Limited Brands Inc. chief executive officer Leslie Wexner nearly doubled his pay package in 2010 as the company registered an 80 percent increase in earnings and double-digit growth in same-store sales.
According to the definitive proxy filed with the Securities and Exchange Commission Monday, Wexner, founder, chairman and ceo of the Columbus, Ohio-based operator of Victoria’s Secret and Bath & Body Works, pulled in total compensation of $20.5 million last year, 89.5 percent above the $10.8 million he earned in 2009.
Disclosure of Wexner’s earnings came on the same day that shares of his firm hit a new all-time high of $37.99. They ended the day at $37.45, up 28 cents, or 0.8 percent, as the S&P Retail Index rose 0.1 percent to 526.77 and the Dow Jones Industrial Average added less than 0.1 percent to end the day at 12,381.11.
While his salary was unchanged at $1.9 million, Wexner’s cash bonus — classified as nonequity incentive plan compensation — grew 28.7 percent to $6.3 million from $4.9 million, and the sum of his stock and option awards nearly quintupled to $11.6 million from $2.4 million. Because of fluctuating stock prices and vesting schedules, these awards aren’t necessarily realized in the year they’re recorded, but companies are required to include them in the compensation tables submitted with proxies.
Limited Brands also reported $324,000 in change in pension value and nonqualified deferred compensation for Wexner, down 16.6 percent from 2009. Other compensation declined 74.5 percent to $312,000 from $1.2 million in 2009. The earlier figure included $930,000 in security services paid by the company; the costs for security services in 2010 weren’t included as part of Wexner’s compensation or elsewhere in the proxy.
Limited did say that security costs unrelated to business were reimbursed to the company by Wexner, as were any costs related to personal use of the corporate aircraft.
Sharen Turney, executive vice president of the company and president and ceo of the Victoria’s Secret brand, earned $7.1 million in 2010, down 7.5 percent from $7.6 million in 2009, when she received a $1.9 million cash payment in connection with a guaranteed minimum gain on options awarded under her initial employment offer in 2000.
Included in Turney’s pay last year was a nonequity bonus of $3,998,400, just $1,600 below the $4 million maximum to which she was eligible, based on Victoria’s Secret’s operating income.
Driven by Victoria’s Secrets’ results, Limited’s net income rose 79.7 percent to $804.8 million, while sales rose 11.4 percent to $9.61 billion and same-store sales expanded 11.4 percent. Its annual meeting is scheduled for May 26 at its headquarters.
U.S. consumers spent March on the move, allowing many retailers to deliver solid sales numbers that suggest resilience in the face of challenges from a later Easter, poor weather and higher gasoline prices.
Early reports from companies including warehouse club Costco Wholesale Corp., Victoria's Secret operator Limited Brands Inc., and teen retailer Zumiez Inc. show considerably better gains than expected at stores open a year or more.
Others, including Hot Topic Inc., Stage Stores Inc. and apparel retailer Cato Corp. posted drops in same-store sales from a year earlier, but the declines were less than analysts projected.
"I wouldn't necessarily say the performances we're seeing for March was remarkable, because expectations were so low," said John Long, retail strategist at Kurt Salmon. "It will take April and the Easter holiday to really gauge what's going on, especially on the apparel side."
Wet Seal Inc., a young women's retailer, reported a 4.7% gain in same-store sales compared with expectations for a 1.7% drop. Chief Executive Susan McGalla said the company estimated same-store sales would have increased at a high single-digit percentage without the effect of a later Easter, but that April would benefit as a result.
The month did see robust growth in employment, with non-farm payrolls showing the addition of 216,000 positions, spurring hopes for a sustained employment recovery. The stock market also continues rising, a plus especially for higher-end shoppers.
Costco, which posted a 13% rise in same-store sales when analysts were projecting a 7.4% gain, continued to benefit from higher gasoline prices at the pumps at its clubs, favorable foreign exchange rates and the continued economic recovery in California, where the company has a significant presence.
