Commentary

Only Option Left For The Limited: Online Sales

Dedicated followers of The Limited are finding their options are just that after the retailer revealed Friday that it was shutting down all 250 of its shops and reportedly will lay off about 4,000 workers, about 800 of whom are full-time staffers.

The Web site, where a public announcement was made Saturday, will remain open, however. “We’re sad to say that all The Limited stores nationwide have officially closed their doors. But this isn’t goodbye,” it said. “… We’re just a quick click away 24/7.”

“There had been a steady drumbeat of evidence that trouble was brewing at The Limited. During the December shopping rush, the store’s 80% off deals and its sudden decision to disallow returns seemed more characteristic of a fire sale than a holiday bonanza,” Sarah Halzack reports for the Washington Post.

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“And reports have cropped up across the country of individual store closures in recent weeks: Shoppers in the Washington region were notified by e-mail that the Pentagon City store was closing. News outlets in places such as Indianapolis, Albany, N.Y., and central Illinois reported that their local Limited stores were shuttering.”

It is indeed the signal of the end of an era, if a claim on the site is to be taken at face value: “The Limited was founded in 1963 in Columbus, Ohio, and began mall-based specialty retailing as we know it.”

Fortune’s Phil Wahba observes: “Just like Chico's, Ann Taylor and other women's apparel stores struggling with big drops in sales, The Limited has been struggling with shifts in consumer behavior and interest, a greater number of rivals and longer store leases.”

Not to mention the problems at Macy’s, Sears and other larger retailers. 

“In December, The Limited began laying off employees at its New Albany, Ohio, headquarters, with roughly 250 workers expected to be affected,” Lillian Rizzo writes for Dow Jones Newswires. “In a letter to employees, which was reviewed by the Wall Street Journal, Chief Financial Officer Larry Fultz said that due to a heavy debt load and tough retail environment the company had to be sold or it would be closed altogether.”

Interim CEO John Buell resigned in December for a position elsewhere. He had succeeded Diane Ellis, who held the position for three years, in October, Rizzo reports. 

The loss of a retail presence likely foretells liquidation, according to several observers.

“In many ways, brick-and-mortar shops like The Limited act as billboards for the company’s online business. Without traditional stores to show the flag, it seems likely that The Limited’s online store will last only long enough to clear out existing inventory,” Paul Ausick writes for 24/7 Wall St.

Launched by self-described “shopkeeper” Leslie H. Wexler, The Limited went public in 1969 and, by 1990, was operating 772 stores. Sun Capital Partners, Inc., a global private equity firm based in Boca Raton, Fla., with a diverse portfolio, bought a majority stake in 2007 and fully acquired it in 2010. 

Wexner, meanwhile, remains chairman and CEO of Columbus, Ohio-based L Brands, which operates Victoria's Secret, PINK, Bath & Body Works, La Senza and Henri Bendel and it valued at about $12 billion.

“In an increasingly challenging environment for mall-based retail and women's apparel, we are very disappointed that the company has had to make the difficult decision to close its retail locations,” Sun Capital said in email to Reuters.

At the same time that it was informing its investors about the closings in a letter, Sun Capital revealed “it has made 1.8 times its $50 million investment in Limited Stores, thanks to prior distributions and dividends,” reports Reuters’ Jessica DiNapoli, who saw the email. It “also said in the letter that it is writing down the remaining equity value of Limited Stores to zero,” she reports.

“Erik Gordon, a professor at the University of Michigan Ross School of Business, called Sun Capital's return on its investment ‘an unusually happy ending for the private equity firm,’ though he added that the nine-year period during which Sun Capital was an investor in Limited Stores was a ‘little on the long end,’” DiNapoli writes.

“It’s definitely part of a much broader malaise, a combination of competition from the internet, discounters and ‘fast fashion’ retailers,” Lee Peterson, EVP of retail consulting firm WD Partners, tells Marla Matzer Rose and Mark Williams of the Columbus Dispatch

Plus, The Limited has “gone after an older customer, which is a very difficult market. They were kind of nowhere, competing with everybody from Macy’s and Nordstrom to Chico’s and Banana Republic,” according to Peterson, who worked at the retailer from 1980 to 1991.

Go ahead. Blame it on crotchety codgers.

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