UNIVERSITY OF OREGON
INVESTMENT GROUP
2/4/2011
Consumer Goods
Limited Brands, Inc.
RECOMMENDATION: BUY
Stock Data
Price (52 weeks)
Symbol/Exchange
Beta
Shares Outstanding
Average daily volume
(3 month average)
Current market cap
$19.12 – 35.48
LTD
1.55
332 M
4,424,610
9,707.7 M
Current Price
Dividend
Dividend Yield
$31.84
.60
2.1%
Valuation (per share)
DCF Analysis
Comparables Analysis
Current Price
Target Price
$34.56
$26.47
$31.84
$34.56
Summary Financials (In Millions)
2009 A
Revenue
Net Income
Operating Cash Flow
8,632
448
1,004
BUSINESS OVERVIEW
Limited Brands (LTD) was founded in 1963 in Columbus, Ohio by current Chief Executive Officer, Leslie
H. Wexner. Limited Brands‟ headquarters are located in Columbus, Ohio. They also have offices in New
Covering Analyst: Farbod Sedeh
Email: Farbod@uoregon.edu
The University of Oregon Investment Group (UOIG) is a student run organization whose purpose is strictly educational.
Member students are not certified or licensed to give investment advice or analyze securities, nor do they purport to be.
Members of UOIG may have clerked, interned or held various employment positions with firms held in UOIG’s portfolio. In
addition, members of UOIG may attempt to obtain employment positions with firms held in UOIG’s portfolio.
Limited Brands, Inc.
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York, Kettering, Ohio, Hong Kong, Montreal, Quebec, Paramus, New Jersey, and Rio Rancho, New
Mexico.
Limited Brands is a specialty retailer that focuses on lingerie, beauty, and personal care products that makes
consumers feel young, sexy, and sophisticated. The approximately $9.5 billion segment leader leads these
products through the brands Victoria's Secret and Bath and Body Works. Limited Brands‟ portfolio also
includes Victoria's Secret PINK, C.O. Bigelow, White Barn Candle Co., La Senza, and Henri Bendel.
Victoria’s Secret Stores
Victoria‟s Secret markets products such as bras, panties, clothing,
accessories, fragrances, lotions, cosmetics, swimwear, and athletic attire.
They market their products through Victoria‟s Secret stores and
Victoria‟s Secret Direct (web and catalogue) which sells to customers in
over 200 countries. Currently, there are 1,039 stores in the US and 6 locations that were just opened in
Canada this year. As announced recently, Limited Brands is opening their first Victoria‟s Secret flagship
store in London in 2012.
In 2007, 2008, and 2009, Victoria‟s Secret stores generated approximately 37%, 40%, and 41% of Limited
Brand‟s total revenue
Victoria’s Secret Direct
Through VictoriasSecret.com and Victoria‟s Secret Catalogue, Victoria‟s Secret Direct makes it possible for
customers globally to feel young, sexy, and sophisticated 24 hours a day, 7 days a week. Victoria‟s Secret
Direct reaches more than 390 million customers each year in over 200 countries. In 2007, 2008, and 2009,
Victoria‟s Secret Direct generated approximately 14%, 17%, and 16% of Limited Brand‟s total revenue. The
website is one of the most profitable and fastest growing websites on the Internet.
PINK
Victoria‟s Secret PINK was launched in 2004, targeting the college girl‟s lifestyle and celebrating campus life.
PINK markets sleepwear, loungewear, and bras and panties designed to appeal to the young, optimistic,
self-confident girl who wears, loves, and lives PINK. The collections of items are sold in Victoria‟s Secret
stores, in PINK stores, and online at both www.VictoriasSecret.com and www.VSpink.com.
This past August, PINK launched a line of apparel branded with more than a dozen NFL teams. The
apparel, which includes T-shirts, sweatshirts, hoodies, and tank tops are available for purchase on
VSpink.com. Victoria‟s Secret‟s financial results include PINK.
La Senza
La Senza Corp. operates more than 250 stores throughout Canada and
approximately 100 stores in 48 other countries. They are the ultimate
shopping destination in Canada for a variety of exclusive branded lingerie at
affordable prices. La Senza offers a beautiful and intimate shopping
environment , featuring sleepwear, loungewear, bras and panties, body care,
and accessories. The La Senza shopping experience can also be available
online at www.lasenza.com.
In 2007, 2008, and 2009, La Senza generated approximately 4.8%, 5.4%, and 5% of Limited Brand‟s total
revenue.
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Bath and Body Works
The Bath and Body Work brand has been a leader in the personal care industry ever
since the introduction of fragrant flavors indulgences, such as shower gels, antibacterial soap, lotion, candles, and accessories. These products are easily incorporated
into the simple rituals in the consumer‟s daily life at home, work, or any other
location where emotion and physical well-being take its role.
Bath and Body Works operates 1,617 stores in the US and 56 stores in Canada. In
addition, BBW is expanding in the Middle East through the Alshaya Group (the leading retailer in the
Arabian Gulf). Limited Brands planned to open 6 Bath and Body Works stores by the end of 2010.
In 2007, 2008, and 2009, Bath and Body Works generated approximately 24.6%, 26.3%, and 27.6% of
Limited Brand‟s total revenue
White Barn Candle Company
The White Barn Candle Company offers a variety of fragrances and décor items for homes of consumers.
They are a destination for a collection of high quality candles, home fragrances, and accessories with a
European sensibility. Bath and Body Works‟ financial results include White Barn Candle Company.
C.O. Bigelow
C.O. Bigelow, an American apothecary, was founded in 1838 in New York‟s Greenwich Village. It is a
destination for beauty and personal care brands from all around the globe. This upscale beauty and skin
care store competes with other stores such as Sephora and Neiman Marcus.
C.O. Bigelow products are available at all Bath and Body Works locations. Bath and Body Works‟ financial
results include C.O. Bigelow.
Henri Bendel
Henri Bendel is an upscale women‟s specialty store based in New York that
sells handbags, wallets, totes, key fobs, jewelry, the famous signature home
fragrance collection and more. Currently, Henri Bendel operates in 11
locations around the US. The financials for Henri Bendel are included in the “Other” category.
BUSINESS AND GROWTH STRATEGIES
Domestic Growth
Before growing internationally, management has stated its main focus will be on domestic growth. This
growth will be organic. Limited Brands have not expressed interest in acquiring anymore stores, especially
after divesting in The Limited Stores and Express and acquiring La Senza several years ago.
