Limited Brands Presentation

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Limited Brands Presentation

  1. 1. Dustin Nadeau, Donatas Sumyla, David Deprey and Jaime Rodriguez Bus 411, April 2006 LIMITED BRANDS - Inc. 2003
  2. 2. Case-Study Overview <ul><li>Existing Condition </li></ul><ul><ul><li>Limited Brands overview </li></ul></ul><ul><ul><li>Industry overview </li></ul></ul><ul><li>History, Key Facts, Goals and Objectives and Stock Information </li></ul><ul><li>Limited Brands Proposed Vision and Mission </li></ul><ul><li>External opportunities and threats </li></ul><ul><ul><li>CPM </li></ul></ul><ul><ul><li>EFE </li></ul></ul><ul><li>Financial Ratios </li></ul><ul><li>Internal strengths and weaknesses </li></ul><ul><ul><li>IFE </li></ul></ul><ul><li>Analysis </li></ul><ul><ul><li>SWOT Matrix </li></ul></ul><ul><ul><li>SPACE </li></ul></ul><ul><ul><li>BCG </li></ul></ul><ul><ul><li>IE matrix </li></ul></ul><ul><ul><li>Grand Strategy Matrix </li></ul></ul><ul><ul><li>QSPM </li></ul></ul><ul><li>Possible strategies: Matrix Analysis </li></ul><ul><li>Decisions </li></ul><ul><ul><li>Strategic implementation </li></ul></ul><ul><ul><li>Long-term and short-term Actions </li></ul></ul><ul><li>Evaluation Procedure </li></ul><ul><li>Current Update </li></ul>
  3. 3. Limited Brands Overview <ul><li>Founded in 1963 by Leslie H. Wexner, Limited Brands, Inc. is a specialty retail business in the U.S. </li></ul><ul><li>Headquartered in Columbus, Ohio </li></ul><ul><li>Sells women’s intimate apparel, personal care and beauty products, and women’s and men’s apparel </li></ul><ul><li>3 segments: </li></ul><ul><ul><li>Victoria’s Secret (women’s intimate and other apparel, beauty products, and accessories through retail stores, catalogue, and e-commerce) </li></ul></ul><ul><ul><li>Bath & Body Works (personal, care, beauty, and home fragrance products) </li></ul></ul><ul><ul><li>Apparel </li></ul></ul><ul><ul><ul><li>Express stores , which offer women’s and men’s apparel, sportswear, and accessories </li></ul></ul></ul><ul><ul><ul><li>Limited stores , a mall-based specialty store retailer of sportswear for women </li></ul></ul></ul>
  4. 4. Limited Brands Overview
  5. 5. <ul><li>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. </li></ul><ul><li>At first - a multi-divisional, largely apparel-based, popular-priced retailer </li></ul><ul><li>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) </li></ul><ul><li>Limited Brands in the past has: </li></ul><ul><ul><li>Re-visioned the business </li></ul></ul><ul><ul><li>Sorted the portfolio of businesses, and </li></ul></ul><ul><ul><li>Re-thought its talent </li></ul></ul><ul><li>Now they are: </li></ul><ul><ul><li>Turning to offense, and </li></ul></ul><ul><ul><li>Applying its specialty retailing skills to deliver high-value, branded, consumer packaged goods through channels of distribution it controls – stores and direct. </li></ul></ul>Limited Brands Overview
  6. 6. Key facts (2003) <ul><li>Sector: Services </li></ul><ul><li>Industry: Apparel Stores </li></ul><ul><li>Full Time Employees: 18,000 (2002) </li></ul><ul><li>3,911 Stores (2003) </li></ul><ul><li>Net sales 2003 $8.934M </li></ul><ul><li>Operating income $963M </li></ul>
