Leslie Wexner and The Limited
The Limited was the biggest success story of retailing. Throughout the 1980s The Limited grew at an unprecedented rate. Sales rates and stock holder equity climbed at 46 percent per year, with earnings increasing 63 percent annually. I 1984 The Limited sold over 200 million garments, which averages out to three for every woman between the ages of fifteen and fifty-five. By 1985 The Limited controlled 5 percent of the $50 billion per year women’s clothing business. So what happened to this retailing giant? Rapid expansion and market saturation, combined with poor quality products and lack of band image, eroded the customer base.
Leslie Wexner was studying to be a lawyer at Ohio State University in 1961 when he decided he would rather work at his family’s women’s store named Leslie after him in Columbus, Ohio.
Wexner’s father, a Russian immigrant, had been named a manager for the Miller-Wohl clothing store chain when he decided and his wife would open their own store. Leslie Wexner began to help his parents when they decided to take a vacation. It was during this period that Wexner realized that certain things sold better than others. Dresses and coats did not move as quickly as the other merchandise.
Wexner and his father disagreed on how to run the family business. Wexner wanted to focus on women’s sportswear, which sold faster than the career-wear or formal-wear. Wexner’s father believed a clothing store needed to have a diverse range of products to survive. Two years later, Wexner borrowed $5,000 from his aunt and opened his own store in Columbus which offered a “limited” selection of clothing. The Limited carried only moderately priced women’s sportswear. Sales the first year were $165,000, vastly surpassing his father’s business. His father closed Leslie’s, and joined his son as Chairman of The Limited, in 1969, with six stores, the company went public.
In 1970 Wexner’s first annual report predicted that “The Limited would become the largest retailer of women’s specialty clothing in America.” By 1976 Wexner was on his way to realizing that boast with 100 stores. Wexner was one of the first businessmen to engage in niche retailing. The Limited marketed to the emerging baby-boomer generation with moderately priced jeans, pants, skirts, and tops. As his customer base aged, The Limited was also one of the first vertically integrated stores. Vertical integration allowed Wexner to produce private-label goods inexpensively through a network of foreign manufacturers. The rapid response inventory and distribution strategies developed by Wexner allowed The Limited to respond to changes in fashion trends faster than their competition. The third key to The Limited’s success was store representation. The design of the store fronts and merchandise displayed reflected the brand image Wexner wanted to project. The Limited store interiors were modern, captivating, and glamorous.
Knocking off a competitor’s line was cheaper than creating his own
The Limited’s success in the 1980s came from their product development philosophy: “We don’t set the style, we follow it. We try to be fast followers (Edelson)”. Wexner traveled the world looking for hot products and fashion trends which could be knocked off at lower prices and sold in large volumes, The pivotal production in The Limited’s success was the Forenza sweater of 1984. Wexner noted that the “Preppy Look,” which had dominated women’s fashions for the previous two years, was reaching saturation levels, but what would be next? The status-conscious 1980s was a time when Americans craved the sophisticated, sleek, modern look of European products. Wexner invented Forenza, an Italian sounding word, and decorated the interiors of his stores with Italian flags and slogans. He declared Forenza “official…accept no substitute.” And women agreed. The shaker-knit Forenza sweater became the most successful sweater in American retailing history, selling more than 3 million pieces at $29. By 1985 The Limited appeared to be “limitless” in its market domination.
1985: Arthur Shapiro murder
In 1985 Arthur Shapiro who was Leslie Wexner’s attorney was killed execution style one day before he was scheduled to testify before a grand jury. Shapiro had an office in the same building as Wexner. When Jeffrey Epstein was first arrested his house manager Alfredo Rodriguez had in his possession Epstein’s little black book. In the book on page 133 the FBI found information on the murder of Arthur Shapiro. (Based on the fact that many source pages are disappearing I am including the full link here:
The Limited becomes the dominant retailer
With The Limited installed as the dominant retailer in the twenty-to-thirty-five-year-old women’s sportswear niche, Wexner was ready to capitalize on other marketing niches. In 1980 Wexner added a new division to The Limited, Inc. Limited Express. Express was targeted at females from fourteen to twenty-five, who wanted fashion forward looks that mirrored the latest runway trends. The stores were bold and bright with whimsical fixtures. Express was another success for Wexner, and within three years the division had opened 161 stores. In 1982 Wexner purchased the clothing giant Lane Bryant. Lane Bryant, a leader in plus-size fashions, had lost touch with its core customer. Wexner revitalized the chain by upgrading the apparel to moderately priced fashionable sportswear targeted to the younger plus-size customer.
Wexner’s next acquisition was the 800 Lerner Shiops in 1984 from Meshulam Riklis’s Rapid-American Corporations (under their McCrory Division). The store carried a vast assortment of budget priced merchandise targeted to women between the ages of twenty and thirty. The capstone to The Limited, Inc., women’s business came with the 1985 acquisition of the prestigious Henri Bendel department store. Henri Bendel was originally founded in 1896 as a hat shop, but later became an upscale retailer of women’s bridge and designer fashions. The Bendel acquisition put The Limited, Inc., on the same playing field as Bergdorf Goodman, I.Magnin, and Neiman-Marcus.
