At age 70, Les Wexner is once more reinventing the city's sexiest company, from cutting jobs and selling off the flagship to installing new execs and focusing only on the megabrands Victoria's Secret and Bath & Body Works.

(This story originally appeared in the December 2007 issue.)

In the conference room off Les Wexner’s office at Limited Brands, there’s a Rolling Stone on display with the bold headline: “He’s bringing sexy back!” It’s not the real thing, just one of those faux deals given to someone as a gag birthday gift. So instead of featuring Justin Timberlake, it stars a guy who just turned 70 years old. Talk about the opposite of sexy, right?

But the twist is that the cover boy is Wexner, who, despite becoming a septuagenarian in September, practically owns the patent on all things sexy. After all, he’s the father of the world’s sexiest brand, Victoria’s Secret, with its sexy lingerie, sexy supermodels and that sexy fashion show. He figured out long ago how to turn a business that sells underwear into a global icon.

The corporate home of all this sexiness, Limited Brands, is dramatically changing the way it does business, however; it is reinventing itself one more time some four decades after Wexner began with one shop at Kingsdale Shopping Center. The company has dumped the apparel divisions (Express and the long-suffering Limited Stores), spurring a reorganization and the axing of more than 500 local jobs. It made its first serious international push with the purchase of the dominant Canadian lingerie company La Senza (sexy long johns?). There was the abrupt departure of Wexner’s No. 2, Len Schlesinger (see “Gone baby gone”)—as well as several other top execs in the past 18 or so months, resulting in the installation of new CEOs at both Victoria’s Secret (VS) and its companion powerhouse brand Bath & Body Works (BBW), which has revolutionized the personal-care market.

According to Wexner, Limited Brands is now a more agile and smarter business that’s laser-focused on its two distinctly different megabrands, VS and BBW. And, the thinking goes, with those apparel anchors cast aside, this more than $10 billion company with nearly 2,900 stores and a growing online presence can soar higher.  

Skepticism abounds, though. While analysts agree it was a no-brainer to ditch Express and Limited Stores, they identify many worrisome signs: increased competition, a lackluster stock performance and sluggish sales heading into the all-important holiday period.

On the day after Wexner and his top executives held an important meeting with Wall Street types (more on that later), the founder, CEO and chairman of Limited Brands settles into the conversation pit of his office dominated by the large abstract painting “Fond Rouge” by Antoni Tapies. During the one-hour interview with Columbus Monthly, he talks about the next phase of his ever-evolving company, which started out selling women’s sportswear, grew into a widely diverse collection of divisions (see “Retrospective”) and now has pared its focus to just lingerie and personal-care and beauty products.

His announcement in an e-mail distributed to company employees in June that “I’ve shifted my mindset in a fundamental way” reminded Wexnerologists of the company’s last big shake-up. In 1997, the business (then called The Limited) was under attack for poor performance, and Wexner responded by essentially reinventing himself and the company. It went from a freewheeling entrepreneurial system to a highly centralized one intent on not just running stores, but also building brands. And Wexner, who had been criticized for micromanaging every little detail, realized he no longer could be both a player and a coach. He spent months thinking through the changes, consulting with a variety of high-powered figures, from CEOs to movie director Steven Spielberg. The transformation was a remarkable shift for someone in the middle of a fabulously successful career.

And now, 10 years later, he’s making big changes again, although he didn’t do anything as interesting as meet with, say, Jay-Z. (The brands he now admires, by the way, are Apple and Starbucks for their consistency and customer service, among other things.) This time, the company is returning to decentralization and getting leaner by cutting expenses. It would appear that Reinvention 2.0 is actually going back to the model of the 1990s. Well, yes and no, Wexner says. While it won’t be as bureaucratic (“We need quicker decisions”), there still will be companywide discipline. “For instance, nobody is touching the VS logo or going to call a store ‘Vickie’s,’ ” he says.

