L Manufacturers spinning off Victoria’s Secret at increased valuation


Shoppers pass in front of a Victoria’s Secret store at a mall in San Diego, California, April 22, 2021.

Bing Guan | Bloomberg | Getty Images

L Brands said Tuesday it will spin off its Victoria’s Secret brand rather than selling it.

The company said it received interest from and held discussions with multiple potential buyers, but its board concluded that separating Victoria’s Secret and Bath & Body Works into two separate publicly traded companies would be a better option. The spinoff is expected to be completed by August.

L Brands Chief Executive Andrew Meslow will continue to hold his position and will also lead Bath & Body Works following the spinoff, the company said. Victoria’s Secret CEO Martin Waters will keep leading the standalone business following the separation.

“In the last ten months, we have made significant progress in the turnaround of the Victoria’s Secret business,” Sarah Nash, chair of L Brands’ board, said in a statement.

L Brands shares fell around 3% in premarket trading.

Boosted outlook

The Columbus, Ohio-based retailer also released preliminary first-quarter financial results that were stronger than expected as stimulus payments and relaxed Covid restrictions helped boost shopper traffic.

L Brands said it expects to earn $1.25 per share after adjustments in the period ended May 1, compared with a prior outlook of 85 cents to $1 per share. Net sales are estimated at $3.02 billion, compared with $1.65 billion a year earlier.

Analysts had been anticipating L Brands would earn 98 cents per share on revenue of $2.89 billion, according to a Refinitiv survey.

Notably, this is the third time the company has raised its first-quarter outlook.

A turnaround takes hold

L Brands said the split will allow both brands to continue to build on the newfound momentum. As separate companies, each will be able to better focus on growth and have greater financial flexibility to adapt to a changing retail landscape, it said.

Victoria’s Secret had long held a dominant market share in the lingerie industry, but had fallen out of favor due to its overtly sexy marketing that shunned certain body types. That marketing message wasn’t working for many women, and they had started shopping at other brands like Aerie that embraced inclusivity and comfort. Victoria’s Secret has had to pivot to meet their needs.

Since this past holiday season, momentum at Victoria’s Secret has grown. The company’s efforts have included changes in marketing, fewer promotions, and most importantly, new products such as more comfortable items, such as bralettes.

L Brands also shuttered more than 200 stores in 2020, in a bid to focus on its more profitable locations and invest online.

Analysts at Citi and JPMorgan had recently valued Victoria’s Secret at about $5 billion as a standalone business.

L Brands restarted talks with potential buyers for Victoria’s Secret after a sale to the private equity firm Sycamore Partners fell apart last year due to the Covid pandemic. That deal would have valued the lingerie label at $1.1 billion.

Sycamore sued L Brands last April to terminate a deal that would have given the private equity firm 55% control of Victoria’s Secret, for around $525 million. It argued that L Brands had violated the terms of the agreement, when it failed to pay rent and furloughed workers. L Brands averted a legal battle by agreeing to call off the deal.

The plans for the split were first reported in The New York Times.

L Brands shares are up about 84% year to date. It has a market cap of $19.2 billion.


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