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Victoria’s Secret Just Bought a B Corp

Victoria’s Secret & Co. is putting its money where its mouth is—at least as of roughly 17 months ago.

On Tuesday, the lingerie-focused company said it inked a $400 million deal to purchase recently certified B Corp Adore Me, the digitally native size-inclusive bras and panties platform CEO Morgan Hermand founded a decade ago. The agreement seems to make good on Victoria’s Secret’s move away from its long-standing sex-sells image toward a modern, inclusive approach that resonates with today’s shopper. The Ohio company planted the first seeds of its makeover last year when it replaced its famous stable of scantily clad Angels with activists, athletes and other accomplished personalities who don’t necessarily hew to the image of airbrushed perfection it peddled for decades.

The company, which owns the Victoria’s Secret and Pink brands, said the deal offers “significant upside,” not the least of which is Adore Me’s digital expertise, 1.2 million customers and status as what NPD Group describes as a leading digital native growth brand in intimates.

“As a trailblazer in the intimates value segment, Adore Me will also serve as a growth vehicle for VS&Co, providing access to a consumer that is complementary to VS&Co’s existing customer base,” it said, adding the tie-up will fuel the intimates sector’s “inclusive, tech-forward, and sustainable” growth.

VS&Co. CEO Martin Waters last month told investors about the company’s ambitions to reignite growth.

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“This acquisition will be a significant accelerant as we pivot toward growth and modernize the foundation of our company with an entrepreneurial mindset that puts technology at the forefront of everything we do,” he said in a statement, noting Adore Me will help unlock “differentiated experiences” for Victoria’s Secret and Pink customers.

Hermand will remain in charge of Adore Me as the the online platform’s staff and operations integrate with VS&Co. “We have significantly grown our business over the past decade, and are excited to bring our technology, purchase experiences, inclusive assortment, brand and team to join the next phase of Victoria’s Secret’s growth and customer journey transformation,” he said.

Adore Me’s monthly subscription model and “Home Try-On” options have helped the company drive strong customer retention. The company said it has scaled “by leveraging a complex combination of proprietary logistics, algorithms, and operational assets.” VS&Co. said Adore Me’s shopping experience “exemplified the next generation of retail innovation.”

VS&Co. has been steadily turning things around since it was spun off from L Brands in August last year. The stale, mall-heavy business had deteriorated so badly that Moody’s Investors Service cuts L Brands’ credit ratings outlook to “Negative” from “Stable” in April 2019, blaming 10 quarters of sagging operating margins and negative comparable store sales at Victoria’s Secret for the downgrade.

The pandemic scuttled L Brands’ attempts to sell a 55 percent stake in the Victoria’s Secret to Sycamore Partners for north of $1 billion. L Brands eventually shuttered 251 mall locations.

Victoria’s Secret has been working to replace its sexy image with a refreshed emphasis on diversity and inclusion.

Victoria’s Secret’s new marketing campaign further emphasizes diversity and body positivity. Over the summer Waters admitted a viral TikTok video excoriating the lingerie brand’s history of cashing in women’s body image problems wasn’t without merit.

The company’s second-quarter results show bras and panties continue to perform, while apparel, where it has long struggled, needs some work. Still, analysts believe the business has what it takes to reach the next level.

Jefferies analyst Corey Tarlowe in August said he expects the U.S. intimate apparel market to remain positioned for growth, with loungewear demand expected to increase from August through January. He believes the Adore Me acquisition gives VS&Co a “well-established and profitable asset” that’s on track to generate $240 million in 2022 revenue with a 55 percent gross margin, an 82 percent of revenue coming from mobile. The deal also supports the acquirer’s plans to grow outside the U.S. Tarlowe doesn’t “expect a linear recovery [but] we believe VS&Co.’s long-term opportunity remains unchanged and that VS&Co. is capable of restoring lost sales while recapturing margin.”

The agreement is structured as a $400 million cash payment that includes an additional cash component commonly referred to as an earnout based on achieving stated growth targets over a two-year period. VS&Co. said its board has already approved the transaction, which is subject to customary closing conditions. The deal, which VS&Co. will finance with cash on hand, is expected to close by the end of January.