Once proud, The Limited now weak link in Wexner chain

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It's 1987. Every teenage girl with any fashion credibility, like, at all, owns a 10-button Outback Red henley and V-neck Forenza sweater.

The Limited rules middle-class, suburban fashion and in practically every mall across America you find a Limited store-875 in all. Other mall-based apparel brands-Gap, J.Crew, Benetton, Banana Republic-are on the rise, but even into the early `90s, The Limited leads the specialty apparel retail world.

"At that time, The Limited stores had its finger on the pulse of the market in a very real and very palpable way," recalled Ed Razek, who worked on the now-defunct apparel brands Outback Red and Forenza, and now serves as chief marketing officer at the Limited Brands. "For awhile, we were riding bigger waves better than anyone."

Fast-forward to 2005: Another 43 Limited stores will close, taking the store count to 280, down from 341 in 2003. What happened?

"There is not a narrative everyone accepts," Mr. Razek said. "There is honest disagreement among a number of people about what happened to the brand."

This quiet and largely ignored decline of a once seemingly unstoppable retail star gets highlighted whenever rumors circulate that Columbus, Ohio-based Limited Brands CEO Les Wexner might sell-off the brand, just as he did Lane Bryant, Lerner, Abercrombie & Fitch and Limited Too. Most often, though, the consensus is: It's too late.

RELUCTANCE

Mr. Wexner's reluctance to sell seems understandable. It is the legacy brand of his $9 billion retail empire. The son of Russian immigrants, Mr. Wexner launched the brand with a family loan in 1963, opening a single store in a suburban Ohio mall. And it's The Limited brand that gave Mr. Wexner the capital to build his retail empire to include Victoria's Secret, Bath & Body Works and White Barn Candle Co. Victoria's Secret posted $3.1 billion in sales last year, not to mention another $1.1 billion from the brand's direct (catalog/Internet) division, beating by more than three times The Limited's $577 million in sales. Even The Limited's sister chain, The Limited Express, launched in 1980, overshadows its predecessor with $1.9 billion in sales and 815 stores.

Analysts blamed a promotion-and-sale-driven strategy. After recounting a long list of sales, Bear Stearns retail analyst Dana Telsey wrote in a recent report: "Sound like one sale after another? You're getting the picture!"

Advertising for the chain also has been nonexistent. The bulk of the company's estimated $82 million in ad spending last year supported other brands, especially Victoria's Secret.

Despite comparable-store sales in the doldrums in 2004-down 5% at The Limited, compared to a 12% jump at Bath & Body Works and a 9% jump at Victoria's Secret-Mr. Wexner still seems positively giddy about the prospects for his two apparel brands, as evident in an annual letter to shareholders: "Let me be crystal clear: Express and The Limited are not for sale. I believe that both apparel businesses can double their volume. ... I believe the turnaround at The Limited has already begun."

Mr. Wexner clearly isn't giving up on his brand. In January, he executed a massive corporate restructuring, and hired Jay Margolis as group president-apparel, luring him away from Reebok International, where he served as president.

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