Limited Brands sheds clothing business

0 Comments | Deseret News (Salt Lake City), Jul 10, 2007 | by Matt Leingang Associated Press

COLUMBUS, Ohio -- Limited Brands Inc., repositioning itself as a lingerie and beauty products retailer, stepped away from the apparel business Monday by giving up majority ownership of its former flagship clothing store.

The operator of Victoria's Secret and Bath & Body Works said it had agreed to transfer 75 percent ownership of its Limited Stores chain to buyout firm Sun Capital Partners Inc.

Company founder Les Wexner had used Limited Stores as the starting point for the specialty retailer when he opened his first store in 1963, but the chain had been underperforming for years, pushing Limited Brands to focus on its more profitable beauty products and underwear.

Limited Brands will not receive any money for the transfer of its stake in Limited Stores to Sun Capital and expects to record an after-tax loss of $42 million on the deal.

The chain has 251 stores and sales of $493 million in 2006.

Also Monday, Limited Brands said it had finalized the sale of a 75 percent interest in its Express brand to affiliates of private equity firm Golden Gate Capital for $602 million in cash -- up from a previously announced 67 percent stake.

Express had sales of $1.7 billion in 2006 and operated 624 stores.

Together, the Limited Stores and Express chains had $2.2 billion of Limited Brand's $10.7 billion in sales last year.

Both chains are expected to remain headquartered in Columbus. Golden Gate also announced that it has picked Michael Weiss as chief executive of Express. Weiss led Express for most of the period from its founding in 1980 to his retirement in 2004.

The chains were the last apparel retailers Limited Brands owned after selling or spinning off several others over the past several years, including Abercrombie & Fitch and Lane Bryant.

As part of its new focus, Limited Brands bought Canadian-based intimate apparel retailer La Senza for $628 million last year.

The moves help signal a "new" Limited Brands, one now centered on the high-profile Victoria's Secret and Bath & Body Works brands, Wexner said in a statement. Beauty products and underwear are seen as less prone than apparel to seasonal changes in consumer taste.

"The challenge facing management is delivering on the potential of these two brands," analysts Richard Jaffe and Megan Roesch of Stifel Nicolaus & Co. said in a research note issued Monday. "With visibility for improvement limited, we remain neutral on the shares."

Limited Brands, through Victoria's Secret, Bath & Body Works, C.O. Bigelow, Limited Stores, La Senza, White Barn Candle Co., Henri Bendel and Diva London, currently operates 3,140 specialty stores.