Liza Gross
Group 2
10:00am
3/28/2013
Overview
Smart Art 1
Limited Brands is a company that has
been around since 1963. Limited Brands
was founded by Leslie H Wexner.
Limited Brands headquarters is located
What
• Specialty Retail
Where
• Columbus, Ohio
When
• 1963
Who
• 90,000 employees
in Columbus, Ohio and currently employees 90,000 people. Limited Brands
Fiscal Year End:
•January
27th
has five specialty stores: Victoria Secret,
Pink, Bath & Body Works, La Senza, and
Market Cap:
•12.93B
Henri Bendel. Between the five stores they
Stock price: •$44.84
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equal to 2,620 stores total. Limited Brands fiscal year ends
January 27th and has a market cap of 12.93 B.
Beliefs
Limited Brands is driven by passion and guided by value. Limited Brands has
four beliefs they follow; the
The customer
rules
Passion leads
to success
Inclusion
makes us
stronger
It matters how
we play the
game
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customer rules, passion leads to
success, inclusion makes us
stronger, and it matters how we
play the game. Limited Brands
believes that at the end of the day the customer rules and
as an employee you must do everything within your power to satisfy the
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customer. From the start of your day to the end of the day your goal is to have
a customer walk away having expectations fulfilled and happy. Limited Brands
pursues nothing but excellence. Limited Brands is able to set this standard
because everyone is emotionally, intellectually, and spiritually engaged in the
work set before them. Limited Brands is able to connect to customers well
because they allow their employees to embrace their diversity and experiences
and enforce them in the work place. Limited Brands believes that you can win
in many ways as a company, but unless it is fair, collaborative, and rooted in
the values and benefits the program it means nothing. The beliefs of Limited
Brands are at the root of the company.
History
1963
2002
2007
•The Limited was
established
•Pink is launched
•La Senza Corporation
is acquired
1982
2002
•Victoria Secret was
purchased
•The Limited changes
to Limited Brands
1985
1990
•Henri Bendel was
acquire
•First Bath & Body
store was opened
Smart Art 4
3
Smart Art 4 displays Limited Brands history.
Products
Victoria Secret
Victoria Secret
products include:
bras, panties,
sleepwear,
hosiery, and
more. Victoria
Secret’s motto is sex sells. Victoria Secret’s target market is geared towards
women between the ages of 20-40 years of age. Victoria secret is very sexy,
glamorous, and innovated.
Pink
Pink products
include: sleepwear,
loungewear, bras,
and panties. Pink
targets young girls
between the ages of
15-22 to sell their products too. Pink products also have contracts with NFL
and MLB teams to sell products with team logos and names on them.
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Bath & Body Works
Bath & Body Works
products include:
shower gels, lotions,
candles, and
accessories. Bath &
Body Works products
are for women of all ages.
La Senza
La Senza products include: bras, panties,
and lingerie. La Senza is a company in
Canada Limited Brands acquired in 2007.
La Senza is Canada’s number one lingerie
brand. With the acquisition of La Senza
Limited Brands is able to expand outside
of the United States.
Henri Bendel
Henri Bendel sells handbags and
small accessories. Henri Bendel is
known for its brown and white
stripes. Henri Bendel has a very
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limited target market and is geared towards upper class women.
Product Breakdown
Limited Brands product by net sales are
Chart 1
11%
shown in chart 1 Victoria Secret (Pink) and
La Senza make up 62% of Limited Brands
27%
62%
net sales in 2011 with Bath & Body Works
having 27% and Henri Bendel at 11%.
Limited Brands products are broke down
Chart 2
-8%
by operating sales in chart 2 Victoria
Secret (Pink) and La Senza compile 67% of
41%
operating sales in 2011. Bath & Body
67%
Works make up 41% of operating sales
and Henri Bendel has an 8% loss.
Core Competences
Limited Brands has three
Specialization
Differentiation
Efficiency
core competences: 1.
Specialization 2.
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Differentiation 3. Efficiency. Limited Brands has a strong ability to adapt to the
markets they are entered in. Having products covering more than one industry
makes Limited Brands a diversified organization. Limited Brands has had
extreme success in specializing in each diverse industry.
