Limited Inc.

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The Limited, Inc. Three Limited Parkway Columbus, Ohio 43230 614-415-7000 www.limited.com Administrative Decision Making BSAD 490 July 12, Overview Name: The Limited, Inc. Headquarters: Three Limited Parkway Columbus, Ohio 43230 Telephone: 614-415-7000 Internet Address: www.limited.com Top Officers: Leslie H. Wexner, Chairman and Chief Executive Officer Kenneth B. Gilman, Vice Chairman and Chief Administrative Officer V. Ann Hailey, Executive Vice President and Chief Financial Officer Arnold F. Kanarick, Executive Vice President and Chief Human Resources Officer Total Number of Employees: 131,000 Number of Locations: over 5,600 in Domestic U.S. S.I.C. Number: 5621 Current Stock Price: $47.50 History The Limited, Inc. was founded by Leslie H. Wexner on August 10, 1963, beginning with one store located in Columbus, Ohio. During its first year in operation, this store achieved sales of $157,000. His strategy was to provide a "limited" assortment of quality, fashionable sportswear at medium prices. The "limited" concept worked well and by the late 1970s, Wexner began a twofold strategy of market development and product development. New stores were opened and acquired an appeal to women of different ages, sizes, and budget limits. The Limited, Inc. is comprised of a unique family of brands. Since the grand opening in 1963, the Company has grown to over 5,633 stores and 13 retail businesses. Businesses that fall under the umbrella of The Limited, Inc. are: Express, Lerner New York, Lane Bryant, Henri Bendel, Structure, Limited Too, and Galyan's Trading Company. The Limited, Inc. also owns 83% of Intimate Brands, Inc., IBI, which consists of Bath & Body Works, and Victoria's Secret. Instead of offering a wide-variety of types of clothing, the stores offer a limited assortment in large quantities and a variety of colors. The company emphasizes rapid turnover of inventory so only the newest fashion is in the stores at all times. As of 1997, the Limited, Inc. is a $9.2 billion specialty retailer selling women's, men's, and children's apparel; lingerie; personal care products, and sporting goods through its 5,633 stores and a catalogue. The past few years have seen significant change in the business. In May 1998, The Limited, Inc. completely divested itself of Abercrombie & Fitch stock. They gave shareholders the choice of exchanging their Limited shares for shares of A&F in a process known as a modified Dutch tender. Today, The Limited, Inc. operates as four separate business groups: Women's Brands, Emerging Brands, Intimate Brands, and Support Businesses. Women's Brands: Express: The Express underwent reconstruction in the early 1990s to have a more sophisticated European image instead of the neon-lit high-tech store of the mid-1980s. The company now describes its Express stores as providing "hot new fashion to young women in their early twenties." Merchandise includes "young and spirited fashions of good taste and quality." A private label brand created for the Express is called Compagnie Internationale. Express added petite sizes in 1995. The 753 Express stores in operation as of year-end 1997 were located mostly in shopping malls. Limited Stores: This is the flagship division of the organization. Originally, merchandise in these stores was targeted to women between the ages of 16 and 25, but that orientation changed to women in their thirties and forties several years ago. Limited Stores recently shifted its orientation to women who want "casual American fashion." These stores focus on the sale of medium-priced fashion clothing and accessories. The company began opening larger-format Limited stores in 1990, and older stores took on a new look to provide additional selling space. Most of the 629 Limited stores are located in regional shopping centers or malls across the U.S. Henri Bendel: In 1985, the The Limited, Inc. purchased this upscale fashion store. The store offers the best in clothing and accessories from international designers. The price of clothes correlates with "today's modern woman in her mid-thirties in a higher-income household." This is the only upscale store owned by The Limited, Inc.. There were six Henri Bendel stores as of year-end 1997. Lerner NewYork: This division sells fashionable women's sportswear for "value-minded customers." The store created a brand called NY & Co. There were 746 Lerner stores in operation as of year-end 1997 in malls and shopping centers across the U.S. Lane Bryant: Lane Bryant had been in operation for 80 years and was actually larger than The Limited, Inc. at the time of purchase in 1982. Lane Bryant's market is middle-aged-women between 30 and 50. The store specializes in the sale of medium-priced clothing, intimate apparel, and accessories for the "special-sized woman" (sizes 14 and up). Nearly all Lane Bryant stores originally were located in regional shopping centers, but Wexner has shifted Lane Bryant stores to mall locations near the other Limited stores. There were 773 Lane Bryant stores as of year-end 1997. Emerging Brands: Structure: The Limited, Inc., began testing the market for men's fashions by offering "Express for Men" in Express stores beginning in 1987. Sixty-nine Structure stores opened in 1989 and by the end of 1997, there were 54 stores. Structure stocks good-quality, affordable clothing in the latest styles. The target customer is in his mid-twenties and "urban, active, young, and creative." Structure stores generally open into Express stores so customers can shop in both stores without having to exit to the mall. Limited Too: The market for girls' clothing (sizes 6-14) was tested by The Limited in the late 1980s when the Limited Too brand was offered in The Limited's flagship store. Sixty-two stores opened during 1989, and by the end of 1997, there were 312 Limited