The biggest change, of course, was the sale of Express and Limited Stores. Both were sold to different private equity firms, with Limited Brands retaining a 25 percent ownership interest in each. It was a sad ending for Limited Stores since it was the flagship—the engine that fueled the business’s phenomenal early growth and turned it into an internationally known corporation and one of the city’s largest employers, in addition to making Wexner a multibillionaire and the region’s most powerful man and top philanthropist. 

He says he came to realize that “nobody dominates the apparel business” because of the fickle customer base. Analysts say he waited way too long to cut loose the two divisions. (Even Wexner says he should have made the move two years ago.) While Express had become a $1.7 billion business, its performance was like a roller coaster. Limited Stores, however, resembled Cedar Point’s Demon Drop, a straight decline—falling from $1 billion in sales in the 1990s to just $493 million in 2006.

Some observers speculate that Wexner held on because he couldn’t bring himself to kick his first child, so to speak, out of the house. He dismisses the point casually: “I’m more interested in what is than what was.” He says his wife, Abigail, tells him that while he talks about old acquaintances, he never discusses former possessions, such as residences in New York or Bexley. “My thinking is very much in the present,” he says. “I like the present and the future.”

He refers often to the late Art Cullman, a mentor and Ohio State marketing professor who advised him to organize his life so change would become a habit. (Remember, Wexner is the guy who married for the first time in his 50s and then quickly fathered four children.) “I wonder what’s next,” he says, citing as examples two of his most successful projects, New Albany (the next suburb) and Easton (the next shopping complex).

“I am very good at changing,” he says.

It’s Oct. 16, a few minutes before 8 am, and a ballroom in the Hilton hotel at Easton is packed with about 250 men and women in their best business attire. They are here for the Limited Brands Investor Update Meeting, where Wexner and other execs will try to convince the Wall Street types that it’s wise for investors to buy stock in the company.

As Wexner takes the stage, a song with the lyric “It’s a new day” plays briefly. It’s the theme of the event. He says he’s looking at the company with “fresh eyes,” adding, “I’m delighted we don’t have apparel retail in the stores.” (Technically, that’s not correct since Limited Brands still owns Henri Bendel, which sells women’s clothing, but it’s treated as an afterthought at the meeting—rarely is it, or the meager sales from its two stores, ever mentioned.)

“Brand loyalty to beauty and lingerie is very different than loyalty to apparel,” he says. “Because of that loyalty, we get trial and repeat [business] in a way that apparel does not get.” So the growth that investors clamor for will be found in VS and BBW—not, as has been the case throughout Wexner’s career, in creating and building whole businesses from scratch.

Most of his remarks are about VS (maybe because it brought in more than twice as much revenue, $5.1 billion, as BBW’s $2.5 billion last year). “Victoria’s Secret owns supermodels,” he says. “The fashion show is the Supermodel Olympics.”

Then it’s on to expanding internationally, which Limited Brands has been talking about for around a decade (besides VS’s worldwide online presence). But now—with apparel gone, freeing up time and resources—it is ready to open shops outside the U.S. In January, it spent $628 million to buy La Senza, with 310 stores in Canada and 430­ in 37 countries from China to Qatar. Bath & Body Works will begin to open outlets in Canada in 2008.

Wexner, though, expresses caution, citing examples of American retailers who’ve struggled overseas. “I don’t want to cast a dark shadow on these two golden geese,” he says, referring to BBW and VS.

Another big talking point is last year’s performance, which appeared to be healthy with VS and BBW experiencing same store sales increases of 11 and 10 percent, respectively, over 2005. Wexner, in the annual report, even called it a “very good year.” Yet, at this meeting, Limited Brands treats 2006 like a tattered teddy. Wexner and other execs stand before the crowd essentially to say, “We’re sorry, we’ll do better next time.”

Wexner now believes 2006 wasn’t as good as it could have been. Limited Brands badly miscalculated on inventory and, he says, was “loose with expenses.” He tells the analysts it was “embarrassing,” and uses a Buckeye football analogy (which he does repeatedly during the meeting). “It was like Ohio State not tackling or blocking,” he says. He assures them that inventory management is under control and that $100 million in cuts have helped the bottom line.