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Sustainable Competitive Advantage
Supplier
Diversity
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Limited Brands separates its company from
others by their supply diversity. Having such
diversity allows Limited Brands to have diverse
suppliers that are able to supply them with
extensive resources, niche expertise, innovative business approaches, and the
ability to be flexible when achieving their goals. Having such a vase diversity of
suppliers also allows long term growth for Limited Brands as a company.
SWOT
Strengths
Weaknesses
• Brand recognition
• Experienced
management team
• Supply contracts
• Henri Bendel
Opportunities
Threats
• Interntaional growth
• Innovative inability
• Foreign market
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Strengths
One of Limited Brands strengths is their brand recognition. Victoria Secret,
Pink, and La Senza all set Limited Brand up as an icon for pop culture. Limited
Brands other strength is their experienced management team. Limited Brands
senior management team has excessive amounts of business and retail
experience. Limited Brands is believed to have one of the most experienced
management teams in the retail business. .
Weaknesses
Supply contracts are one of Limited Brands weaknesses. Limited Brands does
not have any long-term merchandise supply contracts. Limited Brands import
their supplies and have a variety of custom regulations and international trade
arrangements; duties, tariffs, and quotas. Henri Bendel is also looked as a
weakness to Limited Brands. Henri Bendel is expecting low growth and already
has a loss in operating income for the year 2011.
Opportunities
Limited Brands has a huge opportunity with international growth. Currently
Limited Brands is focused on domestic growth, but do plan on expanding
internationally. Prospective countries to expand in the next couple of years are
Canada, the Middle East, and London.
Threats
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Limited Brands threats include the inability to innovate and foreign markets.
Having the inability to innovate can increase to a decrease in market share.
Foreign markets oppose threats to expansion including currency and exchange
risks. Expanding into a foreign market will need years of research on
prospective countries.
SIP
Graph 1
Limited Brands saw a dip in their stock price during 2009 due to the recession.
The stock price dropped down to a low of $7.13 and has continued to rise ever
since up to a current price of $44.12. This is shown in graph 1.
Financials
Income Statement
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After the
(in thousands)
2009
2010
2011
acquisition of La
Senza and the
Net Sales
$8,632,000 $9,613,000 $10,364,000
Cost of Goods Sold
$5,098,000 $5,464,000 $5,744,000
recession Limited
Brands saw a
slight dip in
Gross Profit
$3,534,000 $4,149,000 $4,620,000
Operating Income
$862,000
$1,290,000 $1,338,000
Net Income
$448,000
$805,000
$850,000
revenue, but was
able to maintain
healthy numbers.
In 2010 Limited
Earnings Per Share
$1.39
$2.49
$2.80
Brands had an
80% increase in
Table 1
Net Income and this was due to their recovery from the recession. This is
shown in table 1.
Balance Sheet
Limited Brands had a decrease of 80% to stockholder’s equity from 2010 to
2011 due to the retirement of treasury stock. This is shown in table 2.
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Table 2
(in thousands)
2009
2010
2011
Total Current Asset
$3,250,000 $2,592,000 $2,368,000
Total Assets
$7,173,000 $6,451,000 $6,108,000
Total Current Liabilities
$1,322,000 $1,504,000 $1,526,000
Total Stockholders’ Equity
$2,183,000 $1,476,000 $137,000
Total Liabilities & Stockholders’
Equity
$7,173,000 $6,451,000 $6,108,000
Long Term Debt
$2,767,000 $2,564,000 $3,541,000
Competitors
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Macy’s is one of Limited Brands
main competitors. In the 1830’s
What
• Department Stores
the early production of Macy’s
Where
• Cincinnati, Ohio
was formed. Prior to 2007 Macy’s
When
• 1830
was formally known as Federated
Department Stores, Inc.
Who
• 166,000 employees
Federated Department Stores got its name from the combining of Abraham &
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Straus of Brooklyn, Filene’s of Boston, F&R Lazarus & Co of Columbus, Ohio,
and Bloomingdale’s of New York. With the combination of each company they
agreed on linking financial interests while maintaining their own separate
identity. Macy’s headquarters is located in Cincinnati, Ohio while employing
166,000 people. Macy’s products include apparel, shoes, jewelry, cosmetics,
fragrances, for the home, bed and bath, and accessories.