To grow domestically, management believes retail fundamentals are essential in determining success. They
consider retail fundamentals as “read and react with speed and agility, disciplined inventory management,
management of overhead and SG&A expenses, and deliver returns on capital spending.” Already, Limited
Brands has improved substantially in their retail fundamentals, but CEO Les Wexner always says “we can
always do better.”
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Les Wexner stated back in the beginning of January, that Limited Brands has the potential to double its
domestic revenue. He expressed this rapid revenue increase would not occur through an increase in store
openings, but rather through an increase in revenue per store. From following news and listening to
conference calls and presentation, I‟ve projected most of this growth is to come from Victoria‟s Secret.
Bath and Body Works will continue to experience revenue growth, especially with the new release of the
“Island Escape” fragrance collection. However, Victoria‟s Secret Beauty, PINK, and Direct (website and
catalogue) are going to be the key drivers in the rapid revenue growth.
Victoria‟s Secret Beauty has now become a major competitor with Estee Lauder, Channel, and Dior
domestically and globally. Management has high expectations for VS beauty. PINK continues to be a
growing success in the college world, capturing loyal customers at an early age.
International Growth Opportunities
Limited Brand‟s international opportunities are endless, but after the security of their business domestically,
they plan on expanding globally at a fast pace.
La Senza
La Senza is the company‟s first international priority. Under new leadership, La Senza completely
repositioned their business to focus on a younger and more-trendy customer. Along with their new
business focus, the La Senza leadership team created a new store design, which already is giving them great
early results from their customers. With already 450 stores outside of North America, Limited Brands and
its global partners committed to open at least 60 more La Senza stores in 2011.
Bath and Body Works
Two years ago, Limited Brands opened 6 stores in Canada, mostly in Toronto and Edmonton. Now Bath
and Body Works is in a market leadership position and plan to open 60 stores in Canada by the end of the
year. The first BBW store outside of North America was just opened this past October in Dubai. The
partnership between Limited Brands and the Alshaya Group (Leading Retailer in the Middle East) has
welcomed 6 stores in the Middle East in the past few months. The first store opened at Mirdif City Centre
mall in Dubai on October 25th. Two more stores were opened in Kuwait at The Avenues and Marina Mall
on November 9th and 10th. In the month of December, Dubai welcomed three more stores: the Mall of
Emirates on December 14th, The Dubai Mall on December 20th, and the Ibn Battuta Mall on December 27th.
PINK and Victoria’s Secret
Limited Brands have established 8 PINK stores in Canada so far this year. PINK is doing very well on the
balance sheet and will continue to be a platform of growth in the future.
The first Victoria‟s Secret flagship stores outside the US opened this past October in Canada. In the
months of September and October, four stores were opened in Canada. Some of the stores had 2,500
people lined up outside at lunchtime to get into the store. Currently, Limited Brands is planning the
opening of their first flagship store in London, in the famous luxury retail destination on the corner of New
Bond and Brooks Street. Limited Brands has also opened VS stores at the airports in Buenos Aries,
Argentina; San Paulo, Brazil; Dubai, United Arab Emirates; Barbados and Mexico City International
Airport.
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I predict Limited Brands to open stores in Brazil within the next 5-6 years. Brazil‟s GDP is expected to
grow 5.5% in 2011, 2012, and 2013. Brazilian women love the intimate appeal and sophistication Victoria‟s
Secret has to offer. In fact, a 1000 sq. foot Victoria‟s Secret Beauty store in an airport in Brazil generated
over $10 million/year in top line revenue. I believe Limited Brands will not ignore the potential sales they
could generate from opening stores in Brazil and possibly other South and Latin American countries.
MANAGEMENT AND EMPLOYEE RELATIONS
Limited Brands was founded in 1963 and has been led since by Leslie H. Wexner. Their senior management
team has an excessive amount of business and retail experience at Limited Brands and other companies such
as Target, Neiman Marcus, The Gap, Inc., Yum Brands, Carlson Companies, and The Home Depot. They
believe they have one of the most experience management teams in the retail business. Their fundamental
mentality has lead Limited brands to great quarterly reports and new growth opportunities internationally.
Leslie H. Wexner, 72, has been the Chief Executive Officer since the founding of Limited
Brands since 1963. With a net worth of $2.9 Billion, this law-school drop-out earned
$160,000 in his first year of opening Limited Brands. He further expanded his portfolio
through innovation and acquisitions. Under his leadership, Limited Brands has become an
approximately $ 9.5 billion segment leader, offering lingerie, beauty, and personal care
products.
Stuart B. Burgdoerfer, 47, has been Limited Brand‟s Executive Vice President and Chief
Financial Officer since April of 2007. Before, Mr. Burgdoerfer held several positions at
Limited Brands from 1998 to 2004, including VP of financial planning, CFO for the White
Barn Candle Company, Senior Vice President of Finance and corporate controller. He
joined The Home Depot in 2004 as the SVP of Finance, until he returned to Limited
Brands in 2006.
RECENT NEWS
“Limited Brands raises annual dividend 33 percent” – 1/28/2011
Limited Brands, which operates Victoria‟s Secret, Bath and Body Works, and other mall stores, announced
it was increasing its annual dividend by 20 cents (33%). Instead of 15 cents, it will pay a quarterly dividend
of 20 cents on March 11th to shareholders.
“Victoria’s Secret Opens in Canada” – 8/16/2010
Victoria‟s secret opened its first of four stores in Canada this month. The 18,000-square-foot shop is
located in West Edmonton and a second shop is set to open August 26th in Toronto. Limited Brands plans
to open the four stores in the provinces this year, one in Mississauga in September, and a second store in
Toronto in October.
“Limited Brands Announces Flagship Victoria's Secret Store in London” – 6/22/2010
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Limited Brands announced it will open a Victoria‟s Secret flagship store in London‟s premier retail
destination for luxury and fashion brands. The store will be located on the reputable corner of New Bond
Street and Brooke Street in 2012.
INDUSTRY ANALYSIS
Limited Brand‟s Victoria‟s Secret and Bath and Body Works are major players in different industries.
Intimate Apparel Industry
Victoria‟s Secret has a strong foothold in the intimate apparel industry at a market share of 27.5%. The
majority of Victoria‟s Secret‟s competitors in the industry are family owned individual proprietorships.
The industry is affected by several factors. These factors are consumer sentiment, disposable income, and
external competitors. As the economy picks up, disposable income will increase. The graph below shows a
representation of what IBIS world believes consumer sentiment and per capital disposable income will be
until 2016.
