Limited Brands to Shed Express

Limited Brands, which owns Victoria's Secret and Bath &  Body Works, is selling 67 percent of its interest in Express.
Limited Brands, which owns Victoria's Secret and Bath & Body Works, is selling 67 percent of its interest in Express. (By Kiichiro Sato -- Associated Press)
By Ylan Q. Mui
Washington Post Staff Writer
Wednesday, May 16, 2007

Limited Brands said yesterday that it plans to sell a majority stake in its women's clothing chain Express to private-equity firm Golden Gate Capital for $548 million, ceding control of the stores' daily operations after years of failed attempts to rejuvenate the brand.

The company also said it is exploring strategic options for Limited, another women's apparel store, but has not set a timetable for a decision. The retailer has been shifting attention from the two chains in favor of its intimate apparel, personal care and beauty brands. Along with Limited and Express, the company owns Victoria's Secret, Bath & Body Works, C.O. Bigelow, La Senza, White Barn Candle Co., Henri Bendel and Diva London.

"Over the past decade, we've changed a lot and we've evolved," said Leslie H. Wexner, Limited Brands chairman and chief executive. "The announcements that we made today are consistent with that narrowing of focus."

Golden Gate Capital, which owns catalogue companies Spiegel and Newport News, would have a 67 percent interest in Express under the terms of the deal, which is expected to close by July 6. Limited Brands would retain a 33 percent stake in the chain.

Express operates 743 stores that did a total of $1.7 billion in sales last year. Limited has 292 stores and had $493 million in sales last year.

Retail consultant Craig R. Johnson, head of Customer Growth Partners, said Express has struggled to define its core customers in recent years, alternating between styles targeted at 17-year-olds and 30-year-olds. Meanwhile, he said, Limited stores have failed to offer inspiring merchandise.

"It is a good move," Johnson said. "If you look at the strengths in that business, it has not been on the apparel side."

Martyn Redgrave, chief administrative officer of Limited Brands, said intimate apparel, personal care and beauty account for about 70 percent of the company's revenue. The company has invested heavily in remodeling many of its Victoria's Secret stores, decorating them with scantily clad mannequins and creating boutiques within the store. Its collegiate-inspired lounge and sleepwear line, Pink, has been wildly popular.

Wexner said the company plans to increase the size of its Victoria's Secret stores by 50 percent over the next five years and is considering launching Victoria's Secret sportswear, accessories and swimsuits lines. It also plans to expand Bath & Body Works in locations outside of malls and internationally, as well as invest in e-commerce and catalogue business for the chain.

Johnson said yesterday's announcement could also be considered a defensive move by the company, as both Victoria's Secret and Bath & Body Works stumbled last month. Sales at Victoria's Secret stores open at least a year were down 4 percent from April 2006, when there was a blockbuster 12 percent increase. Redgrave called the results disappointing. Same-store sales at Bath & Body Works declined 2 percent in April after an 8 percent jump in April 2006.

"They want to get ahead of the curve on the problem," Johnson said. "Victoria's Secret hit a speed bump and not having the distraction of the other two nameplates makes a good amount of sense."

Redgrave attributed the problems at Victoria's Secret to a lack of "energy and newness" in its bra launches and discounting after weak Valentine's Day sales.

As a result, Limited Brands reduced its outlook for first-quarter earnings from 25 cents to 28 cents a share to 12 cents to 14 cents a share. For the year, it reduced the forecast to $1.55 to $1.65, from $1.75 to $1.90.

Limited shares closed yesterday at $26.18, down $1.23 or 4.49 percent.


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