Costco's international operations showed continued growth, with foreign sales rising 17% for the month, while U.S. sales increased 11%. Costco said its Tamasakai, Japan, warehouse, closed for repairs from earthquake damage, is expected to reopen before the end of the year.
While many other big players are still to be heard from, including Target Corp., Macy's Inc. and Saks Inc., it is looking like retailers will beat expectations as a group.
The 25 retailers tracked by Thomson Reuters are expected to post a 0.7% drop in same-store sales for last month, with much of the reservations for a stronger showing the result of Easter being its latest since 1943. The calendar shift pushed buying into April. The March showing is expected to be followed by 7.5% gain in April. As a result of the April momentum, sales for the two months are expected to show 3.4% growth, which Thomson Reuters considers healthy buying.
Easter fell on April 4 last year and is three weeks later this year on April 24.
And consumers are expected to buy. U.S. retail spending on Easter related merchandise, for everything from cookware to clothing, is expected to average $131.04 a person this year, up 11% from a year ago, the National Retail Federation said. The figure is based on a poll of consumers. The increase suggests momentum and is "a good sign leading into the much busier and important months to come," said Matthew Shay, the trade group's president.
Retailers in coming months will look to back-to-school and Christmas holiday buying to the lion's share of their annual sales. They are also facing increasing cost pressures from rising cotton and labor prices and will have to see what kind of price increases shoppers will absorb.
Stores Try To Beautify Spaces, 'Seduce' Shoppers to Buy More With Better Lighting, Mirrors, Design.
Wall Street Journal By Elizabeth Holmes and Ray A. Smith
You spot a gorgeous dress on a hanger and, hopes high, make your way to the fitting room.
It's downhill from there. The door doesn't fully shut, the lighting makes you look ill and the frock looks frumpy in a mirror fit for a fun house.
The retail dressing room can be a total sales killer.
Now stores are making a big push to transform the dingy fitting room into a more flattering space. It's part of an ongoing struggle by retailers to coax consumers to spend more. Having saturated the market with stores over the last decade, they can't expand to increase sales. Instead, companies are trying to squeeze more profits out of their current fleet.
Customers who try on clothes in fitting rooms have a conversion rate—meaning they ultimately buy something they tried on—of 67%, according to retail consultant Envision Retail Ltd., of Surrey, England, based on observations of more than 8,000 shoppers. Customers who don't use the fitting rooms have only a 10% conversion rate. Shoppers who use the fitting rooms spend a third of their in-store time there.
Aesthetically, the dressing-room makeovers are an attempt to go from bland and barren to comfortable and inviting, as if the shopper is trying on clothing in her own home. Chandeliers are cropping up in luxurious anterooms, where racks of camisoles hang waiting to smooth the unexpected bulge. Inside the fitting rooms, wallpaper and back-lit mirrors aim to flatter, not frighten.
Stores are focusing their design efforts on dressing rooms in the women's clothing sections. Men tend to buy without trying on in the store, says Paco Underhill, founding president of Envirosell, a retail behavioral research and consultancy firm, who has timed men's visits in stores.
The new design at Ann Taylor, a division of Ann Inc., is intended to replicate a shopper's walk-in closet, says Samantha Dorfman, senior vice president of store development, design and facilities. A huge chandelier and larger-than-life marketing poster fill the entrance to "seduce" customers back to the space, Ms. Dorfman says. It's an about-face from the barren, beige entrance to the fitting rooms in the current layout.
Old Navy, the bargain-priced division from Gap Inc., moved fitting rooms to the center of its new store design. The relocation came after customers referred to the old tucked-away location as the "dungeon," says Tom Wyatt, Old Navy's president. To further cater to its target customer—a time-starved, young mother—the chain added what it calls "quick change" areas. The half-circle spaces are enclosed by a curtain.
Noticing that many women like to go into a fitting room together, Anthropologie, a division of Urban Outfitters Inc., makes sure each room can accommodate more than one person. "They consider it a little bit of a party," says Co-President Wendy B. McDevitt.