Consumer sentiment was expected to grow by 13.5% in 2010 and a further 12% over 2011. The growth can
be represented in the graph below. The group that tends to spend more on lingerie and swimwear is the 1529 age groups. Limited Brands is targeted this key demographic through Victoria‟s Secret, PINK, and La
Senza in Canada.
Consumer consumption is forecasted to speed up
in 2011 as Americans find their discretionary
appetite return. Victoria‟s Secret is likely to further
dominate the industry through international store
expansion and increased investment in brand
promotion.
Clothing retailers are facing an increase in
competition from substitutes, especially in the last
5 years. Victoria‟s Secret faces increase competition from department stores, such as Target, JCPenney, and
Sears. If consumers purchase more apparel from department stores, demand for lingerie will from clothing
retailers will decrease.
IBIS World projects revenue growth in 2011, 2012, and 2013 to be 2.7%, 2.9%, and 3.0%. They also
project the leading companies in this industry will only gain more market share in the future.
Beauty, Cosmetics, and Fragrance Industry.
Bath and Body Works and Victoria‟s Secret Beauty operate in the Beauty, Cosmetics and Fragrance store
industry as well. Limited Brands has a 19.8% market share in this industry. Similar to the industry
described above, it is affected by consumer sentiment, disposable income, and external competitors.
Bath and Body Works is facing an increase in competition from big and small department stores, such as
Wal-Mart, Target, and Fred Meyer. These major department stores offer similar products that BBW offer,
but at a cheaper costs. However, IBIS World projects that the top four companies will strengthen their hold
in the industry and account for a larger portion by 2015. Below is a representation of the products and
service segments in the industry.
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Bath and Body Works and Victoria‟s Secret Beauty offer
products in 5 of the 7 segments (at 85%). The only two
segments where Limited Brands does not offer products
is “sun care, baby care, and other products” and
“deodorants and shaving products.”
IBIS World projects the revenue of this highly
competitive industry to grow at 2.8%, 3.2%, and 3.7%
in 2011, 2012, and 2013.
Inflation
The average inflation rate for 2010 was 1.5%. Following this was an inflation rate of 1.6% for the first
month of 2011. On January 7th, 2011, Ben Bernanke gave a testimony on the economic outlook. The
chairman of the Federal Reserve explained that even though inflation has decreased by .8% in the last year,
he and most committee participants believed an inflation rate of just under 2%, would be enough to balance
the risk of adverse economic shocks in the future. Many central banks around the world have come to
similar judgments about future inflation rates. Therefore, I have predicted inflation rate to around 1.9%
until 2013 and 2% until the terminal year.
S.W.O.T. ANALYSIS
Strengths
 Limited Brands purchases merchandise from over 1,000 suppliers from all around the world. No
supplier provides over 10% of merchandise.
 Their senior management team has an excessive amount of business and retail experience and they
believe they have one of the most experience management teams in the retail business.
 Strong Brand Recognition- Icon for pop culture.
 Healthy Financial Position.
 High conversion rate of store visitation to purchases.
Weaknesses
 Because they do not have any material long-term merchandise supply contracts, their imports are
subject to a variety of custom regulations and international trade arrangements, including existing
duties, tariffs, or quotas.
 Henri Bendel, White Barn Candle Company, and C.O. Bigelow are expecting little growth.
Opportunities
 Limited Brands plans on expanding internationally in Canada, Middle East (with the Alshaya
Group), London, and other countries within the next couple of years.
 E Commerce growth
Threats
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


Limited Brands‟ revenue, profits, and cash flow are sensitive and may be negatively affected by the
current economic condition and consumer confidence.
Currency and exchange risks from doing business in foreign markets.
Inability to innovate can lead to a decrease in market share.
COMPARABLES ANALYSIS
I used several factors when screening for comparable companies. First, I started off by looking at
companies in the retail industry that shared similar risks, products, market cap, and betas. Then I screened
for similar growth percentages in the categories of forward-looking sales, EBITDA, and gross profit for
three years. The comparable companies that I selected based on this process were Nordstrom (JWN),
Macys (M), and Hanes Brands (HBI).
The four multiples I used were EV/Revenue, EV/Gross Profit, EV/EBITDA, and EV/FCF. Due to
outliers, I did not weight my EV/FCF at all. Rather, I weighted the other multiples evenly at 33.33%.
EV/Revenue is a measure of how the market is pricing the company based off of its revenue. EV/Gross
Profit was used as a measure of how well the company controlled their respective cost of sales.
EV/EBITDA was used to measure how the companies were able to turn revenue into income.
Limited Brands‟ growth rates are shown below:
Limited Brands(LTD) 2011 E
2012 E
Revenue
4.1%
3.2%
EBITDA
8.4%
6.6%
Gross Profit
5.1%
4.5%
Nordstrom Inc. (50%)
“Nordstrom, Inc., a fashion specialty retailer, offers apparel, shoes,
cosmetics, and accessories for women, men, and children in the United
States. The company offers a selection of brand name and private label
merchandise. It sells its products through various channels, including
„Nordstrom‟ full-line stores, „Nordstrom Rack‟ off-price stores, „Last
Chance‟ clearance stores, and „Jeffrey‟ boutiques; and through catalog and the Internet. Nordstrom, Inc. also
provides a private label card, two Nordstrom VISA credit cards, and a debit card for Nordstrom purchases”
- Yahoo! Finance
Nordstrom was weighted the highest for several reasons. Nordstrom offers many, if not all, of the same
products that Limited Brands offer through their multiple stores. In addition, Nordstrom and LTD both
share very similar profitability margins. Both companies have high long term debt and similar capital
structure. LTD and JWN both operate in multiple markets that are the same, therefore sharing similar
market risks. However, JWN and LTD have a 0.3 gap in their regression betas.
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Nordstrom‟s growth rates are shown below:
Nordstrom (JWN)
Revenue
EBITDA
Gross Profit
2011 E
2012 E
6.2%
5.9%
10.1%
6.4%
6.2%
5.9%
Macys (25%)
“Macy‟s, Inc., together with its subsidiaries, operates department stores and
Internet Websites in the United States. The company‟s retail stores and
Websites sell a range of merchandise, including men‟s, women‟s, and
children‟s apparel; and accessories, cosmetics, home furnishings, and other consumer goods.” - Yahoo!
Finance
I chose to weight Macy‟s as 25% because Macys offers similar products like lingerie, beauty supplies, and
accessories. Along with a similar market cap, they have similar future growth rates to Limited Brands.
Macys operate in some of the same markets as Limited Brands, therefore share similar market risks.