Nordstrom is another one of Limited Brands tough competitors. Nordstrom
was first started in 1901 when John W Nordstrom opened a shoe-repair store
What
• Department Stores
Where
• Seattle, Washington
When
• 1901
Who
in Seattle with former friend Carl
Wallin called Wallin and Nordstrom
and has evolved over the years into
Nordstrom, Inc. Nordstrom’s
headquarters is located in Seattle,
• 52,000 employees
Washington and currently employees
Smart Art 9
52,000 people. Nordstrom’s products include apparel, shoes, jewelry,
cosmetics, fragrances, and accessories.
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Comparative Financials
Table 3
(in
thousands)
Net Sales
$10,364,000
$26,405,000
$10,497,000
$5,744,000
$15,738,000
$6,592,000
Gross Profit $4,620,000
$10,667,000
$4,056,000
Cost of
Goods Sold
Operating
Income
$1,383,000
$2,386,000
$1,249,000
Net Income
$850,000
$1,256,000
$683,000
$2.80
$2.96
$3.20
Earnings Per
Share
Table 3 shows 2011 comparative Income Statement. As shown in the table
Macy’s leads in all
categories except
earnings per share,
where Nordstrom
leads by twenty
four cents. In chart
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Chart 3
Limited Brands
Macy's
Limited Brands
Macy's
Nordstrom
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2009
6.2%
2010
12.5%
2011
13.9%
0.2%
4.1%
5.7%
6.7%
8.2%
8.0%
Nordstrom
1.00
Chart 4
0.80
3 comparative
0.60
0.40
Limited Brands
0.20
Macy's
0.00
Nordstrom
Limited Brands
2009
0.70
2010
0.77
2011
0.98
Macy's
0.78
0.73
0.73
Nordstrom
0.76
0.73
0.77
return on assets
is shown. In chart
3 you can see that
Limited Brands
has the highest
return on assets. In chart 4 comparative debt to assets is shown. In chart 4
you can see that Limited Brands had an increase by 0.21 due to the
investment of more stores.
Root Problem
Smart Art 10
Lack of sales with
Henri Bendel brand
Limited Brands root problem is
their lack in sales with Henri
Bendel. In 2009 Henri Bendel
make the executive decsion to discontinue their clothing line. With the clothing
line gone Henri Bendel’s sales have continue to decrease. Henri Bendel has
narrowed their target market even more by discontinuing their clothing line.
Before Henri Bendel starts to have a loss the executive decsion is to liquidate
the company and keep the ongoing commitment to increase shareholders
wealth by issuing cash dividends.
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Strategy
Smart Art 11
Within the next five years
Liquidate
Henri
Bendel
Issue Cash
Dividends
Limited Brands will have
to pay on the building
leases they have for Henri Bendel. Limited Brands has a $5,000 payment a
month which equals to be a $60,000 payment for a year. Taking the $60,000
year payment and multiplying it by Limited Brands 5 year lease commitment
and 3% year increase. Limited Brands will be looking at a payment of
$1,292,741 for the lease buyout of Henri Bendel stores. Limited Brands is also
looking at issuing a 3% cash dividend to stockholders. The total cash dividend
payment Limited Brands is looking at is $1,964,380.
Table 4
(in
2012
2013
2014
2015
2016
$309,000
$318,270
$327,818
$337,653
$370,000
$381,100
$392,533
$404,309
$416,438
($679,000)
($699,370)
($720,351)
($741,961)
($416,438)
thousands)
Lease
Payment
Cash
Dividends
Payable
Total
This is shown in table 4. The total impact of this strategy is shown in table 5.
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(in
2012
2013
2014
2015
2016
Net Income
$850,000
$969,000
$1,104,660
$1,259,312
$1,435,615
Cash
$935,000
$1,065,900
$1,215,126
$1,385,244
$1,579,178
Expenses
$679,000
$699,370
$720,351
$741,961
$416,438
Cash
$256,000
$366,530
$494,775
$643,283
$1,162,740
thousands)
(beginning
year)
(ending
year)
Table 5
By 2016 Limited Brands will increase their cash by 80%. Therefore this
strategy would benefit Limited Brands.
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