Two of Limited founder Les Wexner's superbrands—Victoria's Secret and Bath & Body Works—have been slipping and sliding. So this fall, Wexner, four of his CEOs and supermodel Heidi Klum told a passel of stock analysts about a rosy future, one including tomorrow's new star: Victoria's Secret Beauty.

(This story originally appeared in the December 2001 issue.)

The meeting at The Limited Inc. headquarters is hardly an hour old and it’s already 28 minutes behind schedule. You can thank Les Wexner, but, hey, it’s his show. He’s the lead speaker in the State of the Brands forum on Oct. 10, addressing about 75 men and women in dark business attire who flew in from New York and spent the previous night at the Hilton at Easton. Most of them are analysts for investment firms, the people who recommend whether to buy a certain company’s stock. They’re important folks, particularly since Wall Street hasn’t been kind lately to Wexner’s portfolio of businesses and, hence, his own personal wealth.

Perhaps as a symbolic gesture, Wexner’s shirt sleeves are rolled up to mid forearm as he stands at the podium. He’s scheduled to talk for 15 minutes and goes for more than 40. While a thoughtful public speaker, he never quite seems comfortable, so he tends to meander. He plugs Easton as the shopping experience of the 21st century, tosses in an anecdote about Ohio State football coach Jim Tressel, describes how the company located all 130,000 or so Limited employees within 24 hours after the Sept. 11 terrorist attacks—which, as part of their terrible toll, caused the destruction of five stores.

But that’s not what the analysts—scribbling in notebooks, punching the keypads of calculators—are here for. On the eve of this vital holiday shopping season, they want to hear about Victoria’s Secret and Bath & Body Works, the principals of Intimate Brands, which is largely owned by Limited Inc. This yin and yang pairing—the naughty VS with its supermodels and sexy lingerie and the nice BBW with its Heartland sensibilities and Country Apple shower gel—has brought in billions of dollars over the past decade.

The unthinkable has happened, however. The two superstar brands have lost their shine. Sales are down, and there’s criticism of the product lines and speculation the good times might be ending.

A lot is riding on this meeting. It’s the chance for Wexner and his crew to atone for their errors and convince this skeptical bunch that it has a Big Fix. As one Limited insider said the day before the meeting, “Everything spins out from tomorrow: all products, all launches, all images, everything we’ve been working on all year. All aimed at this fourth quarter.”

Today, in fact, is the unveiling of the next phase of VS and BBW, the introduction of their more sophisticated and upscale looks and products. And it’s also the time to promote what Wexner hopes is the company’s next superstar brand, Victoria’s Secret Beauty.

Wexner sprinkles his talk with buzz phrases—“the new norm” and “moving to next”—as he explains the strategy for winning the hearts and minds and debit cards of customers. He points out he’s battle-tested and taking conservative measures in this tough economic climate by cutting inventories and pulling back plans to open and expand stores. But he insists he’s driven by the long view and not short-term solutions.

He ends optimistically, emphasizing the company’s ability to change and adapt and build. “The future of brands and our brands are very bright,” he says. “We will build a portfolio of master megabrands.” Yes, master megabrands. Optimistic, indeed.

The next four hours are spent trying to get back on schedule as executives stand at the podium and, in a few cases, concede their mistakes, or, in all cases, speak enthusiastically about the future. There’s a lot of talk only a number cruncher would love.

Wexner, however, didn’t build a $10 billion retail juggernaut solely by impressing analysts with efficiency initiatives or capital discipline. He also knows how to sell the sizzle. To use the language of the day, the big “take-away” for the analysts comes at lunch. That’s Heidi Klum, supermodel and Sports Illustrated cover girl. She’s announcing a remarkable coup for Victoria’s Secret—an agreement that essentially allows VS to dominate an entire week of national television programming to promote its famous fashion show.

Klum did her job perfectly. That is, did what supermodels are supposed to do: be pretty, charming and flirty. And the male analysts did what most males do in the company of supermodels: titter.

Coincidence or not, the stock price of Limited holdings jumped substantially the very next day.

Call them Les’s Angels. (But maybe not to their faces.) They are the four CEOs of Intimate Brands. There’s Bath & Body Works’ Beth Pritchard and the heads of the three Victoria’s Secret divisions: Grace Nichols of VS Stores, Robin Burns of VS Beauty and Sharen Jester Turney of VS Direct, which is the catalog and online operations.