Even though Macys and Nordstrom are very similar companies and nearly identical beta, I decided to
weight Macys 25% lower. Macy‟s offers a wider variety of products, including bedding, kitchen supplies,
furniture, and much more. In addition, Macys has much more long term debt than Limited Brands and
Nordstrom. Also, Macy‟s LTM operating results are much higher than those of Nordstrom and Limited
Brands.
Macy‟s growth rates are shown below:
Macys (M)
Revenue
EBITDA
Gross Profit
2011 E
2012 E
2.7%
2.3%
2.3%
2.6%
2.8%
2.3%
Hanesbrands Inc. (25%)
“Hanesbrands Inc., a consumer goods company, engages in the design, manufacture,
sourcing, and sale of apparel essentials in the United States and internationally. Its
product portfolio includes T-shirts, bras, panties, men‟s underwear, kid‟s underwear,
casual wear, active wear, socks, and hosiery.” – Yahoo! Finance
HBI was weighted 25% for multiple reasons. First, their market cap is substantially smaller than LTDs.
Second, their D/E ratio is much higher than LTDs (shown in the Hamada beta). However, after running a
5 year monthly regression, HBI‟s beta is 1.74 while LTD‟s beta is 1.55. Along with similar betas, they share
similar profitably margins, risks, and products offered.
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Hanesbrands growth rates are shown below:
Hanesbrands (HBI)
Revenue
EBITDA
Gross Profit
2011 E
2012 E
9.0%
5.7%
13.8%
10.1%
9.3%
6.2%
DISCOUNTED CASH FLOW ANALYSIS
Operating Margin (EBIT Margin)
Limited Brands is very discipline when it comes to retail fundamentals. Their main focus is to reach an
operating margin of 15% by 2012. Below is a graph showing their LTM operating margin. I forecasted the
necessary line items so a 15% operating margin could be reached in my DCF. Their management team is
very confident in reaching 15% and growing past that as well.
Revenues
Victoria’s Secret
The average revenue/store has decreased in the past few years. Management‟s goal was to return and
eventually exceed the revenue/store amount from previous years. I forecasted the amount of stores
opening until 2014, and then multiplied it by the revenue/store calculated amount from previous years.
This growth trend will increase until 2014 and then decrease gradually until the terminal year. The reason
being management will focus more on capitalizing on their international opportunity.
Victoria’s Secret Direct (website)
VS Direct is one the most popular websites on the web. It provides products to customers in over 200
countries. LTD considers VS Direct to be a main source of global growth in the next few years. I
forecasted growth to be very high until 2014, then decreasing until the terminal year. One reason being, IBIS
world projects e commerce revenue growth to be very high in those years. Second, VS Direct will be their
main international growing market until stores around the globe start to open. As more stores open
internationally, people will purchase less online from VS direct.
La Senza
La Senza in Canada is Limited Brand‟s first international priority. Through the hiring of new management,
Limited Brands has rebuilt and turned around the La Senza Business. I don‟t see much growth through
store openings, but rather revenue growth from each individual store. I have their business growing around
4 % - 5% until 2014, when LTD switches their main focus to rapid international growth through Victoria‟s
Secret and Bath and Body Works.
Bath and Body Works
Because BBW is a simpler model, I forecasted it to grow by a historical trend. I calculated the revenue per
store before 2009, and multiplied by the number of stores I projected BBW to open domestically in the next
4 years. After that, I projected revenue growth to decrease at a small rate until the terminal year as more of
management‟s focus will be on international expansion.
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Other
The other category includes Victoria‟s Secret international, Bath and Body Works international, and Henry
Bendel. Because the main focus in that segment is from Victoria‟s Secret and BBW, I did not project
growth for Henry Bendel.
Chief Executive Officer, Les Wexner, stated back in their October conference call that there is a huge
potential for stores in the Middle East. He said Turkey alone had a 200 store potential and Middle East
overall had a 400-500 store potential. He didn‟t specify whether Victoria‟s Secret or BBW would have a
higher ratio, but knowing that BBW is a simpler model than Victoria‟s Secret, I assumed most of the stores
opening will be BBW.
There were several steps in forecasting revenues for Limited Brands‟ international growth. First, I calculated
revenue/store by dividing the total revenue by the number of international stores. Second, I multiplied the
revenue/store by what the potential store count could be in the Middle East and Europe. Third, after
finding the total revenue, I divided it by the number of years from 2011 to 2020 (ten years).
I did not distribute the revenue equally among the years until 2020. Rather, I added a smaller amount of
revenue in the years until 2014 and then added more in the later years until 2020. I thought this was an
accurate assessment because management will aim their concentration on the international growth
opportunity around 2014-2015.
Cost of Revenues
It is imperative that any retail business manages their inventory with caution. An important part of
achieving the 15% operating margin goal set by management is COGS. When inventory is piled up, markdowns occur and increase the COGS margin rate. Since 2006, Limited Brands have shown a decrease in
inventory per selling square foot, as shown below. As you can see, the decreased inventories have resulted
in an increase in the merchandise margin. I forecasted Limited Brands‟ COGS to follow this trend and
decrease gradually until the terminal year to 61% of revenue.
Tax Rate
In the past, the tax rate has fluctuated from 37.19% in 2007 to 51.89% in 2008 and then back down to
31.08% in 2009. The tax rate increase in 2008 was primarily due from recognizing $215 million related to
the impairment of goodwill and trade name assets associated with Limited Brand‟s La Senza business. The
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same reason explains the decrease. I projected for the tax rate to return to market 35% by 2011. The
continue fluctuation until that point in time is due from the divesture of the remaining 25% ownership in
Limited Stores. I have the tax rate staying at 35% until the terminal year because LTD does not plan on
divesting or acquiring any companies in the near future.
Depreciation
I forecasted depreciation to be around its average historical percent of revenue which was 4.07%. Within
the last 10 years, the percentage has moved between a 1.5% interval. Therefore, I thought a historical
average would be accurate grounds for forecasting.
SG&A
Historically, SG& A has been around 25% of revenue. Limited Brands are committed to growing expenses
slower than sales. I projected SG&A to decrease slow until 2013, but then pick up again until 2016. The
reason being, Limited Brands will be entering a global market at that point. Therefore, marketing and
advertising costs will rise. However, once Limited Brands has gained its desired global market share, I
forecasted SG&A to decrease slowly from 2016 to the terminal year.
Current Assets and Net Working Capital
To forecast current assets accurately, I treated cash and cash equivalents as excess cash and added it back to
equity value in my DCF assumptions. I took out cash for two reasons.
