The Limited, Inc. History

Company Perspectives:

We are determined to build a Company of powerful, differentiated retail brands that maintain and strengthen our position as the world's dominant specialty retailer.

Company History:

The Limited, Inc. is one of the largest corporate collections of specialty apparel retailers in the United States. The company owns and operates more than 5,300 stores throughout the United States and the United Kingdom, including big guns such as the Limited, Express, Structure, and Victoria's Secret. The Limited, Inc.'s holdings are separated into three main operating divisions: Women's Brands is composed of The Limited Stores, Express, Lerner New York, Lane Bryant, and Henri Bendel; the wholly owned subsidiary Intimate Brands, Inc. is made up of Victoria's Secret, Cacique, and Bath & Body Works; and Emerging Brands includes stores aimed at men and children, such as Structure, Abercrombie & Fitch, Limited Too, and Galyan's Trading Company.

The Early Years

The Limited, Inc.'s beginnings can be traced to 1961, when Leslie Wexner dropped out of law school and went to work in a women's clothing store owned by his father in Columbus, Ohio. After a short time there, Wexner suggested to his father that business would improve if the store concentrated on sportswear, but his father, Harry Wexner, believed that a full product line was necessary to attract customers. Instead, he encouraged his son to try out the sportswear idea on his own, which Leslie Wexner soon did.

Two years later, in 1963, Wexner used a $5,000 loan from his aunt to open a 2,000-square-foot store in Columbus's Kingsdale shopping center. Wexner christened it The Limited, named after the limited line of merchandise it carried. Wexner's goal was to gross $100,000 the first year--a goal which was surpassed with sales of $162,000. This success soon prompted the opening of a second store.

By 1965, The Limited was so successful that Wexner's parents, Harry and Bella, closed their own store and joined him in running his new enterprise. Harry Wexner served as the company's chairman until his death in 1975. Bella remained on the board into the 1990s as corporate secretary, providing her son with advice on his business moves. One year after Wexner's parents closed up shop and joined him, The Limited opened its first corporate headquarters above its Eastland mall store in Columbus. The company's employee count had reached 100, and by 1968 The Limited's sales had surpassed the $1 million mark.

In 1969, with five stores in operation, Wexner issued The Limited's first public stock, traded over the counter. After going public, the company began to expand rapidly&mdashøo rapidly, in fact, causing earnings to collapse. Wexner responded by improving the efficiency of the company's manufacturing and distribution systems. In a brief period, what The Limited had done in order to survive became the company's distinctive strength.

Innovations and Growth Throughout the 1970s

After identifying The Limited's trouble spots, Wexner implemented a system of financial controls supported by electronic point-of-purchase terminals. These terminals allowed the company's Columbus headquarters to monitor inventory levels to see what was selling and where it was selling. This information helped the company aggressively mark down slow-selling items, which cleared shelf space for hot new items to be brought in. Although marking down slow-sellers was not necessarily a fresh idea, the speed at which The Limited's headquarters evaluated and authorized these markdowns was impressive. The computer lines that link The Limited's shops to corporate headquarters brought the company the flexibility and speed of a small privately run boutique. This became The Limited's competitive edge over department stores that were forced to stick to price adjustment budgets planned months in advance.

The Limited's 1970 annual report, produced with a common copy machine, was bold enough to predict that The Limited would become the largest and most profitable retailer of woman's specialty clothing in the nation, although, at the time, there were only six Limited stores in existence. Nonetheless, the company's confidence certainly paid off. By 1974, The Limited had more than 1,000 employees, and the company opened its 100th store two years later. In just over a decade, the company had carved out a niche for itself by selling to young, fashion-conscious women who could coordinate an entire wardrobe with one stop at a Limited store.

The Limited's purchase of Mast Industries in 1978 added to the company's efficiency and flexibility. Mast Industries, a supplier that contracted with more than 150 production facilities around the world, became The Limited's merchandise procurement arm. The acquisition of Mast, coupled with the electronic point-of-purchase terminals on line to headquarters, allowed The Limited to place orders, purchase, and restock shelves with its most popular merchandise within two to three weeks. In comparison, the company's department store competition required months to do the same. The Limited also added to its marketing strength when it opened its first distribution center, a 525,000-square-foot structure in Columbus.

Rapid Expansion in the 1980s

Meanwhile, on the retail end of things, The Limited did more than concentrate on a specific market segment; it segmented the segment. In 1980 it opened its first Limited Express store, which focused on the youngest of fashion-conscious women--teenagers--putting more trendiness into its designs than would go into its other women's sportswear. In 1982, The Limited Express was comprised of eight successful stores, and became a separate business that was later renamed simply Express.