1987 Leslie Wexner meets Jeffrey Epstein
Both men, Leslie Wexner and Jeffrey Epstein, and frankly even Robert Meister, former Vice President of the insurance company AON seem to have discrepancies with the exact year Epstein and Wexner were introduced. Epstein is quoted as saying it could have been 1986, 1987 or later. Other sources link Epstein to Wexner during the time of Arthur Shapiro’s murder in 1985. We may never know the truth. The one constant has been that it was Meister, who knew both men, and who met Epstein on a plane in first class enroute to Palm Springs; and who’d heard from Wexner of his complaints with “the people handling his money” that he decided to make the ill-fated introduction.
1989 Wexner continues acquisition of companies
In 1988 Wexner began to expand The Limited, Inc., into menswear. Abercrombie & Fitch, the first menswear acquisition, was positioned to compete with Ralph Lauren, Tommy Hilfiger, and Calvin Klein. The division was so successful that Wexner opened Structure, a chain of men’s retail stores which provided moderately priced, contemporary, Armani-inspired looks for casual work environments. Next, Wexner expanded The Limited into the sporting goods market, dominated by Patagonia, LL. Bean and Eddie Bauer, by purchasing the majority interest in Galyan’s Trading Company in 1995. Galyan’s opened in 1982 in Indianapolis by Patrick Galyan provided sporting goods and apparel targeted to the outdoors sports enthusiast.
The Limited acquired Victoria’s Secret, Cacique, White Barn Candle Company, and Bath Body Works during the 1980s and 1990s and spun them into a separate division in 1995 known as Intimate Brands, Inc.
Victoria’s Secret and its founder Roy Larson Raymond
A detail lost to history is the tragic story of Victoria’s Secret founder, Roy Larson Raymond. Raymond, a Tufts University and Stanford Graduate School of Business alumnus, opened the first Victoria’s Secret shop with his wife Gaye on June 12, 1977 at the Stanford Shopping Center in Palo Alto, California. Raymond opened the store after becoming embarrassed trying to buy lingerie for his wife Gaye. His idea was to open a store where men felt comfortable shopping for lingerie. Raymond’s clever idea in the selection of the name evoked the sexually repressed Victorian era while at the same time suggesting that one could unveil the secrets laying beneath the façade of repression. Raymond trademarked the name Victoria’s Secret on an application dated February 21, 1978. On March 28, 1980 he trademarked the font type and design of what became known as the logo of Victoria’s Secret. An ornate border with laurel leaves and branches with an ornate Edwardian script font. Initially Leslie Wexner’s The Limited apparel stores were located in Ohio and in San Francisco.
By 1982 Raymond had six stores however he was not as good in business as he was in his initial creation of Victoria’s Secret. As Raymond expanded, he got into debt, so much so that he was going to declare bankruptcy. Wexner had already become friendly with Raymond, having walked into his store while in San Francisco. The two men, according to Raymond’s wife Gaye, spoke about a partnership. Raymond is said to have thought he and Wexner were so different that it would be a better idea to just sell the stores to him outright rather than declare bankruptcy. Six months after their initial meeting Raymond called Wexner. On the same day Wexner flew out to San Francisco and within 24 hours negotiated the purchase of Raymond’s company that was grossing $6 million per year for the amount of $1 million. On August 26, 1993 Raymond at the age of 46 jumped off the Golden Gate Bridge in San Francisco.
VICTORIA’S SECRET: A PHENOMENAL SUCCESS
Of the four divisions in Intimate Brands, Inc., Victoria’s Secret has experienced the most phenomenal success. Victoria’s Secret boldly positioned itself in malls, with seductive window displays that declared it acceptable for women to purchase sexy, romantic lingerie. In 1999 The Limited created one last off-spin off from their company, The Limited, Too. The Limited, Too, Inc., at the time was a 321 store retail chain of trendy girls’ clothing.
Secretive Wexner and those tax loopholes
Before Jeffrey Epstein became a fixture in Leslie Wexner’s life he was already known to be very secretive. The Limited, as early as 1980 used tax loopholes to avoid paying taxes. Two men Stanley Schwartz then general counsel for The Limited and Frank Colucci his trademark counsel helped. They did this by using various tecniques. One was by offering “private label” for the clothes sold under the trademark “The Limited”. So that instead of purchasing from manufacturers they realized the name had become a brand in the public’s mind. The trademark became an asset. One they were not about to include when The Limited went public in its IPO (Initial Public Offering).
LIMCO: A tax shelter
The trademark of Victoria’s Secret was removed from The Limited and placed into a holding company named Limco. Limco then licensed the trademark back to its parent company The Limited for a 5 percent of the gross sales. On June 10, 1982 The Limited went public without owning its very own name and brands.
Additionally, Limco made loans to The Limited and other subsidiaries. Loans that were rarely paid back.