  7. 7. History <ul><li>1963 The Limited opens its first store in Kingsdale Mall in Columbus, Ohio </li></ul><ul><li>1969 The Limited's first public stock offering is issued over-the-counter. 47,600 shares are offered at $7.25 per share </li></ul><ul><li>1982 Victoria's Secret store and catalogue are purchased for $1 million. </li></ul><ul><li>1985 One Henri Bendel store is acquired for $10M </li></ul><ul><li>1988 25 Abercrombie & Fitch stores and one catalogue are acquired for $46 million </li></ul><ul><li>1990 Bath & Body Works opens first store in Boston. </li></ul><ul><li>1995 Initial Public Offering of Intimate Brands, Inc. establishes it as a fully independent company. </li></ul><ul><li>1998 50 Bath & Body Works Home stores are converted to The White Barn Candle Co. stores to begin a home fragrance brand test. </li></ul><ul><li>1998 The Limited, Inc. completes split-off of Abercrombie & Fitch. </li></ul><ul><li>Victoria's Secret launches e-commerce site www.victoriassecret.com which has been profitable since day one. </li></ul><ul><li>1999 The White Barn Candle Co. is launched by raising an old-fashioned barn in New York City's Bryant Park. </li></ul>
  8. 8. History <ul><li>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. </li></ul><ul><li>2001 Sale of Lane Bryant </li></ul><ul><li>Integration of Structure into the Express brand as Express Men’s </li></ul><ul><li>2002 Recombination of Intimate Brands and The Limited, Inc. </li></ul><ul><li>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 </li></ul><ul><li>2003 Sales of remaining interest in Alliance Data Systems Named the world's most admired specialty retailer by FORTUNE magazine </li></ul>
  9. 9. Our Brands
  10. 11. <ul><li>Victoria's Secret Stores </li></ul><ul><li>Victoria's Secret Direct </li></ul><ul><li>(Catalogue/E-commerce) </li></ul><ul><li>Victoria's Secret Beauty </li></ul>
  11. 12. <ul><li>First six stores opened in 1990 </li></ul><ul><li>Remodeled in 2002 (wood shelving, red-checked fabric, country atmosphere) </li></ul><ul><li>Website launched in 2002 (www.BathandBodyWorks.com) </li></ul><ul><li>Two new brands in 2003 - &quot;Aromatherapy&quot; and &quot;True Blue Spa&quot; </li></ul><ul><li>1,639 stores </li></ul>
  12. 13. Apparel Division <ul><li>Limited Stores </li></ul><ul><ul><li>Flagship division of the organization </li></ul></ul><ul><ul><li>No online presence (351 stores) </li></ul></ul><ul><ul><li>Focuses on fashion-conscious women who want a “sexy, sophisticated style” </li></ul></ul><ul><li>Express Stores </li></ul><ul><li>- Offers cutting-edge style </li></ul><ul><ul><ul><ul><ul><li>- Still making the transition to a dual- gender brand through remodeling </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>- 1,031 stores are located primarily in shopping malls </li></ul></ul></ul></ul></ul>
  13. 14. Other Retail Businesses <ul><li>Henri Bendel </li></ul><ul><ul><li>Offers the best in clothing and accessories from international designers </li></ul></ul><ul><ul><li>Products for “higher income 30-something women” </li></ul></ul><ul><ul><li>The only upscale LB store </li></ul></ul><ul><li>aura science </li></ul><ul><ul><li>LB owns 51% with Japanese cosmetics company Shiseido </li></ul></ul><ul><ul><li>The product line consists </li></ul></ul><ul><ul><li>of different beauty products </li></ul></ul>
  14. 15. Support Businesses <ul><li>Limited Logistics Services </li></ul><ul><li>Limited Real Estate </li></ul><ul><li>Limited Design Services </li></ul><ul><li>Limited Brand and Creative Services </li></ul><ul><li>Limited Technology Services </li></ul><ul><li>Mast Industries </li></ul>
  15. 16. Limited Brands, Inc. Stock (LTD) Information <ul><li>Index Membership : </li></ul><ul><ul><li>S&P 100 </li></ul></ul><ul><ul><li>S&P 500 </li></ul></ul><ul><ul><li>S&P 1500 Super Comp </li></ul></ul><ul><li>Company Type - Public (NYSE: LTD) </li></ul><ul><li>Fiscal Year-End – January </li></ul><ul><li>First IPO : 47,600 stocks @ $7.25 (1969) </li></ul><ul><li>Shares Outstanding : 523M (2003) </li></ul><ul><li>Stock Price: </li></ul><ul><ul><li>Dec. 2003: 18$ </li></ul></ul><ul><ul><li>April 20 th 2006: 25$ </li></ul></ul>
