L Brands Inc has made the announcement that it will be selling a controlling stake in its Victoria’s Secret unit to investment firm Sycamore Partners. The deal, which values the lingerie brand at $1.1 billion, will see Sycamore Partners own 55% of Victoria’s Secret, while L Brands will retain a 45% stake. This move marks a significant change for the company, as its focus will now shift towards its core Bath & Body Works brand.

The departure of Chief Executive Leslie Wexner, who had purchased Victoria’s Secret in 1982 and played a pivotal role in shaping its iconic image, accompanies this change. Wexner, who is now 82 years old, will take on the role of chairman emeritus, while Andrew Meslow, an executive at Bath & Body Works, steps in as the new CEO.

Alongside the change in leadership, three directors on the board will be replaced, including the lead independent director. This decision reflects a response to activist investor Barington Capital, which acquired a small stake in L Brands last year and advocated for the company to split Bath & Body Works from Victoria’s Secret, refresh the board, and have Wexner relinquish his CEO position. Currently, Barington Capital is acting as an advisor to the company.

The decision to sell a majority stake in Victoria’s Secret comes at a time when the retail giant has been encountering difficulties in the lingerie market. The brand has faced increased competition from online retailers, leading to a decline in sales. Additionally, it has received criticism for its outdated image and lack of inclusivity regarding body types. Meanwhile, Bath & Body Works has experienced revenue growth.

By selling Victoria’s Secret, L Brands aims to concentrate on the growth of Bath & Body Works and ensure it achieves an appropriate market valuation. The company is confident that this new structure will enable Bath & Body Works to maintain strong growth. Currently, L Brands has a market valuation of approximately $7 billion.

In 2019, Victoria’s Secret accounted for nearly half of the company’s revenue, amounting to $13.24 billion. However, the brand’s sales have been declining for multiple consecutive quarters. Consequently, the company decided to cancel its annual fashion show and part ways with its chief marketing officer, Edward Razek, who was closely associated with the event.

It remains to be seen how Sycamore Partners will tackle the challenges faced by Victoria’s Secret and drive its growth. Meanwhile, L Brands will focus its efforts on revitalizing its core brand, Bath & Body Works, under the leadership of Andrew Meslow.

Useful links:
Victoria’s Secret official website
Bath & Body Works official website