Long synonymous with everything sexy and chic, the iconic Victoria’s Secret brand is being sold off at a discount. At a valuation of just under a billion US dollars, its selling price is a significant markdown on a company that booked revenues of $7 billion last year across its hundreds of stores over the world. According to the brand’s owner L Brands, private equity firm Sycamore Partners will buy 55 per cent of Victoria’s Secret for about $525 million, with the rest of the equity still resting with the original owner. Analysts even say the deal is a positive one for L Brands, since it will be left with its immensely more profitable Bath & Body Works chain.
The sale comes even as L Brands’ Les Wexner, who founded the company in 1963, grapples with probes into his connections with Jeffrey Epstein, a Wall Street financier indicted on sex-trafficking charges. Wexner step down as chairman and CEO after the transaction is completed and become chairman emeritus.
“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 them to their historic levels of profitability and growth,” Wexner said. “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.”
Analysts say Sycamore will face several obstacles in its quest to turn around the iconic brand, most pressing of which is its focus on churning out styles for idealised body shapes when women are increasingly picking styles more suited to their own body shapes. The brand has consequently struggled to keep up with competition like Adore Me and ThirdLove, who have originated from the online segment and market themselves heavily on social media platforms like Instagram. These brands have also focused on fit and comfort while offering more options for different body types.
On top of unfavorable market dynamics, Victoria’s Secret has also been beset by workplace controversies, with many calling the environment toxic. L Brands’ chief marketing officer Ed Razek resigned last August after commenting about why transsexuals shouldn’t be models at its annual fashion show.
Wexner’s links with Epstein haven’t helped either.
The financier had started managing Wexner’s money in the late 80s, but Wexner has said he severed ties with Epstein nearly 12 years ago and accused him of misappropriating vast sums of his fortune. Wexner owns about 16.71 per cent of L Brands. Sycamore, meanwhile, has about $10 billion in assets under management and its investment portfolio includes retailers such as Belk, Coldwater Creek, Hot Topic and Talbots.
Buyer’s challenge
Analysts say Sycamore will face several obstacles in its quest to turn around the Victoria’s Secret brand, most pressing of which is its focus on churning out styles for idealised body shapes when women are increasingly picking styles more suited to their own body shapes.