Of those four, the most prominent are Pritchard and Nichols, who rank, along with master merchant Michael Weiss at Express, as the CEOs with the most seniority in Wexner World. Pritchard and Nichols each have spent about 10 years running their divisions, created $1 billion-plus businesses and earned (with bonuses) paychecks of more than $1 million in 2000. Nichols and Pritchard, both in their mid 50s, also are close friends. So close, goes one story, that Nichols let Pritchard and her family stay in her New Albany Georgian while the Pritchards were building their own New Albany Georgian.

Now, after 10 years of vertical lines on the growth charts, they have encountered sinking fortunes. In short, what worked before isn’t working now. The pressure’s on to perform, especially since Intimate Brands’ stock price dipped to as low as $8.50 this fall after a previous yearly high of $24.31. It’s not as if they’re not making money. They are.  Just not as much as before. And in the brutal world of retail, you’re only as good as your last quarter. Wexner has called his chief executive officers “proven winners.” But as one former company official says, “You’re as well liked as your business numbers.”

And Intimate Brands is sacred to the Wexner empire. IBI is its own company and listed on the New York Stock Exchange. But Wexner oversees both IBI and Limited Inc., which houses Express and other women’s apparel stores, and Limited Inc. owns 84 percent of IBI. While Intimate Brands accounted for $5.1 billion in sales (compared to $4.9 billion for Limited Inc.) in 2000, more importantly it earned $754 million in adjusted operating income—six times as much as the apparel business. When IBI sneezes, the whole Limited enterprise checks its vital signs.

And, as it had throughout the 1990s, IBI racked up sparkling numbers for the first three quarters of 2000 and confidently headed into the holiday shopping season, the bulk of any retailer’s sales. Then came the fiasco formally known as the presidential election, followed by a lingering economic malaise.

Suddenly, the magic was gone; Wexner says IBI’s fourth quarter last year was “our weakest ever.” And things didn’t get better. Comparable store sales—the revenues earned in one month compared to the same month the previous year—are a leading indicator of a business’s health. IBI’s comp sales have been in the red for each month of 2001 through September (the latest available figures).

Not all of the blame rests with the economy. “I’d have to admit that we simply failed to execute—and be as forward and fresh as possible,” Wexner noted earlier this year. “Strong brands should be able to withstand the vagaries of the market. We could have, and should have, this time. But we didn’t.”

Wall Street has begun to whisper, just as it did in the 1990s when Limited Inc.’s apparel stores struggled. In 1997, one analyst said harshly, “Les is great at building embryonic businesses. But he is horrible at mature businesses.” Wexner proved him wrong when the clothing divisions rebounded in the late 1990s. But that same sense of skepticism is just beginning to build about Intimate Brands as it ages. Are the glory days over for Victoria’s Secret and Bath & Body Works?

Bath & Body Works

Before the analysts’ meeting, a Limited insider said that, based on the mood of the investment crowd, the key speech of the day belonged to Beth Pritchard. VS may get all the press, but BBW gets plenty of attention from investors. It makes a lot of money. While BBW accounts for 35 percent of all IBI sales, it brings in 49 percent of all IBI earnings. That means there’s a damn good profit margin in selling scented soap.

And BBW has sold a ton of the stuff, going from just an idea in 1990 to $1.785 billion in sales in 2000 and more than 1,500 stores. Pritchard left her VP position at SC Johnson, where she expanded market share for the bug spray Raid, to grow a business with Wexner. The concept was to take the wholesomeness of a New Albany fruit stand and tap into the emerging trend of gourmet bathrooms to build a dominant body-care enterprise. And Pritchard made a lot of right moves as Bath & Body Works convinced millions of girls and women that Strawberry Lemonade body gels and Cucumber Melon body lotions—sold by clerks in gingham-plaid aprons—were indispensable. “We sell the ability for you to take care of yourself,” Pritchard has said. “We sell good-for-you treats. We sell entertainment.”

In fact, BBW feels it has revolutionized the way women care for themselves; they no longer just scrub with soap, but are, according to the company literature, “Cleansing with a scented Refreshing Shower Gel.”

Other retailers aren’t stupid, of course. When something works, they rush to copy it, and it seems as if you can’t walk into any Gap or Wal-Mart or CVS without seeing a prominently displayed body-care section. According to an Intimate Brands filing with the SEC, “The Company is unable to estimate the number of competitors . . . due to the large number of companies selling . . . personal care products through retail stores, catalogs and e-commerce.”

And so, on the morning of the analysts meeting, Pritchard strides to the podium to deliver one of the most important speeches of her BBW career. And the woman who’s been like the Yankees in October can’t be happy about having to concede she’s made mistakes. In short, she says the company failed to anticipate a changing market; “I didn’t move fast enough,” she says.

