 18 months. And we’ll certainly leverage the Flex, Desire, Cotton Lingerie, and Body Director, Merchandise Manager Cotton Foundations e-commerce knowledge and experience gained at IBI to Researchers who chart this sort of thing say Bare continue to ring up sales and drive VICTORIA’S SECRET STORES IBI became a public company in 1995. BBW’s sales, for the accelerate the BBW site and grow the brand. they’ve never seen the kind of growth in customers to the brand. At the same time, previous year, were $260 million in just over 300 stores. In positive brand penetration and customer the business continues to take the neces- 1999, sales exceeded $1.5 billion, in 1,214 stores. Great All good news. perception we’ve experienced. sary steps to position itself for the long > 58 4 8 LT D A R 9 9 9 9 A R LT D 4 9
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  29. 29. BATH & BODY WORKS offers healthy, natural, good-for-you personal care products from America’s Heartland. 5 4 LT D A R 9 9 9 9 A R LT D 5 5
  30. 30. Launched in November 1999, WHITE BARN CANDLE COMPANY has the potential to become as vivid and powerful a brand as Bath & Body Works. 06 LT D A R 9 9 5 0 LT D A R 9 9 9 9 A R LT D 0 0 9 9 A R LT D 5 7
  31. 31. < 49 When she was a young girl, Marian Wright “We were able to open term. Relentlessly attacking every area to Heavenly is one of them. Edelman, founder of the Children’s Defense get it to “next.” Preparing the organization 7 stores in 10 days, Fund, was told by her father that helping others for growth. And populating it with talent. We believe the potential for the Victoria’s which is incredible. is simply the “rent we pay for living.” We agree. Secret Beauty business is well in excess of The 3-week new hire Giving back has always been an important part of In addition, the Catalogue’s strategy to $1 billion. With excellent margins. And the way we do business. Knowing that our management training produce fewer, better books has proved it’s just the beginning of the potential, the associates, our businesses, and The Limited, program empowered correct. Larger books, stronger images, “what’s next,” in the beauty category’s Inc./Intimate Brands, Inc. Foundation are our managers to do more powerful, differentiated photogra- future. The very reason we established the sources of good in our communities fills us with their job well, right respect for each other and pride in our phy, all help to position the brand. Plus, Intimate Beauty Corporation last year. accomplishments. out of the gate. It we’ve upgraded the merchandising talent to ensure the fashion is consistent with There is, in truth, awesome potential, or gives our associates Our businesses and our Foundation form bonds the aspiration. The right thing to do. “next,” in every part of the Intimate who go through the with local organizations to address the most Brands businesses. That’s what makes program a great deal Our e-commerce site, already one of the them so exciting. of confidence in them- philanthropy most popular and, more important, profit- selves, and in the able, in all e-tailing, has processed orders I’d like to close this letter by going full brand. It’s something from over 160 countries. And, we feel we circle, back to the Victoria’s Secret Fashion I’m incredibly proud of are just beginning to market the site, and Show. Several months ago, we got a call on both a personal and the brand, internationally. from Miramax Films, inviting us to take professional level.” the show to Cannes, to benefit amfAR’s Which leads me to Victoria’s Secret Beauty. Cinema Against AIDS. We were happy to accept. We expect that, with our partici- In the past year, the VSB team examined pation, the event will raise a dramatic We want to make every home a loving and healthy variety of companies. This free public service important issues impacting our communities the entire business, paring back some amount of money for research. A power- home for all children. Following the success of the helps women restore their appearance and confi- every day. Our associates across the country – categories, while eliminating others ful brand, doing powerful good. The right Columbus Coalition Against Family Violence in dence, arming them for the fight against cancer. from New York to New Mexico – also act as 1998, we were instrumental in forming the sources of good, with their own generous contri- entirely. At the same time, they began to thing to do. Central New Mexico Task Force Against Family To be a family of the world’s best fashion brands, we butions of time and money. develop and introduce more brand-right Violence in 1999. This coalition of employers and know The Limited, Inc. and Intimate Brands, Inc. products. The first significant introduc- We are at the beginning of a major global community and political leaders has hosted must attract, retain, and effectively lead a diverse To be effective requires focus. While we support tion was the Dream Angels Heavenly presence, for brands with major global employer training sessions and well-attended workforce. One example of our commitment to dozens of programs around the country, our phi- prestige fragrance collection. potential. Populated by talented associ- forums to address the impact of violence on chil- diversity is our long-standing and growing part- lanthropy efforts concentrate on four issues, ates who pursue growth, and the future, dren, the workplace, and society and offer the nership with the United Negro College Fund – in including some that are of particular interest to Introduced in the fall of 1999, Heavenly with passion. I want to thank them for Pati Kunerth-Crowley community a multifaceted approach for the pre- underwriting UNCF events and contributing in women, our primary customers and associates: District Sales Manager quickly sold out, and should annualize at their hard work. Their passion translates vention and resolution of domestic violence. support of service and scholarships. This national fostering better education, working to support BATH & BODY WORKS over $100 million. It could well end up to results. organization has provided support to more than children and families, investing in health care, Our support of the “Look Good…Feel Better” 300,000 students educated by the 39 small, his- and promoting diversity. being the biggest fragrance launch in histo- program in New York City, created in partnership torically black member colleges and universities. ry. Good initial work, a strong result. And, a with the American Cancer Society, gives women So much hinges on education: progress, change, powerful example of what can happen when Sincerely, undergoing chemotherapy and radiation the tools We hope our involvement with these, and many understanding, and potential. It is an investment talented people touch an astonishingly they need to cope with changes in their appear- other tremendously worthwhile issues, encour- with unlimited payback. This year, 600 of our powerful brand. ance – sometimes as difficult to handle as the ages you to pledge your time and dollars as well. associates have committed their time as reading Leslie H. Wexner disease itself. Our financial support helps women You just might consider it your share of the “rent.” tutors and mentors to more than 300 kinder- By the way, we’ve enclosed some coupons in Chairman and receive training sessions with volunteer cosme- garten students in the Columbus Public Schools this report for you to sample our products. Chief Executive Officer tologists and personal care products from a through our ColumbusReads program. 5 8 LT D A R 9 9 9 9 A R LT D 5 9