First, without cash and cash equivalents, current assets are more reflective of working capital. Since we are
calculating free cash flows, we are only interested in the assets that are not earning a fair market rate of
return, in Limited Brands‟ case: A/R, inventories, and other current assets.
Second, historically Limited Brands have always had a high amount of cash. However, the amount of cash
was always volatile and would change dramatically from year to year. When I took cash out, I am left with
current assets that are more reflective of operations and easier to predict.
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Because there was little change between A/R and other current assets, I forecasted them to be 1.83%, and
2.7% of revenue. These are the averages from the last 10 years. Because Limited Brands plans on opening
new stores internationally, I have inventories increasing at a low rate until the terminal year.
Current Liabilities
Projecting current liabilities was similar to that of current assets. Because there was a steady change
historically, I decided to forecast A/P, income tax payable, and other current liabilities on the historical
average. Thus, 5.4%, 1.33%, and 7.48% of revenue.
CapEx
In the ICR Xchange Conference that took place in the beginning of January, CFO Stuart Burgdoerfer
forecasted capital expenditures to be around $260 million (2.65% of revenue) in 2010 and not exceeding
$350 million in 2011. I forecasted capital expenditures to be 2.95% of revenue and then increasing until the
terminal year. To support the international growth, Limited Brands will be opening new stores across the
globe, therefore, increasing capital expenditures.
Acquisitions
I did not forecast any acquisitions until the terminal year. Limited Brands has expressed no interesting in
acquiring any more companies. They would rather focus on their three big opportunities now, Victoria‟s
Secret, Bath and Body Works, and La Senza. Once they have capitalized on those opportunities, they will
then focus on the smaller businesses they own, such as Henry Bendel, White Barn Candle Company, and
C.O. Bigelow.
Beta
At first, I ran a 5-year monthly regression beta against the S&P and reached 1.67. I didn‟t think this was
accurate assessment of risk because of Limited Brands divesting in Express and The Limited Stores and the
purchase of La Senza in the beginning of the 2007 fiscal year. This meant the risk profile has changed in the
last 5 years.
I then ran a Hamada beta just as a reference and reached 1.18. Because Limited Brands has no pure
comparable company, I didn‟t think a Hamada beta would be an accurate assessment of the company‟s
systematic risk.
My next approach was a 3-year monthly (1.80), 3-year weekly (1.50), and a 2-year weekly (1.60) against the
S&P. Because the 3-year monthly didn‟t consist of enough data points and Limited Brands was still divesting
a portion of The Limited Stores and Express, I didn‟t think it would be an accurate assessment. What were
left over were a 3-year weekly and a 2-year weekly. I decided to take a weighted average of the two betas
and arrived at a beta of 1.55.
RECOMMENDATION
I weighted my DCF analysis 100% and my comparable analysis 0%, returning an implied price of $34.56, an
undervaluation of 8.54%. Therefore, I am recommending a buy for all portfolios.
Beyond the numbers, Limited Brands has one of the most experienced management teams in the retail
business, especially with their CEO, Les Wexner, having over 47 years of retail experience. Management
13
Limited Brands, Inc.
university of Oregon investment group
http://uoig.uoregon.edu
continues to focus on retail fundamentals, always stating they can do better. Their experience and
concentration has led Limited Brands to beat earnings expectations for the last 4 quarters by at least 3.10%,
and as much 31.60%.
In addition, Limited Brands domestic and international growth prospects are excellent. The international
stores already opened are doing great and management sees a high potential for expansion in the Middle
East with their partner, the Alshaya Group, in the coming years.
Target Price
DCF Implied Price (100%)
34.56
Comparables Implied Price (0%)
26.47
Target Price
34.56
Current Price
31.84
Under Valued
8.54%
14
Limited Brands, Inc.
university of Oregon investment group
http://uoig.uoregon.edu
APPENDIX 1 – COMPARABLE ANALYSIS
The University of Oregon Investment Group
($ in millions, except per share data)
LTD
Stock Characteristics
Max
Min
Avg.
Current Price
23.52
23.52
50 Day Moving Avg.
24.98
24.98
200 Day Moving Avg.
22.34
22.34
Beta
1.85
1.67
Size
0.00
ST Debt (MRQ)
605.00
0.00
LT Debt (MRQ)
6982.00
1871.17
Cash and Cash Equiv. (MRQ)
715.00
75.50
Minority Interest
0.00
0.00
Preferred Stock
0.00
0.00
Diluted Share Count
427.50
97.75
Market Cap
10054.80
2536.66
Enterprise Value
16926.80
4525.03
Profitability Margins
0.00
Gross Margin
40.50%
0.33
EBIT Margin
10.00%
0.06
EBITDA Margin
14.50%
0.11
Net Margin
5.20%
0.01
Credit Metrics
0.00
Interest Expense (MRQ)
48.00
31.00
Debt/Equity (MRQ)
0.24
0.24
Debt/EBITDA (LTM)
1.62
1.62
EBITDA/Interest Expense (LTM)
7.03
3.47
Operating Results
Revenue (LTM)
24,583
4,165
Gross Profit (LTM)
10,037
1,387
EBITDA (LTM)
2,980
504
Free Cash Flow (LTM)
Valuation
EV/Revenue
EV/Gross Profit
EV/EBITDA
EV/Free Cash Flow
50.00%
JWN
25.00%
M
25.00%
HBI
31.48
31.04
28.36
1.78
Median
28.90
28.40
26.85
1.80
31.84
31.04
28.02
1.67
44.61
42.38
37.42
1.86
23.52
24.98
22.34
1.85
25.95
25.75
25.67
1.74
200.93
3544.54
706.13
0.25
0.00
269.94
8272.02
11311.61
99.35
2662.50
851.50
0.00
0.00
277.25
9990.26
11897.30
2,519.0
988.0
1
0
332
10,570.9
12,102.9
6.0
2,806.0
1,046.0
0
0
222.5
9,925.7
11,691.7
605.0
6,982.0
715.0
0
0
427.5
10,054.8
16,926.8
192.7
1871.17
75.5
0
0
97.8
2,536.7
4,525.0
36.58%
8.53%
12.45%
3.28%
36.65%
8.95%
12.30%
3.30%
35.10%
10.00%
14.50%
5.20%
38.20%
9.70%
13.30%
5.10%
40.50%
6.20%
11.30%
1.50%
32.50%
8.20%
10.70%
1.30%
69.28
0.49
2.36
6.98
40.05
0.49
2.06
6.00
48
0.24
1.62
7.03
31
0.28
1.78
12.43
166
0.69
2.34
4.97
32.1
0.74
3.72
3.47
Metric
EV/Revenue
EV/Gross Profit
EV/EBITDA
EV/Free Cash Flow
Price Target
Current Price
Under (Over) Valued
11,848
4,638
1,655
9,322
3,564
1,567
1.06
2.82
7.37
34.02
x
x
x
x
Implied Price
24.94
24.57
29.92
26.47
31.84
16.85%
9,220
3,435
1,556
367
1.31
3.52
7.78
32.98
x
x
x
x
9,424
3,692
1,579
479
1.24
3.17
7.40
24.41
x
x
x
x
24,583
10,037
2,980
1,308
0.69
1.69
5.68
12.94
x
x
x
x
4,165
1,387
504
61
1.09
3.26
8.99
74.30
x
x
x
x
Weight
33.33%
33.33%
33.33%
0.00%
15
Limited Brands, Inc.