Too stores. Clothing sold in Limited Too stores is stylish - the newest in colors, prints, and fabrics-and moderately priced. Galyan's Trading Company: In 1995, The Limited, Inc., acquired six Galyan's stores for $18 million in cash and stock. The company had a total of 11 stores by year-end 1997. The company says Galyan's is "the coolest destination in retailing for sports enthusiasts and 'wannabes' of all ages." A new distribution center for Galyan's opened in 1997. Intimate Brands: Victoria's Secret: stores, bath and fragrances Victoria's Secret Stores are the most dominant, intimate apparel stores in the world, presently selling more lingerie than industry competitors Vanity Fair and Maidenform. The stores were redecorated in the early 1990s in a "Victorian Parlor" style. Victoria's Secret bath and fragrance products are an increasingly important portion of store sales. The division's newest product is hosiery. There were 789 Victoria's Secret stores in the U.S. as of year-end 1997. Victoria's Secret Catalogue: Since its purchase by The Limited, Inc. in 1982, the catalogue has steadily increased its operations. Now Victoria's Secret Catalogue is the dominant catalogue for lingerie in the world. The Limited, Inc. spent $10.7 million in 1994 to purchase a telemarketing center in Ohio on Victoria's Secret catalogue operations expansion. The division has three successful specialty catalogues: Swim, Country, and City. A new catalogue introduced in 1996 was "Christmas Dreams and Fantasies." In 1996, the division established a calling center in Japan. This allowed a market for mail order sales. Bath and Body Works: In response to demand by consumers for natural personal-care products, The Limited opened six B&B Works stores in 1990. These stores have a natural market atmosphere and sell a variety of personal care products. There were 921 B&B Woks stores as of year-end 1997. Support Businesses: Mast Industries: Mast Industries, Inc. is one of the world's leading international contract manufacturers, importers and distributors of apparel for men, women and children. Product lines range from sportswear and ready-to-wear to lingerie. Mast delivers over 100 million garments a year to The Limited, Inc. retail and catalogue divisions. Limited Distribution Services: The purpose of Limited Distribution is to design and implement operations that will provide the retail business with the most effective and efficient delivery operations available. Limited Distribution Services will have achieved its objective if each of its customers believes that it has been an asset in helping them achieve their goals. Limited Real Estate: Responsible for locating and leasing all store sites for retail businesses of The Limited, Inc., Intimate Brands, Inc., and Abercrombie &Fitch, Limited Real Estate continually searches for new and exciting retail environments where our brands can be showcased. Limited Store Planning: Limited Store Planning's mission is to create the most innovative, successful stores in the retail business. It employs talented design, engineering, architecture, construction, purchasing, and finance associates -- highly focused teams designing and building leading-edge retail space. Limited Design Services: Limited Design Services oversees the design of branded apparel and merchandise for the retail businesses. Limited Brand and Creative Services: Limited Brand and Creative Services will work with the Chairman and the individual operating businesses to create brand with the founder's visions, and meet customer expectations. Gryphon: Gryphon is one of the world's leading producers of cosmetics, fragrances and personal care products. This year, Gryphon will create, package and deliver almost 300 million units of over 1,000 different products. Responsible for supplying Victoria's's Secret Bath &Fragrance products, Bath &Body Works products, and new products for Abercrombie &Fitch, Gryphon has similar plans for the Limited Too lines. Missions Statement After extensive research on the part of myself there was no missions statement found. Here is missions statement that would cover all of the areas possessed in a good missions statement. -It is the Limited, Inc.'s full duty to provide a service to surrounding communities from every division of the company. The Limited, Inc. excepts responsibility for employees. We offer programs to better deal with lifes problems, geared towards creating friendlier work environments. We want to try to get a better handle on advertising from a promotional point of view. This will allow us to establish specific areas for each brand to compete. At the Limited, Inc. we take an already strong brand franchise and extend it in fresh new ways. We also formalize processes and take that expertise into other areas of the company. It is the goal for Limited, Inc. to give their customers what they want, when they want it. ANALYSIS OF INTERNAL DOMAINS Financial Position / Capacity The Limited, Inc. continues to provide evidence of financial strength and flexibility. This company continues to be successful year to year. New sales for the '98' year were $9.347 billion as compared to $9.188 billion in '97' and net income rose to $2.053 in '98'. Net income declined 49.9% to $219 million. All of these sales come from the 26.316 billion square feet of selling space that The Limited, Inc. owns throughout all of its 5,382 stores. The company's long term debt-to-equity ratio declined to 25% at the end of 1998 from 32% in 1997, and working capital increased 14% over 1997 to $1.1 billion. This shows that The Limited, Inc. long-term debt is decreasing. The Limited, Inc. has total assets of over $415 billion. As a whole it is obvious to see that The Limited, Inc. is in strong financial position with the opportunity to take advantage of more costly strategies. Organization Structure EXECUTIVE OFFICERS Leslie