  16. 17. Stock Price Performance
  17. 18. Industry Overview: Outlet Centers <ul><li>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. </li></ul><ul><li>Among the most significant finding is the identification of this market as the fastest-growing segment of the retail industry. </li></ul><ul><li>Nation's outlet centers generates close to $ 500 million in sales tax revenues every year. </li></ul><ul><li>65 percent of outlet shoppers are married and 74 percent are female. </li></ul><ul><li>Baby boomers, ranging in age from 25 to 54, make up a large percentage of outlet center shoppers. </li></ul><ul><li>Outlet shoppers: </li></ul><ul><ul><li>60 percent, report household income between $ 25,000 and $ 75,000 </li></ul></ul><ul><ul><li>23 percent report incomes of less than $ 25,000 </li></ul></ul><ul><ul><li>16 percent boasted incomes of more than $ 75,000. </li></ul></ul>
  18. 19. Stock Info compared to Industry
  19. 20. Compare to Industry (Nov 2002)
  20. 21. Annual Report Statements <ul><li>“ Our brands are about innovation - about next.” </li></ul><ul><li>Les Wexner (2002 Annual Report) </li></ul><ul><li>“ 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.” </li></ul><ul><li>Les Wexner (2003 Annual Report) </li></ul>
  21. 22. Leslie Wexner, CEO and Chairman
  22. 23. Goals & Objectives <ul><li>Aggressively sort our portfolio and financially restructure our business through spins, splits, sell-offs, and store closings </li></ul><ul><li>With obtained cash from above actions, continue building our brand recognition </li></ul><ul><li>Our principle goal – increase shareholders value through a family of the world’s best fashion brands </li></ul>
  23. 24. Vision Statement <ul><li>Build a “family of the world’s best fashion brands” (Book, 2004) </li></ul><ul><li>To build a Company of powerful and differentiated retail brands that maintain and strengthen our position </li></ul><ul><li>as the world’s dominant </li></ul><ul><li>specialty retailer </li></ul><ul><li>(Website, 2006) </li></ul>
  24. 25. Company Values <ul><li>What are the four company values? </li></ul><ul><ul><li>Doing What is Right for associates, customers and investors </li></ul></ul><ul><ul><li>Being Inclusive in our thoughts and behaviors </li></ul></ul><ul><ul><li>Working for the Greater Good of the enterprise and the communities in which we operate </li></ul></ul><ul><ul><li>Pursuing Excellence in all we do </li></ul></ul>
  25. 26. Mission Statement <ul><li>Create sustained growth of shareholder value by focusing its time, talent, and capital on the highest return opportunities (Book, 2004) </li></ul><ul><li>Limited Brands is committed to building a family of the world's best fashion brands </li></ul><ul><li>offering captivating customer </li></ul><ul><li>experiences that drive long-term </li></ul><ul><li>loyalty and deliver sustained </li></ul><ul><li>growth for our shareholders </li></ul><ul><li>(Website, 2006) </li></ul>
  26. 27. External Opportunities and Threats <ul><li>OPPORTUNITIES : </li></ul><ul><li>Current 31M of people ages 12-19 is expected to increase to a record 34M by 2010 </li></ul><ul><li>Teens ages 12-19 spent approx. $200B in 2002 with 1/3 of this spending in fashion </li></ul><ul><li>Female baby boomers needs are not fully satisfied by retailers and manufacturers of women’s apparel </li></ul><ul><li>General e-commerce sales were up 25% in 2002 with spending at $35.9B, which indicates that shoppers are willing to make purchases online </li></ul><ul><li>Increase in time-conscious type of online consumers because of busy lifestyles </li></ul><ul><li>Increasing acceptance of the casual workplace trend </li></ul><ul><li>Federal tax cuts might encourage more