university of Oregon investment group
http://uoig.uoregon.edu
APPENDIX 2 – DISCOUNTED CASH FLOWS ANALYSIS
The University of Oregon Investment Group
($ in millions, except per share data)
Total Company Revenue
% Y/Y Growth
Cost of Revenue
% Revenue
Gross Profit
Gross Margin
Operating Expenses
SG&A
% Revenue
Impairment of Goodwill and Other Intangible Assets
% Revenue
Gain on Divestiture of Express
% Revenue
Loss On Divestiture of Limited Stores
% Revenue
Net Gain on Joint Ventures
% Revenue
Total Operating Expenses
% Revenue
EBIT
% Revenue
Other (Expense) Income
% Revenue
Interest Expense
% Revenue
Interest Income
% Revenue
Pre-tax Income
% Revenue
Less Taxes (Benefit)
Tax Rate
Less: Net Income (Loss) Attributable to Noncontrolling Interest
Net Income
Net Margin
Add Back Depreciation and Ammortization
% Revenue
Add Back Interest Expense*(1-Tax Rate)
% Revenue
Operating Cash Flow
% Revenue
Current Assets
% Revenue
Current Liabilities
% Revenue
Net Working Capital
% Revenue
Change in Net Working Capital
Capital Expenditures
% Revenue
Unlevered Free Cash Flow
Discounted Unlevered Free Cash Flows
2007
10,134
6,625
65.37%
3,509
34.63%
2,616
25.81%
13.00
0.13%
(302)
-2.98%
72.00
2,399
23.67%
1,110
10.95%
128
1.26%
149
1.47%
18.00
0.18%
1,107
10.92%
411
37.13%
-22.00
718
7.09%
352
3.47%
94
0.92%
1,164
11.48%
1,901
18.76%
1,374
13.56%
527
5.20%
749
7.39%
2008
9,043
-10.77%
6,037
66.76%
3,006
33.24%
2009
2010Q123A 2010Q4E 2010A+E
8,632
6,157
3,669
9,826
-4.54%
0
13.83%
5,604
3,971
2,342
6,313
64.92%
64.50%
63.84%
64.25%
3,028
2,186
1,327
3,513
35.08%
35.50%
36.16%
35.75%
1
2011 E
10,460
6.45%
6,668
63.75%
3,792
36.25%
2
2012 E
11,195
7.03%
7,053
63.00%
4,142
37.00%
3
2013 E
12,041
7.55%
7,525
62.50%
4,515
37.50%
4
2014 E
12,976
7.77%
8,110
62.50%
4,866
37.50%
5
2015 E
13,918
7.26%
8,664
62.25%
5,254
37.75%
6
2016 E
14,889
6.98%
9,231
62.00%
5,658
38.00%
7
2017 E
16,096
8.11%
9,939
61.75%
6,157
38.25%
8
9
10
2018 E 2019 E
2020 E
17,486
19,095
21,013
8.64%
9.20%
10.05%
10,754
11,743
12,923
61.50%
61.50%
61.50%
6,732
7,352
8,090
38.50%
38.50%
38.50%
2,311
25.56%
215.00
2.38%
2,166
25.09%
3.00
0.03%
1,616
26.25%
0
0.00%
742
20.23%
23
0.63%
2,358
24.00%
23
0.23%
2,458
23.50%
0
0.00%
2,463
22.00%
0
0.00%
2,709
22.50%
0
0.00%
2,952
22.75%
0
0.00%
3,201
23.00%
0
0.00%
3,439
23.10%
0
0.00%
3,718
23.10%
0
0.00%
4,066
23.25%
0
0.00%
4,487
23.50%
0
0.00%
4,991
23.75%
0
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
(109)
-1.21%
2,417
26.73%
589
6.51%
23
0.25%
181
2.00%
18.00
0.20%
449
4.97%
233
51.89%
-4.00
220
2.43%
377
4.17%
87
0.96%
684
7.56%
1,694
18.73%
1,255
13.88%
439
4.85%
-88
479
5.30%
293
(9)
-0.10%
2,160
25.02%
868
10.06%
17
0.20%
237
2.75%
2.00
0.02%
650
7.53%
202
31.08%
0.00
448
5.19%
393
4.55%
163
1.89%
1,004
11.64%
1,446
16.75%
1,322
15.32%
124
1.44%
-315
202
2.34%
1117
0
0.00%
1,616
26.25%
570
9.26%
120
1.95%
160
2.60%
2.00
0.03%
532
8.64%
180
33.83%
0.00
352
5.72%
291
4.73%
106
1.72%
749
12.16%
1,993
~
1372
~
621
~
~
197
3.20%
0
0.00%
765
20.86%
562
15.31%
-90
-2.45%
80
2.18%
2
0.05%
392
10.67%
143
36.58%
0.00
248
6.77%
117
3.18%
50
1.37%
415
11.32%
2,001
~
1,391
~
610
~
486
63
1.72%
352
342
0.25
0
0.00%
2,381
24.23%
1,132
11.52%
30
0.31%
240
2.44%
2.00
0.02%
924
9.40%
323.24
35.00%
0.00
600
6.11%
408
4.15%
156
1.59%
1164
11.85%
2001
20.36%
1,391
14.16%
610
6.21%
486
260.00
2.65%
418
0
0.00%
2,458
23.50%
1,334
12.75%
0
0.00%
225
2.15%