The Limited's expansion and market segmentation did not stop there. In 1982 alone, The Limited acquired Lane Bryant, Victoria's Secret, and Roaman's, merging the latter with Sizes Unlimited. The Limited was also listed on the New York Stock Exchange that same year, and its employee count reached 10,000. Each of the 1982 acquisitions prompted the company to restructure portions of its existing business. The addition of Lane Bryant, which sold clothing for larger women, caused The Limited itself to drop its very largest sizes and restock shelves with lower-priced, more fashionable sportswear aimed at younger women. The company also signed a contract with Bonjour to produce jeans and other stylish sportswear in large sizes, giving the chain a new image. When The Limited purchased the Victoria's Secret stores and catalog enterprise, it legitimized women's purchase of sexy lingerie on a national scale. Victoria's Secret stores, full of floral and lace pillows, old English furniture, and classical music, projected a respectable image.

The Limited's procurement arm, Mast Industries, soon began to supply all of the Limited's subsidiaries. In 1984, when Limited buyers stocked stores with career clothes that no one would buy, the Limited was able to develop, place orders for, and receive the completely new and private Forenza line, all within a matter of months. This allowed the company to reverse a slump that could have been catastrophic.

Private-label goods such as the Forenza line, which The Limited manufactured specifically for its stores, were produced at low cost in other countries and sold domestically for whatever price the market would support. The private labels could support large markups because The Limited created a desirable image for each line. For example, the Forenza line sported a romantic Italian name, although most of it was produced in the Far East. Furthermore, garment tags bore the name of a fictitious designer, Maria Pia, a Limited production consultant whose name had appealed to Wexner.

By 1984 The Limited's sales had surpassed the $1 billion mark. That same year, the company was also listed on the London Stock Exchange. The Limited's growth showed little sign of slowing, and the company offered to buy the financially troubled Los Angeles-based retailer Carter Hawley Hale Stores for $1.1 billion, but the offer was rejected. The following year, The Limited acquired Lerner Stores, a chain of moderate-price shops that it made profitable within a year. Another purchase that year was that of Henri Bendel, a store chain which catered to upscale, fashion-conscious women. In 1985 the company also opened its second distribution center, a 1.07 million-square-foot facility.

Net sales rose past $3 billion in 1986. The first Lerner Woman store, carrying larger sizes, was opened in addition to existing Lane Bryant stores, in order to capitalize on The Limited's name recognition. Limited Credit Services was also formed. In partnership with Edward J. DeBartolo Corporation, the company again attempted to buy Carter Hawley Hale, offering as much as $60 per share. Once again, Carter Hawley Hale rejected the bid, instead selling more than 3.5 billion shares to White Knight General Cinema Corporation.

In 1987, the company continued to expand into new markets when it opened two Limited International Fashion "superstores," and also introduced Limited Too, targeting children. It merged Sizes Unlimited and Lerner Woman, while Express unveiled its men's collection. At this point, the corporation was made up of over 50,000 employees.

The following year, The Limited acquired Abercrombie & Fitch, which was a somewhat upscale store chain featuring casual wear for men and women. Some tagged it as The Limited enterprise's answer to J. Crew and The Gap. The company also debuted its own private-label intimate apparel business, Lingerie Cacique, and a natural-toiletries store chain called Bath & Body Works. Another new entrance on the retail scene was that of Structure, a casual and trendy clothing store for men. The company also opened The Limited Building, a one million-square-foot distribution center and office. Then, to weather a slump in The Limited's fashion world, the company enlarged its specialty stores, giving them more expansive window displays in an attempt to attract customers. Sales for 1988 topped off at $4 billion.

The Limited sold Lerner Woman in 1989 to United Retail Group, Inc., in an agreement that gave The Limited a one-third interest in United Retail and its holdings. The company also obtained a charter for Limited Credit Services to become the World Financial Network National Bank, making it the first U.S. retailer to transform its credit division in that way. The company was ranked first in growth and profitability among specialty apparel merchandisers by Forbes in January 1989.

The 1990s and Beyond

Entering the new decade, The Limited continued its string of acquisitions and retail expansion with the mid-1990 purchase of Penhaligon's, a perfume and luxury gift marketer based in London that was formerly a division of Laura Ashley Holdings. Throughout the following two years, the company also completed the acquisition of Gryphon Development, L.P., a producer of bath and personal care products, for a total of approximately $79 million.

