Victoria’s Secret sold at $1 billion valuation; Wexner to step down
Victoria’s Secret is going private. And the retail industry is losing its longest-serving chief executive.
L Brands confirmed it is selling the majority (55%) stake in struggling Victoria's Secret (including the Pink brand and Victoria's Secret Beauty) to private equity firm Sycamore Partners for about $525 million. L Brands will retain a 45% minority stake in the company. Under the terms of the transaction, Victoria's Secret has a total enterprise value of $1.1 billion.
The deal means that L Brands will now be responsible only for running its other division, Bath & Body Works, which has been outperforming Victoria’s Secret for some time. Once the transaction closes, L Brands CEO Les Wexner, 82, will step down from his post, staying on as chairman emeritus.
Wexner, a pioneer of mall-based specialty store retailing and L Brands largest shareholder, is the longest-serving CEO of an S&P 500 company. He opened his first store, The Limited, in 1963, and went on to grow a global retail empire. In 1982, Wexner bought Victoria's Secret, a small lingerie chain on the verge of bankruptcy, for $1 million.
Most recently, he has come under scrutiny for his ties to the late financier Jeffrey Epstein, who was indicted on sex-trafficking charges, and the performance of Victoria’s Secret, whose sales have been declining since 2017. The chain has been criticized for being out of touch with changing consumer tastes amid new competitors that stress diversity and inclusivity.
“Les Wexner is a retail legend who has built incredible brands that are household names around the globe,” Allan Tessler, lead independent board director, L Brands.
His leadership through this transition exemplifies his commitment to further growth of Bath & Body Works and Victoria’s Secret and driving overall shareholder value.”
L Brands said it plans to use the proceeds of the deal to pay down debt.
“We believe this structure will allow Bath & Body Works – which represents the vast majority of 2019 consolidated operating income – to continue to achieve strong growth and receive its appropriate market valuation,” Wexner said. "We believe the separation of Victoria’s Secret Lingerie, Victoria’s Secret Beauty and Pink into a privately held company provides the best path to restoring these businesses to their historic levels of profitability and growth. Sycamore, which has deep experience in the retail industry and a superior track record of success, will bring a fresh perspective and greater focus to the business.”
Analyst Neil Saunders, managing director of GlobalData Retail, commented that the sale could have avoided if L Brands had taken decisive action on Victoria's Secret a long time ago.
"That it didn’t cost the company what was once a key brand and has diminished its sale value," he said. "Ultimately, that is the price of being asleep in a market that has become more woke." For more analysis, click here.
Upon the close of the transaction, Andrew Meslow, currently COO of Bath & Body Works, will become CEO of L Brands and will join its board. Meslow, who joined L Brands in 2003, has 29 years of experience in the retail industry, the last 15 at Bath & Body Works.
Nick Coe, the current CEO of Bath & Body Works, has been named vice chairman of Bath & Body Works brand strategy and new ventures. In Coe’s new role, he will focus more intently on the strategic position of the business, the evolution of the brand, product development and new ventures/acquisitions.
“For nearly nine years, Nick and Andrew have been a powerful combination, driving the Bath & Body Works brand to more than $5 billion in sales with best-in-class profitability,” Wexner stated. “We are pleased to name Andrew as CEO of Bath & Body Works and have Nick step into this new, more focused role as the team propels the brand and business forward.”