0.00
0.00%
1,109
10.60%
388.06
35.00%
0.00
721
6.89%
439
4.20%
146
1.40%
1306
12.49%
2019
19.30%
1428
13.65%
591
5.65%
-30
309
2.95%
1028
886.42
1.25
0
0.00%
2,463
22.00%
1,679
15.00%
0
0.00%
241
2.15%
0.00
0.00%
1,439
12.85%
503.50
35.00%
0.00
935
8.35%
459
4.10%
156
1.40%
1551
13.85%
2106
18.81%
1537
13.73%
569
5.08%
-22
336
3.00%
1237
947.97
2.25
0
0.00%
2,709
22.50%
1,806
15.00%
0
0.00%
259
2.15%
0.00
0.00%
1,547
12.85%
541.52
35.00%
0.00
1,006
8.35%
490
4.07%
168
1.40%
1664
13.82%
2226
18.49%
1644
13.65%
583
4.84%
14
421
3.50%
1229
836.52
3.25
0
0.00%
2,952
22.75%
1,914
14.75%
0
0.00%
279
2.15%
0.00
0.00%
1,635
12.60%
572.25
35.00%
0.00
1,063
8.19%
528
4.07%
181
1.40%
1772
13.66%
2364
18.22%
1830
14.10%
535
4.12%
-48
454
3.50%
1366
826.51
4.25
0
0.00%
3,201
23.00%
2,053
14.75%
0
0.00%
299
2.15%
0.00
0.00%
1,754
12.60%
613.77
35.00%
0.00
1,140
8.19%
566
4.07%
195
1.40%
1901
13.66%
2564
18.42%
2060
14.80%
504
3.62%
-31
557
4.00%
1375
739.00
5.25
0
0.00%
3,439
23.10%
2,218
14.90%
0
0.00%
320
2.15%
0.00
0.00%
1,898
12.75%
664.41
35.00%
0.00
1,234
8.29%
606
4.07%
208
1.40%
2048
13.76%
2817
18.92%
2260
15.18%
557
3.74%
53
670
4.50%
1325
632.73
6.25
0
0.00%
3,718
23.10%
2,439
15.15%
0
0.00%
346
2.15%
0.00
0.00%
2,093
13.00%
732.38
35.00%
0.00
1,360
8.45%
655
4.07%
225
1.40%
2240
13.92%
3078
19.12%
2500
15.53%
578
3.59%
21
724
4.50%
1495
634.25
7.25
0
0.00%
4,066
23.25%
2,667
15.25%
0
0.00%
376
2.15%
0.00
0.00%
2,291
13.10%
801.74
35.00%
0.00
1,489
8.52%
712
4.07%
244
1.40%
2445
13.98%
3384
19.35%
2777
15.88%
607
3.47%
29
874
5.00%
1542
581.20
8.25
0
0.00%
4,487
23.50%
2,864
15.00%
0
0.00%
411
2.15%
0.00
0.00%
2,454
12.85%
858.79
35.00%
0.00
1,595
8.35%
777
4.07%
267
1.40%
2639
13.82%
3733
19.55%
3069
16.07%
665
3.48%
58
955
5.00%
1626
544.74
9.25
0
0.00%
4,991
23.75%
3,099
14.75%
0
0.00%
452
2.15%
0.00
0.00%
2,648
12.60%
926.69
35.00%
0.00
1,721
8.19%
855
4.07%
294
1.40%
2870
13.66%
4161
19.80%
3398
16.17%
763
3.63%
98
1051
5.00%
1721
512.11
10.25
16
Limited Brands, Inc.
university of Oregon investment group
http://uoig.uoregon.edu
APPENDIX 3 – DISCOUNTED CASH FLOWS ANALYSIS ASSUMPTIONS
Assumptions for Discounted Free Cash Flows Model
Tax Rate
35% Terminal Growth Rate
3%
Risk-Free Rate
3.61% Terminal Value
18555.29
Beta
1.55 PV of Terminal Value
5521.54
Market Risk Premium
7% Sum of PV Free Cash Flows
7483.41
% Equity
80.76% Firm Value
13004.95
% Debt
19.24% LT Debt
2519
Cost of Debt
7% Cash
988
CAPM
14.46% Equity Value
11473.95
WACC
12.55% Diluted Share Count
332
Implied Price
34.56
Current Price
31.84
Under Valued
8.54%
APPENDIX 4 – BETA SENSITIVITY ANALYSIS
Beta
1.78
1.72
1.67
1.61
1.55
1.49
1.43
1.38
1.32
Standard Error: 0.115963
St. Deviation Implied Price Under (Over) Valued
2.00
29.71
6.70%
1.50
30.84
3.09%
1.00
31.87
0.10%
0.50
33.17
-4.18%
0.00
34.56
-8.54%
-0.50
36.05
-13.24%
-1.00
37.66
-18.29%
-1.50
39.10
-22.82%
-2.00
40.96
-28.66%
17
Limited Brands, Inc.
university of Oregon investment group
http://uoig.uoregon.edu
APPENDIX 5 – REVENUE MODEL
The University of Oregon Investment Group
($ in millions, except per share data)
Victoria Secret Stores
% Total Revenue
% Growth
La Senza
% Total Revenue
% Growth
Victoria's Secret Direct
% Total Revenue
% Growth
Total Victoria's Secret
% Total Revenue
% Growth
Bath and Body Works
% Total Revenue
% Growth
Other (Includes Mast, Henri Bendel and our international operations excluding La Senza.)
