Cover Story

Unlimited opportunities

By Nancy Byron

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The Heasley file

Living in the shadows of Victoria’s Secret and Bath & Body Works, the dynamic duo of new millennium brands, nearly killed The Limited Stores Inc.

After all, as quickly as fashions come and go, so does capital — especially when a business is underperforming relative to others in the corporate portfolio.

“As Limited Brands started to focus more on Bath & Body Works and Victoria’s Secret, the apparel businesses did suffer from neglect,” says Linda Heasley, chairman and CEO of The Limited Stores, which was the cornerstone of Les Wexner’s fashion empire until its sale to Sun Capital Partners in August 2007.

It’s a move that benefited both enterprises.

Limited Brands shed itself of the last of its seven apparel businesses, which had become a drag on the corporation’s financials. The Limited Stores, which had become stagnant and unprofitable under Limited Brands, was now armed with new capital and ownership bent upon restoring the stores to their former glory.

“If we’d stayed with Limited Brands, we would always have gotten the second-level of attention and focus and capital,” Heasley says. “It would have been an ongoing struggle to get proper investments made in the business.”

Heasley isn’t bitter about the lack of attention and resources focused on The Limited Stores during the rise of Victoria’s Secret and Bath & Body Works. Quite the contrary. She credits Wexner with helping to make the brand a trendsetter of women’s fashion in the 1970s and ’80s, and she’s confident his vision will live on to see better days ahead.

“The good news is, despite ourselves, we hadn’t lost a lot of equity in our brand base,” she says. “The Limited is still a name people recognize as a good business.”

With Sun Capital’s $50 million equity investment in The Limited Stores — and the additional $75 million line of credit Sun Capital arranged — already Heasley is starting to see a turnaround.

“Since Sun has purchased us, we have started a program to refresh the [stores] and remodel,” she says. “Even things like replacing the carpet and painting fitting rooms — we hadn’t done that in years. So that’s all very positive for the business. The focus has been very refreshing.”

In addition, the split from Limited Brands has allowed Heasley and her staff to explore new product lines, such as sleepwear, loungewear and accessories, that are breathing fresh life into a brand that was quickly becoming stale under its former corporate umbrella. Another plus: Ideas that would have taken months or years to get approval through the former corporate hierarchy are now able to be acted on almost immediately.

“Bottom line, we’re just a lot more nimble now,” Heasley says. Here’s how Heasley is working to take The Limited Stores from underperforming to over-the-top success.

Under its own flag now

“When we first announced that Limited Stores was going to look for a buyer, it was very emotional for many of our associates who had been here for a long time,” Heasley says. “Initially, I think people were very shaken.”

That didn’t last long. With Heasley and then-co-president Avra Myers touting the potential upsides to being independent of Limited Brands, associates’ reservations about the sale gradually diminished.

“We’ve been turning it into a good thing,” Heasley says. “It has actually caused us to become closer as a company.”

The key to getting associates to rally around the opportunity that a sale offered, she says, was consistent, open communication.

“The whole time we were interviewing prospective purchasers or owners, we sent out communication to the field to let them know how the meetings were going,” she says.

Heasley also set up round-table discussions with associates over breakfast and installed boxes around the Columbus headquarters as well as the New York offices for associates to submit anonymous questions about the impending sale. She sent out e-mails. She did monthly meetings in Columbus that were videoconferenced in New York and vice versa.

“We demonstrated our willingness to share with them as we had information,” Heasley says. “We weren’t keeping anything back. As soon as I knew something that someone was wondering about, we would get that information out to them. I found that multiple touch points were good. They seemed to like the e-mails so I tried to do one every two to three weeks saying, ‘This is what we know.’”

When the buyout by Sun Capital was finalized on Aug. 3, 2007, associates were ready to celebrate.

“We threw an Independence Day party,” Heasley says. “And we created our own ‘Declaration of Independence.’” A large copy of the missive hangs framed on the wall outside Heasley’s office.

“We wrote it ourselves, and then we signed it,” she says. “I think people were really energized by the whole thing.”

Of course, some acts of independence — such as securing a completely separate location outside the Morse Road campus of Limited Brands and undergoing a name change to further differentiate the stores from their former corporate owner — were not included in the deal. Still, Heasley says a name change is not off the table.

“We have talked about it,” she says. “But we don’t have an answer yet. That is on the list of things that we are thinking about. It’s a tough call. The Limited has got a great history.”

So stay tuned. Another declaration of independence could come later this year.

Reconnecting with customers

Revitalizing The Limited Stores involves more than gaining new-found independence underwritten by Sun Capital and an enthusiastic sales force. It’s going to require a long, hard look at why customers like or dislike the store. It’s going to mean tracking all customer traffic — not just sales. It’s going to mean getting reacquainted with customers on a more personal level. Heasley is all over that.

