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L Brands Sells 55% Victoria’s Secret Stake, Wexner Out as CEO

L Brands confirmed sweeping changes set to evolve one of the industry’s biggest names.

On Thursday, the Ohio-based clothing and accessories firm announced a deal to sell a 55 percent interest in Victoria’s Secret to Sycamore Partners, which stipulates company founder Leslie H. Wexner stepping down as chairman and CEO.

Estimates value the deal at $1.1 billion, with the Sycamore purchase said to be worth $525 million. As part of the deal, L Brands will retain a 45 percent stake in Victoria’s Secret. Once the deal closes, the Victoria’s Secret business–which includes its beauty, lingerie and Pink divisions–will become a privately held entity focused on executing a much-needed turnaround.

Wexner is set to become chairman emeritus and chief operating officer Andrew Meslow has been promoted to Bath & Body Works CEO and will become L Brands’ new chief executive. Nick Coe will shift from BBW CEO and become vice chairman of Bath & Body Works Brand Strategy and New Ventures.

Coe and Meslow have worked together for nine years, driving the BBW brand to more than $5 billion in sales, according to Wexner.

Allan Tessler, lead independent board director, hailed Wexner as “a retail legend who has built incredible brands that are household names around the globe.”

“His leadership through this transition exemplifies his commitment to further growth of Bath & Body Works and Victoria’s Secret and driving overall shareholder value,” Tessler added.

The deal, Wexner said, is designed to maximize the health of each brand. “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,” he added, noting the deal’s debt-reduction benefits.

Proceeds from the deal, plus $500 million in excess cash on its balance sheet, will help L Brands chip away at financial obligations, the company confirmed.

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On Feb. 20, parent company L Brands said it's selling a 55 percent stake in the lingerie brand to Sycamore Partners.
Liu Wen walks the runway in Victoria’s Secret 2018 fashion show. On Feb. 20, parent company L Brands said it’s selling a 55 percent stake in the lingerie brand to Sycamore Partners. David Fisher/Shutterstock

Christina Boni, vice president at credit ratings firm Moody’s Investors Service, believes the deal will position L Brands for future financial strength.

“The separation of Victoria’s Secret into a private entity will enable L Brands to reduce debt and focus on its strong core business of Bath & Body Works, which represents over 80 percent of its operating income,” Boni said, adding that the estimated debt reduction of $1 billion “mitigates the risks associated with the turnaround of the Victoria’s Secret business.”

As for the Victoria’s Secret brand, Wexner said it will be better able to focus on longer-term results as a private company. “We are pleased that, by retaining a significant ownership stake, our shareholders will have the ability to meaningfully participate in the upside potential of these iconic brands, ” he added.

“With unmatched global brand awareness and customer loyalty, we believe there is a significant opportunity to reinvigorate growth and improve the profitability of Victoria’s Secret. We look forward to partnering with the leadership team to pursue these objectives,” Sycamore managing director Stefan Kaluzny said.