The Limited is the latest mall retailer to meet its brick-and-mortar fate.
The brand announced on Friday that it is closing all 250 stores while cutting 4,000 jobs, joining the growing list of stores — including Aéropostale, Delia’s, American Apparel and Wet Seal — that have all filed for bankruptcy since 2014. The mounting retail graveyard points to the continued difficulty of brick-and-mortar stores in the mall market and the growth of e-commerce, which some experts suggest may render such stores obsolete.
Sun Capital Partners, which has owned The Limited since acquiring the company from L Brands (formerly The Limited Company) in 2013, stated it is writing down the remaining equity value of the brand to zero after several quarters of poor performance. Rumors had been percolating since December, when interim CEO John Buell left the company amid efforts to sell or liquidate the company in an attempt to compensate for poor earnings.
“In an increasingly challenging environment for mall-based retail and women’s apparel, we are very disappointed that the company has had to make the difficult decision to close its retail locations,” Sun Capital wrote in a statement to Reuters.
Elizabeth Elder, analyst at L2, said the downfall of The Limited is indicative of the rise of digital platforms like Amazon that have dominated the marketplace and continued to disrupt brick-and-mortar retail. She said this is particularly true of stores with low- to mid-priced products like The Limited, which are fighting an uphill battle against e-commerce.
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“At the end of 2016, we predicted that Amazon would become the be-all, end-all for retailers. It does not come as a surprise that The Limited is closing its stores,” Elder said. “For years, brands that are not in top-grade malls have been languishing, and Amazon’s success is another nail in the coffin. Unfortunately, we expect to see additional store closures as retailers fight to stay alive.”
However, The Limited noted that it will continue to sell styles online, though the scope and longevity of this remains to be seen. Though The Limited declined to comment, Elder said the help of a digital platform like Amazon, where the company already sells product, might be enough to transition The Limited to an online-only company.
A note on The Limited’s website.
“Complete digital sufficiency used to be a revolutionary concept, but now brands must embrace it,” she said. “The Limited is trying to staunch its losses, and the brand sees e-commerce as its only option.”
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Sucharita Mulpuru, chief retail strategist at Shoptalk, added that, due to the influx of professional clothing brands that have e-commerce offerings, it became increasingly difficult for The Limited to have a competitive edge. “More sales are shifting online and there is so much competition for things like, say, women’s work clothes, that there was little reason that The Limited gave to shoppers to go there versus anywhere else.”
Beyond failing to set itself apart from competitors, Mulpuru said that as mall brands like The Limited experience slumping sales, they are forced to alter their supply chains and production processes in ways that hinder their brands and hurt quality.
“Over the last several decades, few retailers other than those in the luxury sector have seen average selling points go up,” she said. “That places tremendous pressure on overall revenue, and they are often forced to go to China where they have long lead times and little nimbleness in their supply chain.”
William Susman, analyst at Threadstone Advisors, echoed Elder, saying that quality and style will continue to reign supreme if brands like The Limited want to succeed in the future. Beyond The Limited, companies like J. Crew and Gap have seen significant sales declines as a result of complaints from consumers of unimaginative products and off-trend designs.
“The Limited is a historically strong brand and Sun Capital is one of the smartest equity investors around. The closing of doors reflects the impact online retailing is having and the importance of good product. Retailers needs to continue to push themselves to reinvest.”