Some industry experts questioned how long The Limited could continue to grow at such a pace. Many wondered if The Limited might be losing its market advantage by leaving its original niche of small stores with limited lines of cost-conscious merchandise, and moving to larger groups of stores that were more department store-like in nature. Also, many U.S. manufacturers began refusing to produce The Limited's private labels and thus operate at the company's breakneck pace.

In part of 1990 and 1991, The Limited experienced organizational and distribution difficulties which resulted in the late delivery of new lines of merchandise to many of its Limited stores. Same-store sales at Limited and the budget-priced Lerner began to decline, and the company made moves to once again boost profits. The Forenza clothing line, which had formerly been a Limited exclusive, was introduced at Lerner in an attempt to attract new customers and increase sales. Many of the company's other predominantly mall-based store chains were either restructured, downsized, or closed if proving to be unprofitable. The company also dealt with quality problems that had surfaced in relation to some Victoria's Secret merchandise. Despite these problems, the company's efforts helped it increase 1992 sales almost 13 percent to $6.94 billion.

In late 1993, The Limited sold 60 percent of its stake in Brylane, an entity that had come to encompass and operate the Lane Bryant chain, as well as other catalog sales operations. The transaction brought in $285 million to The Limited, which maintained its control of the other 40 percent of Brylane. The Limited also reduced its stake in the United Retail Group, Inc. to 20 percent. The company continued to reevaluate each store unit's success, subsequently renovating or closing some stores based on their potential for growth.

In 1994, after having successfully introduced its own credit card, The Limited signed an agreement with Next plc to open Bath & Body Works stores in the United Kingdom, marking the company's first stray from the U.S. market. The decision to make Bath & Body Works the company's first entrance into the United Kingdom was an interesting one, given that the U.K. was the headquarters of The Body Shop, a huge rival in the natural-toiletries market.

The following year The Limited not only opened approximately 400 more stores, but also continued its string of acquisitions and expansion into new retail areas. In July 1995, the company purchased Galyan's Trading Company, an Indiana-based sporting goods store chain, for approximately $18 million. This addition added to the already diverse line of products for which The Limited was responsible, prompting the company to restructure its holdings into three main operating divisions. Women's Brands became responsible for the operation of all women's apparel holdings; Intimate Brands came to encompass the lingerie and toiletries holdings; and Emerging Brands was composed of the men's, children's, and sporting goods lines.

That same year, Intimate Brands was spun off and became a separate business entity, although listed as a wholly owned subsidiary of The Limited, Inc. Stock shares of the new company were offered to the public for purchase, and Intimate Brands was listed on the New York Stock Exchange. The company achieved first-year sales of $2.52 billion, which came from over 1,200 Victoria's Secret, Bath & Body Works, Cacique, and Penhaligon's store units, as well as from Victoria's Secret catalog sales. Intimate Brands was also made up of Gryphon Development, which was responsible for the creation of the company's personal care products.

Approaching the end of the century, The Limited was continuing efforts to position itself for further growth and increased earnings. In 1996, the company sold nearly 60 percent of its credit services to a New York-based investment firm, and also announced plans to close some 200 stores early the next year. These moves were not necessarily indicative of financial trouble, but instead of The Limited's experience in evaluating its weaker areas and then positioning itself for success. Even through its tougher years, The Limited had posted increased sales each year during the 1990s. In 1996 sales rose almost $800 million to $8.64 billion, from $7.88 billion in 1995. With an impressive portfolio of retail holdings, years of experience and proven success in the retail arena, and the international market still almost completely open, The Limited, Inc. approached the turn of the century with great potential for continued growth and expansion in the future.

Further Reading:

• Baumgold, Julie, "The Bachelor Billionaire: On Pins and Needles with Leslie Wexner," New York, August 5, 1985.
  The Limited, Inc. Fact Book: 1989-1990, Columbus: The Limited, Inc., 1989.
• Machan, Dyan, "Knowing Your Limits," Forbes, June 5, 1995, p. 128.
• Sparks, Debra, "Limited Appeal," Financial World, August 12, 1996, p. 36.
• Trachtenberg, Jeffrey A., "Merchant in a Rush: Leslie Wexner Pushes Limited's Fast Growth Despite Retailing's Ills," Wall Street Journal, August 15, 1990.
• "The Unlimited Limited," Forbes, November 15, 1977.
• Weiner, Steven B., "The Unlimited?" Forbes, April 6, 1987.
• Zinn, Laura, "Did Leslie Wexner Take His Eye Off the Ball?" Business Week, May 24, 1993, p. 104.

Source: International Directory of Company Histories, Vol. 20. St. James Press, 1998.