Wexner with the help of his two attorneys used this same tax loophole scheme with all the brands that became subsidiaries of The Limited – including Victoria’s Secret. When Wexner purchased Victoria’s Secret from Roy Raymond the created another corporation called V Secret transferring the intellectual property which was a nonrecognition transfer under Internal Revenue Code section 351. This meant that no taxes, no federal, no state taxes – nothing was owned to the U.S. government.
Four of these holding companies with the same purpose existed. All with Leslie Wexner’s Ohio address.
Using obscure tax loopholes Leslie Wexner became very rich. The way one would describe this is like the Russian Matryoshka doll or stacking dolls. One placed inside the other in varying degrees of sizes. But all belonging to the larger doll.
However, unlike the Intimate Brands, Inc. and the Abercrombie & Fitch spin-offs, The Limited, Inc., does not hold ownership interest in The Limited, Too.
By 1985 The Limited consisted of 2,500 stores
The expansion of the late 1980s and early 1999s positioned The Limited for continued increases in the markets and profits. As the 1980s drew to a close, The Limited consisted of 746 stores, Express of 751, and Lerner of 877. In 1990, when other retailers were struggling with the economic recession, The Limited doubled their stock prices and increased their earnings by 15 percent to $398 million on $5.25 billion sales. However, as early as 1987, there were signs of trouble for the women’s division. The Limited had never developed strong product development or branding strategy. Throughout the 1980s and 1990s, the company continued to merchandise the stores by knocking off hot sellers (basically stealing designs from other companies), instead of developing their own brand specific product lines. This created a problem because virtually identical products appeared simultaneously in each of the four women’s divisions. The identities of each division became confused. There was no consistent design direction. Price points went up and down. The product lines switched from sportswear to career wear and back again. The divisions were also plagued by poor quality merchandise. Boredom and monotony settled over The Limited, Inc.
1993 Leslie Wexner gives Power of Attorney to Jeffrey Epstein
In 1991 Leslie Wexner signed a three-page Power of Attorney that enabled Jeffrey Epstein to hire people, sign checks, buy and sell properties and borrow money — all on Wexner’s behalf. Epstein, the document stated, had the “full power and authority to do and perform every act necessary” for Wexner.
As people close to Leslie Wexner at the time questioned Epstein’s role in Wexner’s life just looking at the published numbers for Wexner’s business it does not appear that Epstein was playing the role of financial advisor. Epstein’s aptitude for tax avoidance as has been cited as the reason Alan “Ace” Greenberg hired him for Bear Stearns is in all likelihood the same reason Leslie Wexner gave him such latitude. There is talk that in addition to the loopholes Epstein was able to skirt on behalf of Wexner that the two men were possibly lovers. Men of both Wexner’s generation and even Epstein’s did not come out to the world but remained deeply closeted. At the age of 55 Wexner married Abigail Koppel, then 33 years old on January 23, 1993 (and Epstein arranged his prenuptial agreement).
By 1993 sales at The Limited fell 25 percent, net income dropped 14 percent, and stock prices remained at the 1987 rate. The 5,600 store chain which encompassed thirteen retail divisions was still the largest women’s specialty retailer in the United States, but it was suffering from extreme growing pains. To save its core business, The Limited, Express, and Lerner, Wexner decided to close down poorly performing stores, sell off select divisions, and spin off others with IPOs (Initial Public Offerings on the stock market). Between 1885 and 1999, The Limited, Inc., closed over 750 stores from The Limited, Express, Lerner New York, and Henri Bendel divisions. Abercrombie & Fitch, Intimate Brands, and The Limited, Too, were all spun off through highly successful IPOs. Cacique was shut down in 1998, and the majority interest in Gaylan’s Trading Company was sold in 1999.
Next, Wexner had to refocus the brand identities of each of the divisions. In 1997 The Limited, Inc., formed a new design studio to redefine the target market for each division and concentrate on cohesive product development. In 1999 The Limited, Inc., devoted considerable resources to advertising their redefined brands. As a company, The Limited, Inc., has never utilized advertising to drive traffic to is stores or differentiate itself in the marketplace. Finally, The Limited, Inc., established new standards for product quality to regain trust with consumers.
In 1999 the Express division of The Limited, Inc., began to see an increase in earnings, while The Limited’s sales were flat. Lerner New York, Lane Bryan, and Structure all continued to experience losses. As of 2000, The Limited, Inc., has been reduced to nearly 3,000 stores which generate approximately $4 billion sales. From its peak growth of 750 stores, The Limited has been reduced to 443. Despite the long-tern brand strategies currently in place by 2000 many questioned whether The Limited division of The Limited, Inc., will survive. The Limited, Express, and Lerner New York continue to canabilize each other’s customer bases, and without clearly defined niches, there may not be room in the marketplace to operate all three.
JEFFREY EPSTEIN: Final nail in Leslie Wexner’s retail empire coffin?
Just before Jeffrey Epstein is said to have committed suicide on August 10, 2019 in his cell in the Metropolitan Correctional Center in New York City Wexner began to make statements to distance himself from Epstein. He first claimed that he did not know about any wrongdoing on the part of Epstein. About two weeks later Wexner claimed Epstein stole millions of dollars from him.