% Total Revenue
% Growth
Total Revenue
% Growth
2007
2008
3,720
36.71%
3,590
39.70%
-3.49%
491
5.43%
0.61%
1,523
16.84%
8.86%
5,604
61.97%
-0.05%
2,374
26.25%
-4.81%
1,065
11.78%
-8.43%
9,043
-10.77%
488
4.82%
1,399
13.81%
5,607
55.33%
2,494
24.61%
1,163
11.48%
10,134
2009 2010Q123A 2010Q4E 2010A+E 2011 E
3,496
40.50%
-2.62%
423
4.90%
-13.85%
1,388
16.08%
-8.86%
5,307
61.48%
-5.30%
2,383
27.61%
0.38%
942
10.91%
-11.55%
8,632
-4.54%
2625
42.63%
~
277
4.50%
~
999
16.23%
~
3,901
63.36%
~
1434
23.29%
~
822
13.35%
~
6,157
1,050
28.62%
~
190
5.18%
~
503
13.71%
~
1,743
47.51%
~
1,158
31.56%
~
768
20.93%
~
3,669
0
3,675
37.40%
5.12%
467
4.75%
10.40%
1,502
15.29%
8.21%
5,644
57.44%
6.35%
2,592
26.38%
8.77%
1,590
16.18%
68.79%
9,826
13.83%
3,809
36.42%
3.65%
481
4.60%
2.94%
1,648
15.76%
9.73%
5,938
56.77%
5.21%
2,741
26.21%
5.75%
1,781
17.03%
12.00%
10,460
6.45%
2012 E
3,998
35.71%
4.95%
504
4.50%
4.85%
1,820
16.26%
10.42%
6,322
56.47%
12.01%
2,871
25.64%
4.74%
2,003
17.89%
12.45%
11,195
7.03%
2013 E
4,244
35.24%
6.15%
527
4.37%
4.50%
2,017
16.75%
10.84%
6,787
56.37%
14.30%
2,999
24.91%
4.47%
2,254
18.72%
12.55%
12,041
7.55%
2014 E
4,564
35.17%
7.54%
548
4.22%
4.00%
2,199
16.94%
9.00%
7,310
56.33%
15.64%
3,119
24.04%
4.00%
2,547
19.63%
13.00%
12,976
7.77%
2015 E
4,945
35.53%
8.35%
561
4.03%
2.50%
2,295
16.49%
4.40%
7,801
56.05%
14.94%
3,213
23.08%
3.00%
2,903
20.86%
14.00%
13,918
7.26%
2016 E
5,217
35.04%
5.50%
573
3.85%
2.00%
2,364
15.88%
3.00%
8,154
54.76%
11.54%
3,309
22.23%
3.00%
3,426
23.01%
18.00%
14,889
6.98%
2017 E
5,451
33.87%
4.50%
581
3.61%
1.50%
2,423
15.06%
2.50%
8,456
52.53%
8.39%
3,392
21.07%
2.50%
4,248
26.39%
24.00%
16,096
8.11%
2018 E
5,642
32.27%
3.50%
590
3.37%
1.50%
2,484
14.21%
2.50%
8,716
49.85%
6.90%
3,460
19.79%
2.00%
5,310
30.37%
25.00%
17,486
8.64%
2019 E 2020 E
5,783
30.29%
2.50%
599
3.14%
1.50%
2,546
13.33%
2.50%
8,928
46.76%
5.58%
3,529
18.48%
2.00%
6,638
34.76%
25.00%
19,095
9.20%
5,899
28.07%
2.00%
608
2.89%
1.50%
2,610
12.42%
2.50%
9,116
43.38%
4.59%
3,600
17.13%
2.00%
8,297
39.49%
25.00%
21,013
10.05%
18
Limited Brands, Inc.
university of Oregon investment group
http://uoig.uoregon.edu
APPENDIX 6 – WORKING-CAPITAL MODEL
The University of Oregon Investment Group
($ in millions, except per share data)
Net Revenues
2007
10,134
2008
9,043
2009
8,632
2010E
9,826
2011 E
10,460
2012 E
11,195
2013 E
12,041
2014 E
12,976
2015 E
13,918
2016 E
14,889
2017 E
16,096
2018 E
17,486
2019 E
19,095
2020 E
21,013
Current Assets
A/R
% of Revenues
Inventories
% of Revenues
Other Current Assets
% of Revenues
Total Current Assets
% of Revenues
355
3.50%
1,251
12.34%
295
2.91%
1,901
18.76%
236
2.61%
1,182
13.07%
276
3.05%
1,694
18.73%
219
2.54%
1,037
12.01%
190
2.20%
1,446
16.75%
251
2.55%
1,456
14.82%
294
2.99%
2,001
20.36%
246
2.35%
1480
14.15%
293
2.80%
2,019
19.30%
257
2.30%
1539
13.75%
309
2.76%
2,106
18.81%
271
2.25%
1625
13.50%
330
2.74%
2,226
18.49%
292
2.25%
1719
13.25%
353
2.72%
2,364
18.22%
306
2.20%
1879
13.50%
379
2.72%
2,564
18.42%
328
2.20%
2084
14.00%
405
2.72%
2,817
18.92%
346
2.15%
2294
14.25%
438
2.72%
3,078
19.12%
376
2.15%
2535
14.50%
472
2.70%
3,384
19.35%
401
2.10%
2817
14.75%
516
2.70%
3,733
19.55%
441
2.10%
3152
15.00%
567
2.70%
4,161
19.80%
Current Liabilities
ST Debt & Curr. Portion LT Debt
% of Revenues
Accounts Payable
% of Revenues
Income Tax Payable
% of Revenues
Other Current Liabilities
% of Revenues
Total Current Liabilities
% of Revenues
7
0.07%
517
5.10%
136
1.34%
714
7.05%
1374
13.56%
0
0.00%
494
5.46%
92
1.02%
669
7.40%
1255
13.88%
2
0.02%
488
5.65%
141
1.63%
691
8.01%
1322
15.32%
0
0.00%
687
6.99%
8
0.08%
696
7.08%
1391
14.16%
0
0.00%
664
6.35%
16
0.15%
748
7.15%
1428
13.65%
0
0.00%
688
6.15%
45
0.40%
804
7.18%
1537
13.73%
0
0.00%
710
5.90%
66
0.55%
867
7.20%
1644
13.65%
0
0.00%
779
6.00%
97
0.75%
954
7.35%
1830
14.10%
0
0.00%
849
6.10%
174
1.25%
1037
7.45%
2060
14.80%
0
0.00%
923
6.20%
223
1.50%
1114
7.48%
2260
15.18%
0
0.00%
1014
6.30%
282
1.75%
1204
7.48%
2500
15.53%
0
0.00%
1119
6.40%
350
2.00%
1308
7.48%
2777
15.88%
0
0.00%
1241
6.50%
399
2.09%
1428
7.48%
3069
16.07%
0
0.00%
1387
6.60%
439
2.09%
1572
7.48%
3398
16.17%
19
Limited Brands, Inc.
university of Oregon investment group
http://uoig.uoregon.edu
APPENDIX 8 – HAMADA BETA
Hamada
Macys
JWN
HBI
Standard er. Weightings Variance D/E
1.853
0.286
25%
0.082
1.857
0.269
50%
0.072
1.739
0.267
25%
0.071
Mean
1.827
Pure Business Beta
Sample D/E
Unlevered Business
LTD D/E
LTD Beta
1.827
2.773
0.652
1.240
1.177
Company
Beta
0.273
100%
0.074
185%
166%
592%
2.77
APPENDIX 9 – SOURCES









http://www.federalreserve.gov
IBIS World
Yahoo! Finance
www.Limitedbrands.com
www.seekingalpha.com
www.businessweek.com
Limited Brands’ 10-Ks and 10-Qs
FactSet
Limited Brands’ conference calls and presentations
20