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These meetings ostensibly benefit investors, but the companies behind them rarely transcribe their proceedings or file them with the SEC. As a result, unless you can attend in person, you're often left out in the cold. That's where our "Fool on the Street" series comes in. We listen to the conferences so you don't have to.
Without further ado ...
Today, we'll recap the news from Limited Brands'
As presentations go, this one was rather short. But that doesn't mean we can't make it shorter still. Let's focus on the three most interesting topics:
A more limited Limited
There's one question topping both the headlines and investors' thoughts: Just what is Limited Brands today? On the one hand, it's a rapidly eroding company -- 75% of its interest in Express was offloaded to Golden Gate Capital, while 75% of its eponymous Limited Stores went to Sun Capital. The "Diva London" concept is dead as of Q2 2007, with six stores shuttered.
On the other hand, the company's growing certain segments nearly as ambitiously as it sells off the others. Katzenmeyer advised that one-half of the business, Victoria's Secret, will be expanding its footprint "by roughly 50% over the next five years," growing "about 8% to 10% each year." Some of the expansion will come via new store openings, but remodeling existing stores is also key. (More on that in a moment.)
Meanwhile, on the other side of the business, Bath & Body Works will emphasize "growth through opening new stores in off-mall locations" as it, too expands its footprint. Finally, the firm sees "significant growth opportunities in ... the Internet and catalog business." Last month, it opened a new distribution center to service sales from both segments made directly to consumers.
Is bigger better?
Beauchamp argues that it is. When one analyst asked for the rationale behind expanding Victoria's Secret, Beauchamp explained, "We are extremely space-constrained in many of the stores in our fleet ... if we had incremental linear footage and table surfaces, we could deliver significant incremental dollars."
That doesn't sound like wishful thinking. According to Beauchamp, stores with more space have proven out the thesis, and management is "very pleased, to date, with the financial characteristics of the stores that have been remodeled and expanded so far."
But expansion per se isn't the only secret in Victoria's bag of tricks. Beauchamp cited one canny move that's already yielding results. Taking advantage of customers queuing at the cash register, who might otherwise be "on the phone or bored waiting in line," Beauchamp pulled some strings and had Beauty products moved next to those registers. For the same reason that Hershey angles to get its candy bars placed next to the supermarket checkout, Beauty reasoned that its just-as-conveniently sized offerings could elicit impulse buys if they were more strategically placed. As a result, "we've seen significant increases, in terms of Beauty penetration in the overall customer base, once [customers are] sort of confronted by it on an every-purchase basis.... Our Beauty conversion is significantly up."
Halt! Who goes there?
Speaking of conversions, one element the presentation addressed was how to keep Victoria's Secret customers from becoming someone else's customers. Asked to sketch out the competitive landscape, and where VS sits within it, Beauchamp described a decade-long "shift from really focusing on department-store competition, which is still relevant and still significant dollars done there, to really seeing a lot of innovation happening at the mass end of the marketplace, in terms of the Targets
Unfortunately, Beauchamp didn't give a lot of easily quantifiable detail on how Victoria's Secret plans to keep these rivals at bay. Instead, she made a more intangible reference to her goal to "differentiate from a quality perceptive."
Katzenmeyer, however, did tell us what to expect in the event that VS does manage to differentiate itself, expand according to plan, and control its costs in the process. In such a happy scenario, we're told to expect "on an ongoing basis ... high-teens operating income as a percent of sales -- 17%, 18%, 19% basis."
How good would that be for shareholders? It's no secret: At the midpoint of those projections, VS would double the operating profit margin it earned over the last 12 months.
Come for the value, stay for the dividends. Limited is an active recommendation of not one, but two Foolish investing newsletters: Motley Fool Inside Value and Motley Fool Income Investor. Try on either of them free for 30 days.