H. Wexner Chairman and CEO Kenneth B. Gilman Vice Chairman and CAO V. Ann Haily Executive Vice Pres. and CFO Arnold F. Kannarick Executive Vice Pres. and Chief Human Resources Officer BUSINESS UNIT LEADERS The Limited: Robert Bernard Intimate Beauty Corp.: Robin Burns Henri Bendel: Ed Burstall Lerner New York: Rich Crystal Lane Bryant: Jill Dean Victoria's Secret Catalogue: Cynthia Fierst Victoria's Secret Stores: Grace Micheals Bath and Body Works: Beth A. Preteberry Limited Too: Micheal W. Rhodem Gryphon: Robert Rhattenburgh Galyan's Trading Co.: Joal Silvermann Mast Industries: Martin Trust Express: Micheal A. Weiss Structure: Peter Whiteford Operations Capacity The Limited, Inc. operates 5,640 stores across the United States. Their stores are located primarily in shopping malls. In 1996 the company only had 5,300 stores open. They has 131,000 associates and a total of 28,400,000 selling square feet. The Limited is a growing company and the number of open stores and square selling feet justifies this. Marketing Capacity The Limited, Inc. is a shopping mall mainstay all over the United States. The Limited focuses primarily on clothing for women in their twenties. The clothing lines offered in the Limited's stores are of average prices geared more towards the middle class consumers. These stores do not offer many different styles although they do offer many different colors and sizes. These clothes can be purchases at mall all over the United States. The Limited, Inc. advertises mostly in magazines, although some advertising money is placed towards television advertising. All of these factors can go into the Limited, Inc's marketing capacities. Research and Development In 1997, The Limited, Inc. is involved in many different areas of research and development. They put approximately 8% of all of their retained earnings back into this area. In 1997, the company acquired certain personnel to research what would be involved in building new images for both Limited and Structure stores, both suffering from lagging sales. The company is trying to focus on the success of branding campaigns. These personnel are researching the changes in changes consumer's shopping habits. The Limited wants to design a branding campaign that will reposition its businesses into consumer's minds as destination stores. This is an example of just one project. The Limited runs many projects similar to this every year. The time and money that will be invested into this project will be costly, but in contrast it is projected to pay off in the near future. Management and Information Systems The Limited, Inc. utilizes a variety of proprietary and third party computer technologies - both hardware and software - into its businesses every day. The company also relies on numerous third parties and their systems' ability to address the Year 2000 issue. The Limited's critical functions include point-of-sale equipment, merchandise distribution, merchandise and non-merchandise procurement, credit card and banking services, and business and accounting management systems. The company is using both internal and external resources to complete its Year 2000 initiatives. In order to address the Year 2000 issue, the company established a Program Management office to oversee, monitor and coordinate the company-wide Year 2000 effort. This office has developed and is implementing a Year 2000 plan. There are several areas of focus in this plan: 1) renovation of legacy systems throughout the company; 2) installation of new software packages to replace legacy systems; 3) assessment of Year 2000 readiness at key vendors and suppliers; and 4) evaluating facilities and distribution equipment with embedded computer technology. Total expenditures that were incurred through 1998 related to remediation, testing, conversion, replacement, and upgrading system applications were $70 million. Total remaining expenditures are expected to range from $15 to $20 million through the year 2000. At the present time, The Limited, Inc. is not aware of any Year 2000 issues that are expected to affect materially its products, services, competitive position, or financial performance. ANALYSIS OF EXTERNAL DOMAINS Political and Legal Forces The Limited, Inc. along with other companies in the apparel industry do not have to be concerned for the most part about government regulations. In the past some companies in this industry for violating child labor laws at the manufacturing levels. This dealt a damaging blow to these companies public images. The United States government is not to demanding on the apparel industry. Although the Limited is facing serious accusations dealing with the Internal Revenues Service. The Limited is disputing an IRS claim that the company owes $58.2 million in taxes on an almost $172 million deposit to The Limited, Inc's bank. The IRS is ruling that Limited, Inc's World Financial Network Bank of Whitehall is not a bank. Deposit of the disputed money was made by Mast Industries. This is by far one of the most serious legal issues this company has ever faced. Economic The Limited, Inc. currently possesses a slightly above average economic structure. The primary economic factor that affects this company is fluctuating interest rates. Fluctuating interest rates influence companies borrowing and investing activities. The Limited borrows money to pay for business operations. The more that The Limited borrows the more they will pay in interest. The fluctuation of interest rates influence how companies borrow. The lower the rates the more The Limited can use commercial paper to finance projects such as marketing strategies. Social/Cultural/Competitive Certain forces affect The Limited's external environment. Social and cultural factors play a large part in how well the Limited fairs in their business activities. Employees tend to cause problems of domestic