“The most critical area we have is our stores and our store experience,” she says.

That’s why getting to know customers again has become priority No. 1.

“We’re developing a lot of metrics right now around the customer,” Heasley says. “Metrics that we probably should’ve used historically but haven’t.”

For example, in the past when customers purchased an item from The Limited Stores, a toll-free phone number would randomly print on receipts inviting them to answer a handful of questions about their store experience. Now, exit interviews will be added to capture information about why customers decide to buy — or not buy — merchandise. Ditto for traffic counters, which track how many people enter the store.

“Right now, we’re only getting information from people who actually complete a transaction,” Heasley says. “For me, it’s as much about who doesn’t complete a transaction. I’ve watched too many people go in our store, turn and go out without a bag. That bothers me. I lose sleep over that.”

Further complicating the task of better connecting with customers is the fact that The Limited attracts an extremely varied demographic among women.

“She’s anywhere from 25 to 50 years old,” Heasley says. “That’s a very broad range. And you can’t be everything to everybody.”

So Heasley and her team fashioned a more specific customer profile, gave her a name and plastered her likeness upon the walls throughout the company’s headquarters to help associates envision who they’re catering to at The Limited Stores.

“We call her Tyler Monroe,” Heasley says. “We believe she’s 28 to 35 years old. She’s a professional woman. She likes fashion, but she’s not a slave to fashion. She’s probably in her second job, but she’s career-minded. She’s involved in a relationship. ... We created a whole brand story around Tyler.”

Limited executives even created a detailed day planner for Tyler listing everything from an upcoming Key West getaway to sticky-note reminders to call her mom.

“It’s a tool to bring life and a face to our customer,” Heasley says. “The associates rally behind it. The design and merchant team really love it. ... It’s been a very helpful way for us to get very clear in our minds where the assortment needs to go. What would Tyler wear? What wouldn’t she wear?

“It also gets to the customer experience in the stores. How would Tyler want to be addressed when she goes into the stores? What would be the store experience she would want? So we’re now carrying this all the way through our service offering.”

Heasley’s only concern with the Tyler prototype is that she may narrow the customer target a bit too much.

“Our customer is broader,” she says. “When you walk in our stores, we have a lot of women who are stroller moms now, but they’re career women. So we’re all Tyler. That’s the theme we’re talking about now. How do we keep it inclusive relative to who the customer really is? How do we capture all of that? That’s what we’re trying to refine right now.”

The new black

Increasing store traffic and converting more browsers into buyers are two main goals of The Limited Stores these days. Yet the importance of returning The Limited Stores to profitability certainly can’t be downplayed.

“We haven’t been profitable in some number of years,” Heasley says. “So the goal here is to get us back to a level of profitability.”

Focusing on the Monroes more than the Benjamins is how Heasley plans to get the company there.

“The measurement of success for most of us in retail is proving your relevance to the customer and establishing a loyal customer base while continuing to attract new customers,” Heasley says. “If we do that well, then profitability falls out. It should happen.”

In fact, she predicts The Limited Stores — whose revenue rebounded to $500 million in 2007, up $7 million from 2006 figures — will turn a profit in 2008.

“We’ve got a very strong balance sheet,” Heasley says. “We didn’t have that before. Sun is very supportive of growing the business.”

Illuminating the runway to better financial performance is a list of 21 initiatives developed jointly by Heasley and Sun. Among them: growing the accessories business, establishing an e-commerce site, assessing the most efficient way to bring in merchandise and even opening new stores.

“The target is three to five new stores in 2008,” she says. “It’s been years since we’ve had a new store.”

And these stores will be new throughout. “We are looking at a new concept for the brand, which is very exciting,” Heasley says. “I think one of the hallmarks of The Limited is our approachability. It’s not stuffy. It’s supposed to be a fashion statement, but it doesn’t make you feel intimidated to come in. So having a store design that’s a bit more contemporary is key. We’re very excited about that work.”

A lot is riding on this new concept. “For many years, the brand has been playing defense,” Heasley says. “Now we’re trying to play offense.”

That involves taking risks, yet staying true to the brand. “Les Wexner left us an incredible legacy,” Heasley says. “How do we build on that legacy, yet be relevant today? How do we leverage that past and move forward? That’s been one of the biggest challenges. Do we mention the Forenza sweater again or not? That was a defining product. Or do we come up with our current defining product?”

The possibilities are unlimited. “We’re going to be swinging for the bleachers,” Heasley says. “I call it regaining greatness.”

HOW TO REACH: The Limited Stores Inc., (614) 415-7000, www.thelimited.com