“This isn’t goodbye…”

So reads the notice posted late last week to The Limited’s homepage, telling its customers that all 250 or so stores nationwide are officially shuttered, with shopping now only possible online. At about the same time, the women's apparel retailer’s owner, private equity firm Sun Capital, was telling its investors that despite the closures, it had nearly doubled its Limited Stores investment, according to an email to shareholders obtained by Reuters. Due to prior distributions and dividends, Sun Capital made back its original $50 million 1.8 times over, and will write down the remaining equity value of Limited Stores to zero, Reuters added.

That difference in the fortunes of the retailer and its owner is stark — all the more so because The Limited’s difficulties snowballed after it left the stable of chains operated by former parent L Brands, which sold a 75% stake to Sun Capital in 2007. Three years later, Sun acquired the remaining 25%. By late last year, it was time for Sun to cut its losses — or, more accurately, get out while it was well ahead.

“Private equity wants to be in and out in five to seven years,” Suneet Chandvani, head of middle market research at corporate debt intelligence firm Debtwire, told Retail Dive. “The goal is after five years, sell it or IPO it. Closing the stores, slashing jobs, the fact that Sun Capital is marking the capital to zero — that just says it all. Retail is just a declining business, especially the brick-and-mortar business where fixed costs are high and margins are thin. It’s not they haven’t done what they were supposed to do as far as managing costs, cutting costs, cutting down on their brick and mortar footprint. It’s the nature of the business.”

But while it seems clear that Sun Capital (which, like The Limited, did not respond to Retail Dive’s requests for comment on this story) didn't address the needs of its adopted chain, the seeds of The Limited’s demise were in fact planted decades earlier, when the retailer took aim for Ann Taylor’s market of well-dressed professional women, among other critical changes, says Lee Peterson, who spent 11 years at The Limited and is now executive vice president of brand, strategy and design at global retail design firm WD Partners.

“All of a sudden, you took that brand and gave it a different target customer,” Peterson told Retail Dive. “And it’s the wrong target customer because it’s really changed and you’re not set up for it. And you changed the process of how you get product into the stores. And you lost Les.”

Limited addition

“Les” is Leslie Wexner, who founded The Limited in Columbus, OH in 1963 and still runs the show at L Brands (originally christened Limited Brands) more than half a century later. Wexner himself sold on the sales floor at his first Limited store, and his dedication to merchandising and stores filtered down the line even as the company grew to become a bustling nationwide chain of hundreds of mostly mall-based stores, helping define casual fashion in the 1980s and into the start of the following decade — about the same time Wexner began to focus on expanding into personal care and fragrances through L Brands’ fast-growing Victoria’s Secret lingerie business and the launch of Bath & Body Works, also turning his attention to further segmentation of his apparel businesses.

For a while, The Limited was everything an apparel retailer could hope to be — shoppers flocked there confident that it was stocked with fun, stylish clothes that couldn’t be found elsewhere, and its racks were regularly refreshed with new finds. According to Peterson, The Limited presaged the apparel model of the 21st century: As early as the 1980s, product teams got merchandise into stores at breakneck speed by seeking and essentially knocking off fashions, an approach that is remarkably similar to the fast fashion ethos of today.

By the mid-1990s, L Brands operated more than 700 Limited stores nationwide as well as a host of complementary apparel chains including Abercrombie & Fitch, Lerner New York, Lane Bryant and two Limited spinoffs: Express (launched in 1980 in Chicago's Water Tower Place as a young women's clothier dubbed "Limited Express") and Limited Too (created in 1987 to target kids and tweens). Those sibling stores enabled the flagship Limited chain to abandon its own emphasis on younger shoppers to chase the women’s professional apparel market.

The gamble didn’t pay off. While buyers and clerks on Limited store floors were all set up to find and push casual clothing styles, they were stumped by the assignment of bringing out the demurer choices sought by older women. As its number of stores grew to some 800, The Limited also eventually shifted from a discovery-based, fast-turnover manufacturing approach to one where designers developed collections from studios in New York. 

The Limited’s consumer appeal waned sharply over the next decade; at the same time, L Brands increasingly backed away from the apparel space, selling or spinning off many of its clothing brands as Wexner shifted the company’s focus to growing Victoria’s Secret and Bath & Body Works. Wexner finally sold The Limited to Sun Capital in August 2007; L Brands did not receive any cash in the deal, with Sun agreeing to invest $50 million to revitalize the chain and arranging a $75 million credit facility.

“Les Wexner has always viewed himself as a merchant,” Peterson said. “And when I worked there, we were always told we were a merchant-in-training. So you take that company out of that mindset and you sell it to private equity. Right when you sell it, you still do have people there with that DNA — the great merchant’s eye, thinking like a businessperson but also having fashion sense — but over the years it’s going to fade. It’s just going to fade.”

Falling behind fast fashion

Needless to say, the change in ownership did little to improve The Limited’s fortunes. Like so many other apparel retailers that thrived in an era when mall traffic was at its peak, the chain failed to keep with dramatic shifts in shopping habits and fashion sensibilities.

