Beauty and intimates Limited’s latest focus

COLUMBUS, OHIO —Limited Brands officially made a break with its heritage in apparel late last month, when it announced it would be selling the majority of its interest in the Express brand and also exploring strategic alternatives for its namesake, The Limited. Moving forward, according to the company’s ceo, Les Wexner, Limited’s growth vehicles will be in beauty and intimate apparel, via its Bath and Body Works and Victoria’s Secret brands.

“Over the last decade, we’ve changed a lot and we have evolved,” Wexner said in a conference call to investors. “The announcements we’ve made are consistent with that narrowing of focus.”

It wasn’t too long ago that the Limited Brands’ focus was narrowed entirely on apparel. A little more than a decade ago, apparel still counted for about 70% of the company’s overall sales, and Limited Brands was the largest specialty apparel retail company. Now, oddly enough, that ratio has flip-flopped, with intimate apparel and beauty accounting for more than 70% of the company’s sales. The Limited and Express accounted for just $2.2 billion of the company’s $10.7 billion in sales last year.

In the ‘90s, Limited Brand’s portfolio offered apparel for everyone from tweens to teenagers and even adults, with Limited Too, Express and The Limited all being solid contenders in the industry. The Limited was the company’s first brand, which Wexner founded in 1963.

But the company has pared down that heritage over time, spinning off Limited Too and Abercrombie & Fitch as separate companies, and selling Lane Bryant and Lerner New York, as well. Wexner has said in past analyst meetings that shedding the company’s apparel focus and refocusing the company on beauty and intimate apparel was a necessary move.

The company has lost its once loyal customers to the numerous other specialty apparel retailers, such as H&M, who have emerged as purveyors of fast-fashion. Beauty products and intimate apparel are seen as less risky and less prone to changes in consumer taste each season, company management has suggested.

“Our strategic agenda focuses on growth in the intimate apparel, personal care and beauty segments of our business,” Wexner said in a company statement.

Although Limited Brands will be focusing on lingerie and beauty moving forward, the company will still own a 33% stake in Express. The company sold a 67% share on its interest in Express to Golden Gate Capital for $548 million, and it expects that the transaction will be completed in the first week of July. Company management has not given any time frame for a possible sale of The Limited.

Limited Brands has already made one major move in staking out its new territory. The company acquired La Senza, Canada’s largest intimate apparel company, last November. La Senza will give the company an opportunity to extend its presence to other countries and possibly overseas, Wexner said during the investor call.

Industry analysts see the company’s announcement to sell a majority interest in Express and possibly sell Limited as well as a positive sign, and one that is perhaps long overdue.

“Limited’s announced sale of Express and its inevitable divestiture of namesake Limited divisions signals the end to fashion-driven volatility and the beginning of a multiple revaluation that we believe should lead to a sharp recovery in shares in the near future,” said Todd Slater, managing director and specialty retail and footwear analyst for Lazard Capital Markets. “By exiting its heritage apparel franchise, the company eliminates a low-margin distraction [and] gets out of a highly competitive business where [the company] had no edge.”