The analysts are all about right now, however, so there is more apologizing for slumping sales this year (VS dropping 6 percent and BBW dipping 2 percent in comp store sales for September) and the languishing stock price: $21 at the time, down from $30 or so near the beginning of the year. About the fourth quarter, when retailers make the majority of their cash, Wexner assures the room that unlike his friend, OSU football coach Jim Tressel, who got his “ass kicked” in the 2007 national championship game, he doesn’t plan to taste defeat during the holiday season.

Near the end of his opening remarks, a man in black quietly steps on stage to pull off a drape to reveal a sign that reads, “The New Limited Brands.” The big moment doesn’t go well; the fabric gets stuck on a corner before coming down with a noticeable tug.

The rest of the show goes smoother, though, as the new company leaders take their turns before the analysts. Executive VP and chief administrative officer Martyn Redgrave, who joined Limited Brands in 2005 after being CFO at a large travel and hospitality company, talks about financial rigor and discipline. “The road needs to have strong guardrails,” he says. “We have been growing over time, but going from ditch to ditch,” referring to the company’s history of inconsistent performance while increasing sales from $8.4 billion in 2002 to $10.7 billion in 2006.

Then there are the new division CEOs: Sharen Jester Turney at VS and Diane Neal of BBW. Turney, previously the head of VS Direct (catalog and online), replaced Grace Nichols, who, after 15 or so years building VS into a megabrand, retired in January. Neal, formerly a high-ranking Gap exec, was hired as president and COO in late 2006 and promoted to CEO when the popular Neil Fiske left to lead Eddie Bauer in July.

Just like the images of VS and BBW, Neal and Turney present stark contrasts. Turney is wearing a low-cut black glamour dress and a Marilyn Monroe-esque haircut; Neal is in a conservative red outfit. The VS entourage, about twice as big as the BBW contingent, is color coordinated in black. During one of the VS sessions, the introductory music is “Chocolate Rain,” the hippest hit on YouTube at the time. BBW’s visual aid for its Q-and-A period is a video featuring an attractive, wholesome young woman with her attractive, wholesome family.

Neal and Turney are both optimistic during their presentations. Turney emphasizes VS’s mantra of sexy and forever young while projecting 10 to 15 percent  growth. VS figures the best way to grow revenue is to get more of its products into its 1,000-some stores by growing square footage by 50 percent. She thinks that in the next five years the bra market can increase by $500 million and panties will hit more than $1 billion in sales. Then there’s casual sleepwear, which VS overlooked last year, but isn’t this holiday season since it’s starting something called the supermodel PJ party. (Who wouldn’t want to attend!?)

She’s excited about emerging lines within VS—Intimissimi, with “flirty” Italian-style lingerie, and VSX, “sexy” and functional athletic wear—and such new products as VS Beauty’s Supermodel fragrance. The next big thing, though, could be Pink ($900 million in sales), playful loungewear geared toward 19- to 24-year-olds. Turney is proud to say that Pink’s page on Facebook has 350,000 friends, second only to Apple, which gives free downloads.

BBW’s Neal also talks about loyal customers, 35 million of them visiting the nearly 1,600 stores, and the brand’s

94 percent awareness rating. She, too, anticipates 10 to 15 percent  growth. While Neal points out she’s only been on the job three months, she’s clear about saying that BBW, which includes White Barn Candle Co. and C.O. Bigelow, has confused its customers of late by not only introducing too many new offerings, but also dabbling with upscale prices. “We need to be more consistent,” she says. Neal insists there will be fewer, but better product launches.

The biggest star in BBW’s lineup, though, could be Harry Slatkin, a leading fragrance expert who’s now president of Limited Brands home design after the company bought his business in 2005. He’s responsible for developing new products for BBW, and its more sophisticated home fragrance offerings have been branded as Slatkin & Co. (His face is displayed prominently on BBW marketing materials and packaging.) Still based in Manhattan, and a friend of  Elton John’s, Slatkin already has made two appearances on QVC, successfully hawking Bath & Body Works home fragrances. “He is a great TV salesman,” says Wexner.