But Pritchard mainly emphasizes BBW’s strengths. “The core of the brand is strong,” she says. In uncertain times, she says people will seek comfort in BBW’s “affordable luxuries” and embrace the store’s new positioning as “a 21st-century apothecary”—presumably, a place to find the cure to what ails you . . . minus the druggist filling prescriptions for, say, Prozac or Cipro.

Later that afternoon, Pritchard is at the newest phase of Easton Town Center, standing in the newest phase of Bath & Body Works. It looks nothing like any of the BBWs modeled after that mythical New Albany fruit stand. It’s about three times as big (6,000 square feet compared to 2,200 square feet), with distinct sections. The old reliable gels and lotions are in the back. The two front areas showcase the new lines Pritchard’s counting on to reverse those lousy comp-sales numbers. They are Aromatherapy and Spa, which she estimates will produce more than $900 million in new revenue.

In this store, Spa means spa, as in a place to get pampered in private spaces. You can get a hand treatment (20 minutes for $15), a manicure (30 minutes for $20), a foot and leg massage (15 minutes for $15), a pedicure (30 minutes for $25), a massage (20 minutes for $20), a facial (30 minutes for $35).

Upscale pampering is the new BBW image. And the atmosphere in the spa section—marble floors, white walls and New Age music—fits the mood. Spa, she says, has “high emotional content.” Is BBW going to retrofit its 1,500 stores with minispas? No, Pritchard emphatically says. Although hand massages are available in every store, she says, “I have no interest in getting into spa services.” BBW is going slow with its large stores, just 14 of them for now, all in upper-income areas and only a handful to feature a spa setting.

The Spa concept, actually, is expressed through its products, such as Milk Facial or Seaweed Detox Mask. And BBW is going more upscale in cost, too. Its Aromatherapy line, presented in glass bottles with promises of soothing oils, carries the highest prices in the store: up to $18.

Pritchard is asked about the importance of her speech that morning. She quickly points out some of the various chapters of the BBW success story, including a 97 percent name recognition that ranks alongside Coke and Nike. But, with some hesitation, she admits that about two years ago Wexner told her to start rethinking the brand to stay ahead of the fickle consumer. He wanted her, as he has put it, to look at “every bottle, box, name and product. Is it fresh? Does it cut through? Does it still matter?” The process, she says, “takes time; we worked hard at it.” She pauses. “But it was hard, in the middle of a fabulous run, to stop and say let’s make a change.”

The abrupt change of fortunes, though, left Pritchard no choice. And that fabulous run of the past is, well, in the past. As Pritchard says, “Everybody questions you when sales are bad.”

Victoria’s Secret

While it’s nearly impossible to do, try to forget about all the sex and glamour and romance. And just focus on this: Victoria’s Secret sells bras. Playtex does, too. Yet when was Playtex ever mentioned as a cultural icon? That’s the magic of marketing and image, all those millions of dollars ($115 million in 2001) spent on ads of supermodels and their cleavage.

And nothing shows the iconic power of Victoria’s Secret more than, if all went according to plan, what happened in November. At the start of the holiday shopping season, Victoria’s Secret got a tremendous marketing boost: five hours of prime-time exposure on national TV without spending one dollar. That’s millions in free publicity through the broadcast of its fashion show and the placement of its supermodels on such hit shows as “Spin City,” “Just Shoot Me” and “Who Wants to Be a Millionaire?”

All this fuss over a business that sells bras!

Now, VS does sell plenty of other items, too, from sweaters to sleepwear—to the tune of $3.3 billion in 2000. You can buy that hot new corset at more than 950 stores, through a catalog that mails out 368 million copies or off a website that is said to be profitable.

The problem is that VS hasn’t sold enough underwear since November 2000. Through this September, its monthly comp sales were in the red for 11 straight months. The impact of the poor performance was felt in Columbus when Victoria’s Secret abruptly closed its call center at Easton in late summer; the company took a public relations hit for giving short and unexpected notice to the 470 employees. (Turney, who recently joined the company from Neiman Marcus to run the catalog and online operations, tries to counter the damage by saying VS did give workers 60 days’ pay, outplacement services, health benefits and relocation help.)

The key mistakes were moving too strong into what VS calls its glamour category—more high-fashion and special-occasion apparel—and turning its back on its less sexy, but reliable casual offerings. For instance, catalog sales suffered when VS dropped its profitable Country Series line of sleepwear and clothing. Now, the stores, catalog and website offer less glamour and more casual. Nichols says, “We’ve done a better job” in the past. Turney adds, “Most of our poor performance has been of our own doing.”

