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Deal reached for Limited Stores

Parent company will concentrate on lingerie and beauty products.

July 10, 2007|From the Associated Press

COLUMBUS, OHIO — Limited Brands Inc., repositioning itself as a seller of lingerie and beauty products, 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% ownership of its Limited Stores chain to buyout firm Sun Capital Partners Inc.

Company founder Leslie H. 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% 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% stake.

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

Together, the Limited Stores and Express chains made up $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 had chosen 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 in recent 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. Besides operating 326 stores in Canada, La Senza licenses operations to 341 stores in 34 countries.

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."

Analysts with Morgan Stanley also predicted pressure on Limited Brands' stock for the next six to nine months, citing few opportunities for the company to further restructure itself.

Limited Brands stock fell 75 cents to $28.24. The shares have traded between $23.54 and $32.60 in the last year.

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.

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