Lex Wexner has been forced to step down as part of a deal which sees New York-based private equity firm Sycamore Partners pay US$525 million for a controlling 55% stake in the business, taking it private.

By Ian Horswill

Posted on February 21, 2020

Les Wexner bought the women’s lingerie business Victoria’s Secret from founder Ray Raymond in 1982 for US1 million.

Under his ownership Victoria’s Secret became a household name, generating US$7 billion in sales at the height of its popularity with lingerie shops all over the world and an annual televised Victoria’s Secret Fashion Show featuring some of the world’s top models, such as Miranda Kerr, Heidi Klum, Gisele Bundchen, Karlie Kloss and Adriana Lima.

Victoria’s Secret’s promotion of its lingerie products eventually tarnished the brand which coincided with a time when push-up bras and uncomfortable underwear were no longer desired.

“Shoppers don’t want fantasy models in push-up bras anymore,” said Tiffany Hogan, an analyst for consulting firm Kantar. “They want authentic beauty and more natural styles, like bralettes.”

Hogan added that shoppers are increasingly looking for a more personal connection.

“Younger shoppers in particular want to feel like they’re buying from a company that believes in the same things they do.”

“There’s been a real shift in how people, especially young women, think about beauty and desire,” Kalinda Ukanwa, a marketing professor at the University of Southern California Marshall School of Business, told the Washington Post. “We’re in the age of #MeToo. Ideals are changing, and people want diversity and representation, ethnically and racially, but also in terms of shape and body type. For retailers to not adapt or evolve can be a fatal flaw.”

Wexner has been forced to step down in part of a deal which sees New York-based private equity firm Sycamore Partners pay US$525 million for a controlling 55% stake in the business, the Financial Times reported.

L Brands, which has all but sold off its once mighty retail empire, will retain the remainder of Victoria’s Secret, in a deal that values Victoria’s Secret at just US$1.1 billion.

Jeffrey Epstein mugshot 2017.jpeg

Wexner, 82, will step down as CEO and chairman of L Brands after his relationship with Jeffrey Epstein, the late disgraced billionaire financier who was charged with sex trafficking before he died in jail last year, became well-known.

Wexner was Epstein’s only known client for decades. He has expressed regret over their business dealings and accused Epstein of misappropriating large sums of money in a letter to members of the Wexner Foundation, where Epstein served as a trustee.

Wexner is expected to remain on the board of L Brands and expected to retain stakes in Victoria’s Secret and L Brands.

Sales of Victoria’s Secret products have been declining since 2015 alongside a 40% stock market plunge in a single year. By 2019 Victoria’s Secret announced that it would be closing 53 stores in the US.

The sale will now makes Victoria’s Secret a private company.

L Brands now only controls Bath & Body Works as a standalone public company. The personal care brand has consistently outperformed Victoria’s Secret.

“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,” Wexner said in a statement.

Randal Konik, an analyst at Jefferies, said the Victoria’s Secret price tag was significantly below full sale projections close to US$3.5bn.

“A partial sale and this low price won’t help the company’s massive debt load and shows just how desperate LB has become to try to unload VS,” they wrote in a note on Thursday.

“With athleisure taking over, the need for regular bras continues to wane. VS Sport has never gained any traction.”

L Brands shares were down 9.5% following the deal’s announcement, giving the company a market valuation of slightly more than US$6 billion. Proceeds from the Victoria’s Secret sale will be used to pay down some of L Brand’s US$5.6 billion debt load.