Victoria’s Secret also projects a new image, which is on display at its newest Easton Town Center store. Nichols is enthused about the new look as she walks through the larger-than-normal 6,500 square feet of selling space. Gone are the hot reds and pseudobordello atmosphere. The Easton store is softer and, like BBW, more upscale: warm pinks, marble floors, chandeliers. Music is romantic. “We are,” Nichols says, “refreshing and repositioning the brand.”

Don’t worry, VS isn’t turning into Gertrude’s Secret. “Sexy” is still the favorite word in the VS vocabulary. Nichols says it during the tour about as frequently as she breathes. One growth opportunity is hosiery, or, as Nichols calls it, “lingerie for the legs.” There’s no mistaking the marketing. The hosiery ads feature a supermodel with impossibly long legs in nothing but hosiery and a bra.

But Nichols sees bigger potential in what’s called Everyday. She wants customers to think of VS as the place to go not only for a lace microchemise, but also for the bras and panties women wear to work. Nichols walks into an area of the store that could be called the Get Real room. “This is the stuff women really wear,” she says, pointing out sensible panties and sleepwear. “But, see, we have lots of color, lots of fun prints. Still sexy, of course, a lot sexier than a department store.”

Next door is VS’s young sibling, Victoria’s Secret Beauty, another example of why Wexner was able to grow a $5,000 loan from an aunt into a dominant retail enterprise. He finds a way to turn a narrow niche into billion-dollar companies. In this case, it’s imprinting VS’s brand (sexy, remember) onto fragrances and cosmetics.

The division has just begun to build momentum, with $377 million in sales (also through the catalog and website) at 560 stores in 2000. But Wexner envisions aggressive growth, which includes a joint venture with the major Japanese cosmetic maker Shiseido, and $1 billion in sales by 2005.

In 1998, Wexner recruited Robin Burns, who had launched Obsession for Calvin Klein, from Estée Lauder to be his next Big Star. The only Intimate Brands CEO based in New York, she, too, flew in for the analysts’ meeting. Burns is now giving some investment types a tour of the VS Beauty store. Although the microphone malfunctions, she remains poised and cheery as she points out displays of two popular fragrances, Dream Angels and Pink. She’s particularly excited about a new product for, of all people, men. Burns explains that while men make up 40 percent of the $5.5 billion fragrance business, 80 percent of men’s cologne is bought by women—VS’s primary customer. She holds up a silver and black bottle and spritzes the male analysts. The name should come as no surprise; it’s Very Sexy for Him.

At the cosmetics area, Burns assures the analysts that store workers are trained to get a customer—intending to buy only lipstick—to purchase six additional items, from plumper to a liner sharpener, for a $65 sale. The sales counter displays impulse buys that seem contrary to the brand: scented dryer sheets and breath mints. The mints, though, are in the shape of lips. Sexy lips.

The key to moving to next, as Wexner might say, is the fragrance and cosmetics lines. It’s a $28 billion market, dominated by the department stores for years, but Wexner and Burns think they have found a winning niche thanks to the power of the Victoria’s Secret brand. Now, it’s a matter of execution and product. As Burns says, “You have to have great juice.”

Soon after Oct. 10, Wexner and crew had a good sense of the verdicts delivered by the analysts—either through their questions that day or the reports they filed for their clients. (The stock price bump was a good sign, but only temporary; a bad fourth quarter quickly would reverse that uptick.)

Bath & Body Works seemed to draw most of the concern, whether the new look and higher prices on some products would alienate core customers. Dana Cohen of Banc of America Securities said she would reserve judgment on the makeover until it was implemented in existing sites. The prime-time coup for Victoria’s Secret drew raves, although some analysts were skeptical about the brand sending a mixed message by pursuing the Everyday category. Overall, the reviews were largely positive, applauding BBW and VS for moving to correct their mistakes.

While some analysts issued Buy recommendations to prospective investors, a few remained noncommittal. After all, Sept. 11, which virtually ground all retail sales to a halt this fall, remained a fresh wound as the holiday shopping season opened with the war in Afghanistan, news of an anthrax scare at home and large-scale layoffs. The biggest wild card—no matter how many supermodels and new product lines Wexner introduces—is consumer confidence. Will enough people spend their paychecks on Very Sexy Miracle bras or Blue Lavender Palmarosa during a time of uncertainty and fear?

Some things even Les Wexner can’t control.