While most of the investors meeting is about the nuts and bolts of the business, this is Limited Brands, after all, so there’s got to be a little sizzle. And marketing guru Ed Razek—responsible, incidentally, for that faux Rolling Stone cover—delivers it: His presentation on the VS Fashion Show (held Nov. 15 at the Kodak Theatre in L.A., but not shown on CBS until Dec. 4) is accompanied by videos of übermodel Heidi Klum and crew while he gives a history of the biggest event of its kind that’s now aired in 90 countries. He then flashes a photo spread of practically naked VS models in Vanity Fair and quips, “Probably the first time a nude picture has ever been put up in an investors relations meeting before.”

He announces that the Victoria’s Secret supermodels will get a star on the Hollywood Walk of Fame. But his biggest news regards one of the hottest pop culture happenings of the year: the Spice Girls’ first appearance of their reunion tour will be during the fashion show. In addition, the only place to buy the group’s new CD until mid January, other than online, will be in Victoria’s Secret stores. “We can sell it in a sexier way than Starbucks,” he says.

While the overall mood was upbeat at the meeting, analysts and others have expressed concern about Limited Brands’ new direction. Howard Davidowitz, chairman of Davidowitz & Associates, a New York-based retail consulting firm, says Wexner correctly downsized the company to protect shareholder earnings, adding, “He’s got some good things going.” But he fears that Limited Brands might be headed for trouble, and he looks to the company’s history with its former Lerner New York chain (a women’s fashion store it sold that’s now called New York & Company). “They say they’re going to take Victoria’s Secret and expand its footprint—make the stores bigger,” Davidowitz says. Wexner did the same thing with Lerner, he says: “They spent a fortune, but they didn’t do more business.”

Two other concerns are increased competition and reliance on mall sales. VS and BBW are being emulated by such powerhouse retailers as Chico’s, American Eagle Outfitters, JCPenney and Target. And although Limited Brands is looking to shift to stand-alone stores, the bulk of its business is tied to enclosed malls, an aging shopping concept. Retailers that depend on mall traffic generally see slowing sales, says analyst Howard Burnett with Smith Barney in downtown Columbus.

“He’s desperately in need of a growth vehicle,” notes Davidowitz. Pink is a possibility, but, says Burnett, “The question is, is whether Pink is cannibalizing Victoria’s Secret sales.”

“The problem is, where does this company go?” Davidowitz adds.

Not too far in the short-term, according to five reports released by analysts after that Oct. 16 meeting. Buckingham Research Group wrote, “We walked away thinking many investors were not fully convinced that LTD [Limited Brands] could restore consistent earnings growth and return to historical operating margins.”

However, there appeared to be agreement among all five that going international, growing Pink and focusing on BBW’s product launches were, as Citi wrote, “The right strategy for a healthy business.”

After 44 years of running Limited Brands, you’d think Wexner would be bored or at least annoyed with having to impress analysts—many of whom are half his age and no doubt think they’re smarter than he is. True, he’s still making a decent wage, earning more than $8 million in salary, stock options and other incentive compensation in 2006 (not including the $1.3 million spent on security for Wexner and his family), according to Morningstar. But his estimated net worth of nearly $3 billion would allow him to wander the seven seas in his yacht, sit and stare at his Picassos in his New Albany mansion or even play Mr. Mom to his four kids. His fellow Titans of the past decade have either retired or, in the case of his good friend, Dispatch publisher John F. Wolfe, receded somewhat from the daily grind.

Yet, as Wexner wrote in an e-mail to his employees in June, “I drive to work each day thinking of our future.” Why? His answer is quite simple. “I’m really lucky,” he tells Columbus Monthly. “I really like what I’m doing.”