“That contemporary market that they’re in is a very difficult market,” Shelley E. Kohan, vice president of retail consulting at store analytics firm RetailNext, told Retail Dive. “You have to nail it on merchandise, you have to nail it on price, and you have to nail it on experience, especially with today’s shopper."

Ironically, The Limited also fell victim to the fast fashion philosophies it helped pioneer. “With Limited, one of the bigger challenges for them was the fast fashion industry and how quickly the fashion came into the marketplace,” Kohan said. “They kind of missed it and weren’t able to keep up with the quickness of the industry. I don’t think the stores — the experience or the merchandise — was as relevant as some of the other places in the market. It was a challenge for them to capture the millennial market.”

While it may be true that fast fashion has taken over where The Limited left off, Peterson notes that the segment’s rise is not due solely to its speedy supply chain. It’s also about the decision makers who are paying attention to what styles they think will fly, and ordering the appropriate numbers for their stores.

“How Forever 21 buys is, they have people in the open market all the time — New York, Los Angeles — and they’re shopping all the time,” Peterson said. “They ask for a sample and the samples go out to L.A. and they’re shown to a team, and they decide ‘That’s cool, get as many you can. That’s nice, get 5,000.’ That’s a fast process, and all those fast fashion guys are what The Limited used to be a long time ago.”

Case in point: Peterson recalls that back in the day, he and his colleagues would scour the globe for out-of-the-way boutiques and bring back styles they thought would resonate with Limited customers. He says today’s fast fashion retailers are not just swift with manufacturing and logistics, but also similarly discerning about fashion itself, while many other apparel retailers now eschew discovery and idiosyncratic insights in favor of safer choices.

“You’d see a little shop in Dusseldorf and say, ‘Look at that cool blouse,’ and ask ‘Does it fit in with our brand?’ and if it did, we would fly it to Hong Kong and get it manufactured,” Peterson explained. “Now you go to a fashion consultant, you go to a color service. Pantone says what the color is.”

Stores of the future (and the future of stores)

The issues that ultimately chased The Limited out of brick-and-mortar retail don’t end there. Aside from discovering styles that shoppers want and bringing them swiftly into stores, specialty apparel merchants like The Limited must also have stores worth visiting, experts say. That entails old-fashioned retail fortes like merchandising and customer service, as well as less tangible qualities like a sustainable ethos and humane employment practices, says Kohan.

“Retailers that are going to win in the next decade are going to have differentiated product — authentic product that creates an emotional connection,” she said. “The Limited, in my mind — and some of the other apparel retailers out there — I’m not sure they’re the attraction that millennials want to see. There’s so much product out there: It takes editing back, pulling back, to more authentic, more crafted, more one of a kind. Also, stores really have to remove a lot of the pain points, and that includes queues and not being able to find products. That really turns off shoppers, but especially millennials.”

Fast fashion retailers, with their carefully curated designs, aren’t the only example of success in today’s marketplace. Peterson also points to stores like Urban Outfitters and Anthropologie, which keep limited amounts of apparel in stock, supplementing them with accessories and other goods that perpetuate their distinctive vibe (and often carry higher margins).

“Urban Outfitters is one of the most forward-thinking apparel companies,” Peterson said. “We used to say that stores like that were just accessories stores in disguise. They’re really selling lifestyle — they think lifestyle first, and that’s smart. Amazon does that too, in a much different sense: They’re thinking about the lifestyle of their customers in terms of saving them time — and making it easy. What are the most of the fashion guys thinking of now? 50% off.”

And while it’s easy to blame the demise of other specialty retailers and mall-based chains on an excess of brick-and-mortar locations as well as the ever-growing threat posed by e-commerce, it’s worth reiterating that The Limited was down to just about 250 stores until its final week. Moreover, e-commerce is not the store-devouring monster people think it is, according to Brent Franson, CEO of consumer insights firm Euclid Analytics. Rather, apparel retailers like The Limited, while competing in a notoriously difficult space vulnerable to changing consumer tastes, actually have an advantage in brick and mortar because people still want to try on their clothes, feel the fabric and see how it looks. 

“Sometimes we talk too much about how Amazon is growing and taking a bite out of everybody’s hide," Franson told Retail Dive. "It was the same story about Netflix killing Blockbuster — now it’s Amazon killing Macy’s or killing The Limited. But it’s more a story of ‘Good sailors aren’t made in calm waters.’ The truth is that there are brands like Sephora that are very successful and are broadening their store footprint. We are overstored, there are too many stores, but often a retailer with operational difficulties is a company making the wrong decisions, not the victim of a large outside macro-force.”

It’s too late for The Limited, but Franson believes that other physical retailers can still right the ship, provided they know the identity of their shoppers — and he means that literally.

"Offline retail is massive, but knowing the identity of your customers in the physical space is massively important,” Franson said. “It takes having their trust so they allow you to know who they are, so you can optimize the experience and find the trends that are common among the individuals that come in."