consumer spending </li></ul><ul><li>Increase Internet advertising and sales </li></ul><ul><li>THREATS : </li></ul><ul><li>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 </li></ul><ul><li>Female baby boomers place retirement savings, college tuition, and mortgages at a higher priority than spending on apparel </li></ul><ul><li>Slow U.S. economy growth in 2003 </li></ul><ul><li>Household debt increase to $9B by fall 2003 </li></ul><ul><li>The gap between rich and poor continues to grow </li></ul><ul><li>Industry is risky because in order to gain competitive advantage you may have to take gambles (prediction of future trends) </li></ul><ul><li>Competitive sector nationally, regionally, and locally represented by the department and specialty stores and mail-order catalogue businesses </li></ul><ul><li>Disruption of foreign suppliers </li></ul><ul><li>Increasing transportation cost caused by escalating fuel prices </li></ul>
  27. 28. EFE Matrix
  28. 29. 2006 Annual ranking of America's largest corporations: Specialty Retailers
  29. 30. Direct Competitors Comparison (2006) <ul><li>LTD = Limited Brands Inc </li></ul><ul><li>GPS = Gap Inc. </li></ul><ul><li>TJX = TJX Companies Inc. </li></ul><ul><li>Industry = Apparel Stores (Source: http://finance.yahoo.com) </li></ul>
  30. 31. Competitive Profile Matrix (CPM)
  31. 32. Internal strengths and weaknesses <ul><li>STRENGTHS : </li></ul><ul><li>Defined company philosophy which implies continuous innovations </li></ul><ul><li>Strong brand recognition </li></ul><ul><li>Victoria’s Secret performance </li></ul><ul><li>Healthy financial position </li></ul><ul><li>Flexible changing strategies </li></ul><ul><li>Fast adaptation to emergent trends, markets, and environments </li></ul><ul><li>Brand building as a model </li></ul><ul><li>Location of distribution center </li></ul><ul><li>Effective computerized system </li></ul><ul><li>WEAKNESSES: </li></ul><ul><li>Increased debt results in lower profits and decline in cash flow </li></ul><ul><li>Reduce in selling square footage of Apparel business group </li></ul><ul><li>Large amount of suppliers (2,500) which means difficulties to ensure consistent quality and time of delivery </li></ul><ul><li>Uncertainty of consumer acceptance of the Company’s products </li></ul><ul><li>Reliance on foreign sources of production </li></ul><ul><li>Locating stores in close proximity in malls </li></ul>
  32. 33. IFE Matrix
  33. 34. Key Ratios Evolution (1999-2003)
  34. 35. Overall Key Ratios (2006)
  35. 36. SWOT Analysis
  36. 37. SPACE Matrix <ul><li>* Y axis: - Financial Strength: +6 </li></ul><ul><li> - Environmental Stability: -2 => Y coordinate: STRATEGY: AGRESSIVE </li></ul><ul><li>* X axis: - Competitive Advantage: - 4 => X coordinate: </li></ul><ul><li> - Industry Strength: + 5 </li></ul>* Y axis: - Financial Strength: +6 - Environmental Stability: -2 => Y coordinate: STRATEGY: AGRESSIVE * X axis: - Competitive Advantage: - 4 => X coordinate: - Industry Strength: + 5
  37. 38. BCG Matrix Cash-Cow Stars Dogs Question marks
  38. 39. IE Matrix
  39. 40. The Grand Strategy Matrix <ul><li>Potential Strategies: </li></ul><ul><li>Market development </li></ul><ul><li>Market penetration </li></ul><ul><li>Product development </li></ul><ul><li>Horizontal integration </li></ul><ul><li>Divestiture </li></ul>
  40. 41. Matrix Analysis
  41. 42. QSPM
  42. 43. Decisions <ul><li>Primary : Long-term Divestiture of the Apparel business group </li></ul><ul><li>Alternative : </li></ul><ul><ul><li>Horizontal Integration by acquiring small and emerging competitors in the lingerie and body care areas </li></ul></ul><ul><ul><li>Product development by introducing new product lines based on best categories’ performance </li></ul></ul>