And Davidowitz, the retail consultant, wouldn’t be surprised if Wexner is still effectively running Limited Brands a decade from now.

Imagine, Les Wexner bringing sexy back on his 80th birthday.

Sidebar: Gone, Baby, Gone

The announcement of Len Schlesinger’s departure from Limited Brands as Les Wexner’s No. 2 came without warning on July 30. The Harvard business professor left academia to join the company after helping guide Wexner through a massive reinvention in 1997 and quickly was seen as the golden boy of the business. “He was largely responsible for the day-to-day operations,” says Howard Burnett, an analyst with Smith Barney in Columbus. “I also think he was generally considered the top candidate to become CEO when Les decides to become only the chairman of the board.”

Since there was no official explanation for Schlesinger’s leaving, speculation filled the void. Did Wexner blame him for 2007’s flat sales or the fact that expenses were outgrowing revenue? Had Schlesinger not followed Wexner’s orders while doing community work for the Columbus Foundation or the Ohio State Medical Center? The abrupt ending appeared to fit a pattern of other No. 2s: Bob Morosky in 1987 and Ken Gilman in 2001 also left under similar circumstances.

Wexner says the end of Schlesinger’s tenure had nothing to do with his job performance. “Not everybody is happy everywhere,” he says. “This isn’t utopia for everyone.” As for his history with right-hand men, he says, “They left the business as part of strategic decisions done in advance. While looking abrupt, they weren’t abrupt. Or not as abrupt.” (Perhaps Martyn Redgrave, the new No. 2, should be taking notes.)

It wasn’t as if Schlesinger walked away empty-handed. According to SEC filings, he will receive, among other things, his current base salary for two years ($1.2 million in 2006), and Limited Brands agreed to buy Schlesinger’s New Albany home (appraised by the Franklin County Auditor’s office at $2.6 million) and provide him relocation benefits.

In exchange, Schlesinger said he wouldn’t “disparage the company or its employees,” and he must refer all media calls regarding his resignation to Limited Brands senior vice president and counsel Bruce Soll.

Sidebar: A Retrospective

Many changes have occurred at Limited Brands in the past 10 years, including the name (it was The Limited until five years ago). In 1997, there were 12 divisions selling everything from sweaters and shower gels to bras and canoes. Here’s an update on the divisions that no longer belong to Limited Brands. (Unless otherwise indicated, sales figures are for 2006.) The surviving divisions are Victoria’s Secret, Bath & Body Works and Henri Bendel.

Abercrombie & Fitch: Apparel for high school and college students, spun off in 1998 with 196 stores and $816 million in sales. Now based in New Albany with 1,004 stores and sales of $3.3 billion.

Cacique: Upscale lingerie. Closed in January 1998 and resurrected in 2001 as a plus-size lingerie store for Lane Bryant.

Express: Fashion apparel for young women and men. Sold in July to a private equity firm (Limited Brands still has a 25 percent stake) with more than 600 stores and $1.7 billion in sales. Headquarters still in Columbus.

Galyan’s: Sporting goods. Sold in 1999 to Galyan’s executives and an investment firm, and then bought in 2004 by Dick’s Sporting Goods.

Lane Bryant: Plus-size women’s apparel. Sold in 2001 to Pennsylvania-based Charming Shoppes with 651 stores and sales of $930 million. Lane Bryant’s headquarters remain in Columbus, with 907 stores and sales of $1.1 billion.

Lerner New York: Discounted sportswear. Sold in 2002 with 522 stores and sales of $940 million to a private equity firm. Now based in New York and called New York & Company, with 561 stores and sales of nearly $1.2 billion.

Limited Stores: Women’s apparel. Sold in August to a private equity firm (Limited Brands still has a 25 percent stake) with 260 stores and sales of $493 million. Headquarters still in Columbus.

Limited Too: Tween apparel. Spun off in 1999 with 321 stores and $376 million in sales. Now called Tween Brands and based in New Albany with 804 stores and sales of $833 million.

Structure: Men’s apparel. Folded into Express in 2001.