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Victoria’s Secret sells control to private equity firm; Wexner steps down

Shoppers walk past the Victoria's Secret store on Broadway in the Soho neighborhood of New York on April 4, 2018. Victoria's Secret's owner, L Brands, said that the private-equity firm Sycamore Brands will buy 55% of Victoria's Secret for about $525 million. Victoria's Secret will become a private company. (Mary Altaffer / AP)
By Sally Blakewell and Jordyn Holman Bloomberg

L Brands Inc. agreed to sell a controlling stake in its Victoria’s Secret brand to private equity firm Sycamore Partners in a deal that values the lingerie brand at $1.1 billion.

Sycamore Partners agreed to buy 55% in Victoria’s Secret in the transaction. The lingerie brand, which will include the Pink line of young-adult focused underwear, will become a private company. L Brands will retain a 45% minority stake, while Bath & Body Works will be a public standalone company, L Brands said Thursday in a statement and a memo to employees that was seen by Bloomberg News.

L Brands also said billionaire founder Leslie Wexner will step down as chairman and chief executive officer. Wexner, 82, the longest-serving chief executive officer on the S&P 500 Index, will be chairman emeritus, remaining on the board of L Brands.

“I think about the endless possibilities ahead for this company. And I’ve thought about where I fit in the picture,” Wexner said in the message to employees. “In keeping with this same thoughtful examination, I have decided that now is the right time to pass the reins to new leadership.”

The transaction follows years of scandal and slumping sales at the lingerie chain. The Columbus, Ohio-based firm has struggled to mend an image tarnished by allegations of misogynistic culture under Ed Razek, its controversial former chief marketing officer, as well as lingering questions about Wexner’s relationship with late convicted sex offender Jeffrey Epstein. Wexner says Epstein defrauded him.

L Brand shares fell as much as 10% to $21.81 on Thursday.

Victoria’s Secret, still tied to the push-up bra aesthetic the company projected for many years, has lost ground to competitors that market their products as comfortable and body-positive. A broader retail shift to e-commerce and away from shopping malls has also dealt a blow.

After this sale, L Brands would be reduced to running the Bath & Body Works chain of skin care products that contributed 35% to the overall revenue in the year ended February 2019. Victoria’s Secret, despite its steady declines, brought in nearly 56% of L Brands’ revenue last year, according to data compiled by Bloomberg.

The deal follows L Brands’ plans, laid out last September, for a turnaround at Victoria’s Secret. At the time, executives said they would improve the in-store experience and update the marketing to be more inclusive while making sure core customers don’t feel alienated.

L Brands shares have climbed almost 36% this year in New York after declining for four straight years. The company is scheduled to report quarterly results on Feb. 26.

The Wall Street Journal reported L Brands was nearing a deal earlier, citing unidentified people familiar with the development.

The new structure will take Victoria’s Secret out of the glare of public markets while leaving the faster-growing Bath & Body Works as a publicly traded company.

Andrew Meslow, who was chief operating officer of Bath & Body Works, is assuming the CEO role effective immediately, according to Wexner’s memo. Current CEO Nick Coe will become vice chairman of Bath & Body Works brand strategy and new ventures.

Mast Global, which handles L Brands’ international operations, will be reorganized to support the separate companies.