Wednesday, August 16, 2006

Limited Brands: "Who Has a Secret?"

4:16PM – August 15, 2006

The specialty retail operator of Victoria's Secret, Limited Express and Bath & Body Works stores, Limited Brands, Ltd. (LTD-$26.81) announced the retirement of its Chief Financial Officer, Ken Stevens.

Mr. Stevens, 54, is leaving before the Company’s exciting “Semi-Annual Volcanic sale event toward the end of the season.” Stepping down after only two months in the post, he said he was retiring “to spend more time with his family.”

Stevens had been with Limited for five years in various roles. Most recently he served as CEO of Limited Brands’ Express subsidiary and earlier was president of its Bath & Body Works chain.

Stevens’ employment agreement (effective June 12, 2006) provided for an initial base salary of $900,000. [Ed. note. I love my family, too, but it’s hard to walk away from—including potential bonus’—one million (+) per annum.]

In our view, “Victoria is not the only one with a Secret.” There is more to this announcement than the bromidic press release—“personal reasons.” We recommend to our readers a reading of Limited Brands’
Q1:06 Conference Call Transcript. Paul Rapp (President of Express) quickly answered a question directed to Stevens on trading margins and he [Stevens] fumbled a second question on the number count in change of store leases.

Stevens does not depart empty-handed. There is a rider in his agreement that articulates that “if he terminates his employment for good reason, he will continue to receive his base salary for one year after the termination date.” All told, provided that he agrees to “execute a general release of the Company,” he will collect—in aggregate--$1.8 million in salary continuation (payable over twenty-four months). Additionally, he has the
earn-out potential to receive $1.98 million in incentive compensation.

Unclear is whether or not he will have to return 15,000 shares committed for purchase to him by the Company for his fleeting promotion to CFO.

Limited Brands has an active group of Loss Prevention Professionals dedicated to reducing shrinkage (inventory shortages)—ranging from tackling organized crime through ‘panty-raids’ of online auction houses to Info-Sharing with other retailers. In the case of this ephemeral CFO, in our view, the Company could have used one of these professionals in working out this departure deal.


jane said...

I believe that stepping down or making sacrifices for the family is a sign of heroism. He made a big time deal though! I wish I was in his shoes.

David J. Phillips said...

Dear Jane:

I agree that making sacrifices for one's family is a BIG DEAL--but not at the EXPENSE of MORE THAN $2M coming out of the pockets of ORDINARY stockholders [for only two months work!!!]