violence, absenteeism, tardiness, productivity, security, medical costs and office moral. Most of the stores target consumers in their thirties and below. The Limited tends to hire even younger floor workers. For most of those workers, it is their first or second job. Sometimes hiring younger workers can be a threat to the businesses efficiency. There is also competitive forces affecting The Limited's external environment. Competitors of the Limited have reported high stepping sales and revenue gains. In recent years The Limited's star performance has faded, while the Gap's has risen. Gap's sales jumped 32% to $548 million compared with a 5% increase for The Limited to %634 million. The Limited, Inc. invests in bringing the customers to the store. Developers of Easton Town Center broke ground in February for a 120-room Residence Inn by Marriott. The partners in this project include The Limited, Inc., Mall Properties Inc., and Georgetown Co. The whole idea was to have the hotels flank the Town Center so guests can walk out the front into all the activity of the mall. The Limited strives hard to appreciate their customers and future employees. The Limited and Intimate Brands sponsored a reading tutor program. Nearly 200 local kindergarten students are getting a boost from associates of The Limited Inc. and Intimate Brands. The workers are volunteering to tutor Columbus kindergarten students twice a week at three local schools as part of a 15 week pilot program. Limited, Inc. and Intimate Brands are the first corporate sponsors and participants of the Columbus Reads program. Examples of this type of activity performed by executives and managers give people of the community credibility in their school system. It also is a good public relations tool. The Limited Inc. also sponsored a community job fair at its Morse Road Campus, Three Limited Parkway in Columbus, Ohio. The company was seeking applicants for full and part-time positions including merchandise processors, handlers, shipping loaders, fashion consultants and customer service representatives. Positions include a forty percent discount at division stores. The Limited resource management is very effective in recruiting. Technological Forces In the apparel industry there are not many technological forces that can have much effect on any one company. The machines that manufacture the clothing are constantly changing. Those companies who produce the amount of clothing demanded in the least amount of time will profit the most. The Limited, Inc. is presently and has been getting Year 2000 ready. The corporation will incur approximately $15 to $20 million in future expenditures to address those risks identified with the Y2K. Contingency plans will be implemented to prevent Y2K failures from occurring, detect them if they do occur, and minimize their impact and expedite their repair. Competitive Forces The Limited, Inc. is involved in a highly competitive industry. In order for The Limited, Inc. to remain as one of the leaders in the apparel business they must keep their prices competitive to other companies in the industry. Product quality and reliability is also a main factor in staying competitive. If the consumer doesn't feel they can get a reliable product at a competitive price, then they will buy their clothes from another competitor such as The Gap. Convenience plays a large role in the competitive force. In order to make the sale the company must give the consumer easy access to the products. This is a rule for just about every industry. Although some people may not agree, the service and support that The Limited, Inc. offers can give them an advantage or disadvantage in the apparel industry. In essence, The Limited, Inc. must offer a quality product at a competitive price in order to remain one of the leaders in the apparel business. International Forces The Limited Inc. is primarily involved in domestic relations only. The only international business they operate in is mostly within the manufacturing aspect. They buy materials from other countries and also manufacture these materials into goods on foreign soils. Some aspects of financing are taken care of on the international level, but for the most part The Limited, Inc. operates mostly in the domestic United States. Consumer Characteristics and Behavior The Limited Inc.'s primary customers include mostly younger to middle-aged women, although some product lines are geared more towards men. Most consumers in the apparel industry are not product loyal. Most consumers will buy the best clothing they can find at reasonable prices. The Limited, Inc's operations are mostly seasonal in nature and consist of two principle selling seasons: spring(the first and second quarters) and fall(the third and fourth quarters). The fourth quarter, including the holiday season, has accounted for 35% of net sales in 1998. Accordingly, cash requirements are highest in the third quarter as the company's inventory builds in anticipation of the holiday season, which generates a substantial portion of the company's operating cash flows for the year. SWOT ANALYSIS Internal Factor Evaluation The Internal Factor Evaluation matrix scored The Limited, Inc. at a 2.75. Note that the firms major strengths are its size, and divers line of products. With over 5,400 stores this company has the potential to do tremendous volumes of sales. Plus the company's increasing line of products helps reach a larger target audience, and allows for more choices. The major weaknesses include several different things. The Limited, Inc. has closed more stores than it has opened, net sales dropped as a result of the Abercrombie and Fitch spin-off, and the fact that in the past years less then 2% of sales went to marketing and promotions. Although these weaknesses are present, The Lim

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