L Brands to spin off Victoria's Secret rather than sell it

Victoria's Secret closed more than 200 stores and focused on improving profitability. PHOTO: REUTERS

NEW YORK (NYTIMES) - L Brands has decided to spin off Victoria's Secret rather than sell it.

The company said last year that it was considering separating Victoria's Secret from the rest of its business, and it tested the interest of private equity. Ultimately, L Brands decided to split itself into two independent, publicly listed companies: Victoria's Secret and Bath & Body Works. The deal is expected to close in August.

L Brands received several bids north of US$3 billion (S$3.98 billion), sources familiar with the situation said, requesting anonymity because the information is confidential. It turned the offers down, because it expects to be valued at US$5 billion to US$7 billion in a spinoff to L Brands shareholders. Analysts at Citi and JPMorgan Chase recently valued Victoria's Secret as a standalone company at US$5 billion.

Apart from a pandemic that upended the retail industry, Victoria's Secret was dealing with a series of challenges: a brand that had fallen out of touch, accusations of misogyny and sexual harassment in the workplace and revelations about the ties between Les Wexner, the company's founder and former chairman, and financier Jeffrey Epstein. (Mr Wexner stepped down as chief executive last year and said in March that he and his wife were not running for reelection on the company's board.)

As the pandemic shuttered stores and battered sales, Sycamore sued L Brands to get out of the deal, and L Brands countersued to enforce it, heralding a spate of similar battles between buyers and sellers. Eventually, last May, the sides agreed to call off the deal.

A lot has changed since then. The retailer has overhauled its brand, deemphasising the overtly sexy image and products that customers saw as exclusionary. It has become "less focused on a specific demographic target and more focused on being broadly inclusive of all women of all shapes and sizes and colors and ethnicities and genders and areas of interest," Martin Waters, the retailer's chief executive, said on a recent earnings call.

The company also closed more than 200 stores and focused on improving profitability, which rose sharply at the end of last year, surpassing its pre-pandemic results.

Victoria's Secret is one of the retailers transformed by the pandemic, along with others like Dick's Sporting Goods and Michaels, accelerating digital overhauls that may have otherwise taken years. Direct sales at Victoria's Secret in North America rose to 44 per cent of the total last year, from 25 per cent the year before.

It's unclear whether pandemic shopping trends will stick, and "it would be reasonable to expect some reversion," Stuart Burgdoerfer, the L Brands chief financial officer, said at a March event. "But I also think that people have very much enjoyed some of the benefits that were forced on us or triggered through the pandemic."

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