  43. 44. Why Divestiture? <ul><li>Competition is fierce </li></ul><ul><li>Industry is risky </li></ul><ul><li>Our top two business groups show significantly better annual results and are gaining larger market share </li></ul><ul><li>Apparel segment does not fit with the company’s philosophy </li></ul>
  44. 45. Implementation <ul><li>Actions: </li></ul><ul><ul><li>Short term: First year </li></ul></ul><ul><ul><ul><li>Shut down unprofitable Apparel stores </li></ul></ul></ul><ul><ul><ul><li>Establish closing-down sales in order to get rid of inventory </li></ul></ul></ul><ul><ul><ul><li>Use earned cash for product development and horizontal integration </li></ul></ul></ul><ul><ul><ul><li>Open up to 15 new Victoria’s Secrets and Bath & Body Works stores in most profitable areas </li></ul></ul></ul><ul><ul><ul><li>Establish a management team which will focus especially on tracing the divestiture process </li></ul></ul></ul><ul><ul><ul><li>Provide precise information to the media, stockholders, and customers with the reasons of our decision and future procedures </li></ul></ul></ul><ul><ul><li>Long-term: Next 5 years </li></ul></ul><ul><ul><ul><li>Look for potential buyers </li></ul></ul></ul><ul><ul><ul><li>Contact specialized companies which would professionally manage the divestiture process </li></ul></ul></ul><ul><ul><ul><li>Use the generated cash to decrease debt and to carry out further investments </li></ul></ul></ul>
  45. 46. Evaluations <ul><li>Apparel’s quarterly financial reports </li></ul><ul><li>Sales and profits reports based on individual Apparel stores </li></ul><ul><li>Frequent divestiture management team’s meetings </li></ul><ul><li>Evaluation reports </li></ul><ul><li>Annual survey to assure our brand image is not damaged </li></ul>
  46. 47. Update: 2004-2006 <ul><li>2004 </li></ul><ul><ul><li>Predominantly became a personal care, beauty, and lingerie company, over 70% of sales from these areas (Victoria’s Secret and Bath and Body Works) </li></ul></ul><ul><ul><li>C.O. Bigelow rapidly becoming known as, “The best specialty beauty store in the world.” </li></ul></ul><ul><ul><li>Victoria’s total U.S. sales is almost as large as the entire lingerie market 10 years ago. </li></ul></ul><ul><ul><li>Victoria has 5 of the top 20 prestige women’s fragrances sold in the U.S. </li></ul></ul><ul><ul><li>New division of Victoria is introduced, “PINK.” Will become the second largest lingerie brand in the U.S., behind Victoria’s </li></ul></ul><ul><li>2005: </li></ul><ul><ul><li>Reorganization into three business groups: lingerie, beauty and personal care, and apparel. </li></ul></ul><ul><ul><li>Victoria’s introduces IPEX wireless bra which is claimed to be the most supportive ever, provides the most coverage, and minimal padding. </li></ul></ul><ul><li>2006 </li></ul><ul><ul><li>Bath and Body Works is now open 24/7 to suit all of their customers’ needs. </li></ul></ul><ul><ul><li>Introduced the Infinity Edge push up bra which has become the most comfortable push up bra offered. </li></ul></ul>
  47. 48. References <ul><li>http://finance.yahoo.com </li></ul><ul><li>Limited Brands Inc. Annual Reports </li></ul><ul><li>Annual ranking of America's largest corporations, Magazine: Fortune 500 (2006): cnn.money.com </li></ul><ul><li>www.hoovers.com </li></ul><ul><li>www.bigcharts.com </li></ul><ul><li>www.limitedbrands (Investor Relations) </li></ul><ul><li>www.businessweek.com </li></ul><ul><li>Strategic Management Concepts and Cases; Fred R. David, 10 th Ed. </li></ul>
  48. 49. Thank you! <ul><li>Questions? </li></ul><ul><li>Comments? </li></ul>

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