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Victoria’s Secret to Spin Off from Bath & Body Works

Victoria’s Secret is on track to spin out from Bath & Body Works.

On Tuesday, parent company L Brands Inc. announced plans to split the two mall staples into stand-alone sisters after entertaining “multiple potential buyers” for the one-time larger-than-life lingerie label.

Over the past 15 months, Victoria’s Secret has seen its fortunes wax and wane. L Brands’ plan to sell a 55 percent stake in the bras-and-panties brand to Sycamore in a deal valued at $1.1 billion ultimately collapsed last year when the coronavirus struck and shuttered stores across the country, and especially took a toll on shopping malls, where the chain has a sizable presence.

Victoria’s Secret has struggled to retain its relevance during the era of #MeToo and amid consumers’ preference for inclusive brands that generally eschew the label’s once-dominant “sex sells” mantra. DTC startups, smelling blood in the water, have eagerly seized their opportunity to exploit Victoria’s Secret’s crumbling facade, with upstarts like ThirdLove, Intimately, Mindd, Harper Wilde and Cuup jumping feet first into the breach. American Eagle Outfitters’ Aerie label has hoovered up market share, too, with its #AERIEreal hashtag celebrating everyday consumers whose range of physiques breaks from its larger rival’s svelte supermodel standard. Perhaps the most telling blow came when Victoria’s Secret pulled the plug on its TV extravaganza in 2019, ending more than two decades of the skin-baring spectacle.

Still, Leslie Wexner’s decision to step down, announced in February last year, signaled a changing of the guard at the company the former CEO founded and where the onetime Jeffrey Epstein confidante now serves as chairman emeritus. In May last year, after the Sycamore deal imploded, L Brands reported plans to slash 251 Victoria’s Secret stores and clamp down on other costs, and had sought rent breaks from real estate landlords as well.

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L Brands board chair Sarah Nash said the company has made “significant progress” effecting a Victoria’s Secret turnaround over the past 10 months. She pointed to merchandise strategies and marketing initiatives that have fostered top-line growth and helped to “dramatically” increase profitability, with operating incoming surging 300 percent over the second half of 2020.

The tax free spin-off to existing shareholders is expected to be completed in August 2021.
The Victoria’s Secret store at the Oculus, in downtown Manhattan. AP Photo/Julia Weeks

By running Victoria’s Secret and its scent-focused sister brand as separate-but-equal companies when the tax-free spinoff is slated to be completed in August, “each will be ideally positioned to benefit from a sharpened focus on pursuing growth strategies best suited” to their customer bases and strategic objectives, Nash said. She added that the board “believes that this path forward will return the highest value to shareholders and that the separation will allow each business to achieve its best opportunities for growth.”

L Brands CEO Andrew Meslow is seen continuing in that capacity and helming Bath & Body Works. Meanwhile, Victoria’s Secret CEO Martin Waters will continue to lead the new stand-alone business, including the Gen Z-facing Pink brand.

Despite current trends and Gen Z proclivities seeming to run counter to the Victoria’s Secret ethos and aesthetic, recent data shows that the scanty-panty purveyor remains the brand most Americans are searching for online.

L Brands expects to post adjusted earnings per share of $1.25, versus prior guidance of between 85 cents and $1, when it reports first-quarter results on May 19 and Meslow said the quarterly results reflect a “significant improvement at Victoria’s Secret.” Net sales for the quarter ended May 1 were $1.55 billion, versus $893.6 million in the year-ago period. The year-ago quarter reflected a number of closed doors due to the pandemic. The current quarter’s results reflect a decline of 7 percent when compared to the first quarter of 2019, as well as the closure of 233 company-operated stores since the 2019 period.