The Limited Said Considering a Liquidation

The Limited might be eying a different kind of sale this holiday season.

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The women’s specialty apparel retailer has been struggling amid declining mall traffic. Guggenheim Securities was hired to find a buyer, but so far the process has been unsuccessful and that could mean a liquidation of the business is a real possibility. Sources close to the situation said it was still too early in the process to determine an exact outcome.

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A spokesman for The Limited said, “Limited Stores is exploring a number of options that would provide the company with greater financial flexibility.” Guggenheim executives declined comment, as did executives from Sun Capital Partners, the private equity firm that has owned The Limited since 2007.

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Other sources familiar with the financials said a bankruptcy filing was a possibility as well. These individuals said that in addition to pitching to potential buyers to sell the company as a going concern, several brand management firms were also contacted about the idea of buying just the intellectual property assets of the retailer.

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Bluestar Alliance and Authentic Brands Group are believed to be among the IP firms who were contacted. That’s because both have experience working with operating companies to keep the store operations intact. Bluestar is part owner of the IP of specialty chain Bebe Stores Inc. through a venture with the publicly held firm, leaving the operations under the public company umbrella. ABG recently acquired the IP of bankrupt Aéropostale Inc., and is working with mall owners General Growth Properties and Simon Property Group to keep about 400 store locations in operation.

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Executives at Bluestar and ABG did not respond to requests for comment. One source familiar with ABG’s thinking said the company was likely eying other opportunities, such as the upcoming bankruptcy auction for the IP assets of American Apparel in its second tour of bankruptcy proceedings.

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As of July, The Limited operated 186 stores. The brand sells women’s clothing and accessories. Average price points range around $60 for tops, $70 for pants and $90 for dresses. The retailer’s web site is running a 60 percent off early Black Friday promotion.

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The Limited has been under the direction of chief executive officer Diane Ellis for more than three years. She’s split the company’s store count into different categories, those for high-end malls and those at lower-tier locations and rolled out value concept Backroom at The Limited, which carries its own specifically designed products and outlet products, in some of the lower-tier malls. The company also operates The Limited Outlet and has been experimenting with adding more technology into some stores. The business also recently launched a perfume line. “We’re rounding off that full lifestyle offering — petites, lounge, accessories,” said Ellis, when the three fragrances launched in September. “Perfume is the most personal accessory there is.”

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The Limited has faced issues similar to those of other mall-based retailers, although declines in foot traffic — which in turn have impacted sales — might not be its only problem. The chain also may be struggling because of a lack of differentiation, said Jane Hali, chief executive officer of Jane Hali & Associates, a retail research business. “This store is not known for anything,” she said. “There are stores that aren’t doing well that can [still exist] because they’re known for something. They have an edge, like Timberland, North Face — they’re known for something so you can build a story around it. But [The Limited is] not telling a story.”

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