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L Brands’ Leslie Wexner Lets Loose at Investor Conference

The firm's chairman and ceo was as provocative as ever, offering plenty of opinions about his own company and others.

Leslie H. Wexner, the founder, chairman and chief executive officer of L Brands Inc., doesn’t talk much publicly but lets loose on those rare occasions.

This story first appeared in the October 17, 2013 issue of WWD.  Subscribe Today.

At the firm’s investor conference Wednesday, Wexner was as provocative as ever, stating he can double L Brands’ business in North America and generate “sustained and significant international growth.” He also said that department stores are irrelevant and that there’s virtually no room for outlets in his retail empire.

He also expressed concerns about Washington’s political gridlock and the impact on business, expressed no regrets about vacating the apparel business, and even took a shot at Macy’s. “I had to laugh to myself when I picked up the news the other day that Macy’s was going to open up on Thanksgiving Day at 8 p.m. I thought, it’s an idea. I mean, they could open at eight in the morning,” and it wouldn’t make a bit of a difference. “But they don’t ask me for my opinions.”

He’s got plenty, about his own company and others.

Globally, the goal is to bring L Brands (formerly Limited Brands Inc.) to $20 billion in revenues within the next five to six years, though no specific time frame was cited. Another big goal: elevating the operating margin a few points to the high teens.

He said his business is “remarkably good considering all the static that’s going on around us. I think our year will be good, perhaps very good, unless Washington completely mucks everything up.…We’re worried about making the week, making the month, making and having the best possible season and that’s just how we think about it. The stuff that’s out of our control is out of control. We’re not immune to it. We focus on the things that we can influence.”

With L Brands’ domestic growth, Wexner sees La Senza coming to the U.S. from Canada, and additional square footage for Victoria’s Secret, Bath and Body Works and Pink in the pipeline. La Senza plans to open five or six stores in the U.S. next spring, at about 2,500 square feet each, in Midwest malls, which the Columbus-based L Brands is familiar with.

“Then of course there’s the rest of the world,” Wexner said. “It’s an interesting story because the pattern that we have followed is relatively unique. It’s not a flagships pattern. It’s one of testing our brands in multiple geographies. We’re getting very focused on geographies of the world and where we can expand with the greatest certainty and the greatest opportunities.”

The U.K., Turkey, the Middle East and Southeast Asia are where the focus is. Currently, L Brands has close to 800 overseas stores, company-owned and franchised. The Middle East, with about 250 stores, including 40 BBW units, is seen potentially expanding to a $2 billion business. BBW could have hundreds of units there, officials suggested.

The U.K., where just few Victoria’s Secret units currently operate, is seen as potentially a $1 billion business, with the brand growing to 40 or 50 units selling “the full assortments” and other brands in Wexner’s portfolio opening there as well.

In Southeast Asia, there are more than 100 stores in such markets as Singapore, Malaysia, Indonesia and Thailand. Eventually, L Brands expects to open in China, with franchise partners, but even without China, Southeast Asia is viewed as at least a $1 billion business.

During the Q&A portion of the meeting, Wexner characterized outlets as “easy money” and brand killers. “Coach became a discount outlet brand,” he said. “As they were growing their outlet channel they cut their own throat. It was easy money and it was irreparable.”

With brands bearing “high emotional content and equity,” Wexner said, outlets typically mark “the beginning of the end.…I read a lot and think a lot about retail history. I can’t find an exception. I think the outlet business is a terrific business, but don’t delude yourself: Whether you’re Gap or Nordstrom, you are cutting off your own water. It’s really hard to have a dual identity.”

L Brands does operate full-price stores in outlet malls. “It works pretty well,” Wexner acknowledged. “Yeah, there is footfall,” in outlet centers.

Victoria’s Secret, he added, does have four “real outlets where we bury mistakes. We are trying to get down to three.” He also acknowledged outlets might be a solution for brands being dropped by department stores. “But it doesn’t build the brand.”

On department stores, Wexner remembered that 28 years ago he said the format would increasingly become irrelevant. “People were really surprised that I would be so insulting to department stores but they did become irrelevant,” he said. “So the average Apple store probably draws more traffic to a shopping center than any department store does. And it’s probably healthier traffic in terms of its age, and what that traffic would mean in terms of opportunity for us. I don’t find that at this point in my young life and probably in yours that there is a great reason to go to a department store or to a shopping center to buy a pair of jeans,” because you can buy them online. “So, the definition of what you shop for, what is commoditylike and what has emotional content has changed and probably will continue to change.”

At malls where L Brands operates stores, “The volume potential for food, sit-down restaurants, food-court restaurants, fine dining, the whole mix of things, is probably greater than the department store volume or traffic.”

Wexner founded his business by opening The Limited, an apparel store, and got deeper into apparel by launching Express and buying the Lane Bryant and Lerner chains. As the apparel businesses started to drag, Wexner ultimately sold them all off, leaving apparel behind to concentrate on the more lucrative lingerie and personal-care businesses. “We made a very smart decision recognizing about 10 years ago, apparel was going to be less significant in terms of how people bought, in terms of emotional content whether your personality is defined by the smartphone or the accessories you carry,” he said.

Wexner said he was in “a playful and good mood.” So he spoke freely, even when a sensitive question about retirement came up, and he said that one of his lieutenants was advising him to duck it. The 76-year-old Wexner suggested retirement is not part of his agenda, at least anytime soon. “When I was greener I used to say I hoped I have a long lease,” he said. “I like what I do. I really like the people I am working with. What I do is fun. At some point I understand there is a reality. I don’t plan for that. Ten or 15 years ago, my wife Abigail sat me down for a serious talk about that and I listened. I didn’t argue.”

And he didn’t retire. “I have an awful lot of energy for a lot of things.”