For women shopping with children or a boyfriend or husband, department store chain Macy's Inc. has been gradually updating its stores to add communal waiting spots with flat-screen TVs tuned to either sports or cartoons and upholstered seating. The theory: Parking a husband, boyfriend or kids in that spot helps a shopper feel "less rushed and stressed," a Macy's spokeswoman said in an email.
Clothing stores typically allot about 20% of the square footage towards fitting rooms and storage and 80% towards displaying the merchandise, says Robin Kramer, head of Kramer Design Group, a retail branding and design firm which works with clients from Talbots to Alexander Wang. She has lobbied stores to dedicate more space to their fitting rooms. "It's the moment where you put the brand on your body and decide if that's what you want," Ms. Kramer says.
Some retailers are filling the fitting room area with merchandise. At Ann Taylor, racks and drawers in the lounge area display undergarments such as shapewear and camisoles. Its sister division, Loft, also includes a bar of belts and jewelry. Sales associates manning the fitting room are able to sell more items to a customer without leaving the space.
Lighting is a critical component. "Any woman who goes into a fitting room that has really bad lighting, you look at yourself, you look at your skin and you're completely distracted," says Anthropologie's Ms. McDevitt. "Then you lose the real reason why you were in there."
The new Ann Taylor rooms have six sources of lighting and three types of bulbs, compared to one source and type of lighting in the old design. The mixture of ceramic metal halide, compact fluorescent and low-voltage bulbs is more flattering, Ms. Dorfman says.
Bloomingdale's has installed rear-lit three-way mirrors, which allow customers to see themselves from a variety of angles. There is also a ceiling-mounted light three feet back from the mirror to eliminate shadows on the shopper's face, says Jack Hruska, executive vice president of creative services at Bloomingdale's.
Personal touches at Old Navy include labels placed over a trio of bright yellow hooks, helping shoppers organize their haul. "I love it!" and "Not for me," the signs read. Anthropologie writes shoppers' first names on the fitting room door, making it easier for sales staff to refer to them by name. That one-on-one time with a customer helps the store to engage shoppers on an intimate level, Ms. McDevitt says.
Because fitting rooms are highly trafficked areas, stores must make the design durable as well aesthetically pleasing. At Ann Taylor, the gray tones of the custom-designed floral wallpaper mask scuffs. The leather benches were chosen for the material's resistance to stains, like lipstick.
To help shoppers get the attention of salespeople, some fitting rooms at Bloomingdale's, such as those in the intimates departments, have phones. Customers are automatically connected to a sales associate to obtain another size, or ask questions regarding fit. Bloomingdale's says the phones are used frequently.
Victoria's Secret, a lingerie chain from Limited Brands Inc., is testing buttons in a small number of its fitting rooms which, when pushed, alert a sales associate via headset. The system also keeps track of how many people use the fitting rooms, how long they stay and how many times they ask for help, says Marge Laney, president of Houston-based manufacturer Alert Technologies, which installed the Victoria's Secret system.
Continuing to build its senior leadership, Limited Brands Inc. promoted Denise Landman to chief executive officer of Victoria’s Secret Pink, a new position at the growing subbrand of Victoria’s Secret. Landman, who was president of Pink, will continue to lead the business. Pink, which was launched in 2004, targets college girls and offers sleepwear, loungewear, bras and panties.
Landman reports to Sharen Turney, president and ceo of Victoria’s Secret, who reports to Leslie H. Wexner, chairman and ceo of Limited Brands.
“This promotion recognizes Denise for her exceptional leadership in guiding Pink to industry-leading growth and profitability,” said Turney. “Her drive for results and her unwavering commitment to growing the business culminated in Pink achieving its first billion-dollar sales year in 2010.”
Landman joined Limited Brands in 1999 as vice president of merchandising and hosiery for Victoria’s Secret Stores. Earlier, she held positions of increasing responsibility in design, sales, marketing and merchandise planning at Danskin, Kayser-Roth, Hue Legwear, Calvin Klein Accessories, Federated Department Stores and Macy’s.
