Underwear and t-shirts: How L Brands' Victoria's Secret and The Limited became mall giants

4 months ago by Amy Lamare in Facts, Features

The man behind Victoria's Secret's growth into a multibillion-dollar lingerie empire under L Brands ($NYSE:LB) never really intended to get into intimate apparel. Instead, he set out to revolutionize how people shopped.

It is hard to imagine now, but once upon a time, people didn't have the option of shopping for casual sportswear separates at the mall. There weren't stores devoted solely to bathing suits or ball caps or underwear. Department stores carried the bulk of what we wore. It wasn't until a 26-year-old man got the idea of selling only a few specific clothing items in stores that changed the way people today shop for clothes.

His name is Leslie Wexner, and today, he is the billionaire tycoon behind brands Victoria Secret, Henri Bendel, and Bath & Body Works. He also oversaw The Limited, Express, Lane Bryant, Abercrombie & Fitch, and a slew of other retail giants that reside in nearly every mall and shopping center.

From family outcast to business tycoon

After graduating from (the) Ohio State University, he returned to his hometown of Dayton, Ohio to help at Leslie’s, the small store his family owned. Wexner wondered why his father didn't make as much money despite working hard, until he found a stack of invoices and began counting the cost and profit of every item in the store. That task led him to discover that the store's real profits didn't come from the more expensive items like coats and dresses, but rather from shirts and pants.

As a fiery young adult, Wexner told his parents that he could run their store better than they could. And naturally, his dad fired him.

Fueled by revenge, Wexner founded a rival store with a $5,000 loan from his aunt in 1963. He sold a limited selection of clothing in the store – only pants and shirts that sold quickly – and called the place The Limited. Before he even opened his first store, Wexner was so sure his idea would work, he signed a lease for a second store.

Before he ever made a sale, he was on the hook to his landlords for $1 million.

In his first year, he made sales of $160,000, double his father's best year. He attributed his success to the fact that he focused on just a handful of products at a time—something that was virtually unheard of in those days.

Inspired by his success, Wexner wanted to know how far his idea could take him. He took a U.S. map and a compass and drew a circle to see all of the places he could get to from Columbus, Ohio in a day. Through this, he discovered that he could get to 70% of the U.S. population in just two hours of travel time, and decided to turn The Limited into a national chain. A decade after opening his first two stores, Wexner had 41 stores selling $26 million worth of skirts, blouses, and pants.

The Stanford Shopping Center in Palo Alto, California, where the first Victoria's Secret was opened in 1977 (Photo Credit: CoolCeasar, Wikimedia Commons)

Enter Roy Raymond and Victoria's Secret

During the rise of The Limited in 1980, Wexner heard about a small chain of lingerie shops in San Francisco called Victoria's Secret.

Back in the mid-1970s, Roy Raymond walked into a department store to buy his wife lingerie. What he found were things he wouldn't be caught dead buying.

It occurred to Raymond that other men may want to buy their wives something sexy but feel out of place in the women's undergarments department. The then-30-year old struck upon an idea to create a market for something that currently didn't exist: a lingerie store that would make men comfortable shopping there.  

In 1977, with $40,000 in savings and another $40,000 in loans from family, Raymond and his wife set up the first Victoria's Secret in a small shopping mall — the Stanford Shopping Center — in Palo Alto, California.

By 1982, three more stores opened in the Bay Area, and Raymond launched the company's now ubiquitous catalog. Victoria's Secret was grossing $6 million a year in the height of a recession, but was near bankruptcy.

This is where Wexner comes in.

In 1982, Wexner called up Roy Raymond to talk knowing the financial situation of Victoria's Secret. Wexner got on a plane that afternoon and bought Victoria's Secret's six Bay Area stores for $1 million (not the $4 million The Social Network, the popular 2010 movie on Facebook, claimed in an iconic scene).

With that, Raymond continued to oversee operations, but Wexner immediately honed in on Victoria's Secret's problems. The store and catalog appealed to men, and Wexner realized that women were as uncomfortable in Raymond's Victoria's Secret as Raymond has been in the intimates section of the department store.

Still, Wexner saw the potential in Raymond's concept, so he restructured the business to make it more appealing to female shoppers. He then fired Raymond set his sights on expansion.

The first Victoria’s Secret outside of California opened April 1, 1983 in Boston, and by 1985, there were 30 Victoria's Secret stores across America. They were all based in malls and shopping centers, which is still where most stores are located today; few of these lingerie stores are in stand-alone buildings, but rather tenants in large commercial buildings.

Over time, Wexner achieved a balance of appealing to both female shoppers, the target demographic, and men who wanted to buy their significant others something extra... Or just enjoying the catalogs by themselves. The store's growth exploded in 1988 with 65 brand new stores opened — more than one per week of the calendar year — and by 1995, it had its very own fashion show. 

Year Stores Opened
1977 1
1982 2
1983 6
1984 21
1985 30
1986 58
1987 48
1988 68
1989 38
1990 47
1991 42
1992 31
1993 37
1994 29
1995 59
1996 56
1997 42
1998 25
1999 55
2000 36
2001 36
2002 30
2003 10
2004 13
2005 14
2006 21
2007 29
2008 43
2009 14
2010 11
2011 13
2012 29
2013 61
2014 52
2015 35
2016 20
2017 13
2018 1
TOTAL 1,176

Despite issues with management gaps and product quality in the early 1990s, the Fashion Show helped L Brands — then The Limited — command a $260 million IPO two months after the final model strutted on the catwalk. By the end of 1995, the brand had over 500 stores across America, as well as strong marketing tool in the fashion show and their tried-and-true catalogues.

Today, Victoria's Secret is the largest lingerie brand in the world, with annual revenues of nearly $5 billion and 1,176 stores in the U.S. and Canada.

The workplace culture of Victoria's Secret

Under the L Brands umbrella is 41% of America's $13.2 billion lingerie market: Victoria's Secret, Pink, and La Senza. And with Wexner at the helm, employee sentiments are high.

Employee reviews submitted anonymously on Glassdoor show an overall rating at or above the average company rating of 3.4, and a reasonable business outlook of 55% for the overall retailer.

Wexner is also near-universally approved by his subordinates; 96% of all Glassdoor reviews on him have been positive, while the CEO of Victoria's Secret stores, Jan Singer, holds a solid approval rating of 78%.

Wexner opened his first store when he was 26 and by his 50s, he was running more than a dozen businesses with five of them doing sales of $1 billion or more. Then from 1998 to 2007, Wexner sold off The Limited, Limited Too, Abercrombie & Fitch, Express, Lane Bryant, and Lerner New York.

In September, L Brands announced it would make Henri Bendel, an upscale women's clothing and accessory store, defunct after 123 years in service. Much like the sales and closures of other brands before it, Wexner cited the company's decision to continue focus on Victoria's Secret, his lingerie investment that continues to dominate the market.

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