Victoria's Secret Is Becoming More... Secretive

Victoria's Secret Is Becoming More... Secretive

about 4 years ago2 mins

Psst, Victoria’s Secret is about to get a lot more hush-hush: the lingerie brand is being sold to a US private equity firm, and won’t be under stock market surveillance much longer 🔍

What does this mean?

The owner of Victoria’s Secret, L Brands, agreed on Thursday to sell 55% of the lingerie company to Sycamore Partners, in turn giving the private equity firm full control. The deal – which values Victoria’s Secret at $1.1 billion – follows years of falling sales as consumer tastes have shifted toward both online shopping and comfort- and inclusivity-focused brands.

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Those aren’t the only problems the brand’s been dealing with: its reputation has been damaged by accusations of employee sexual misconduct and its chief executive’s dubious ties 🙅‍♀️ That could explain why Victoria’s Secret is so keen to escape the glare of public markets – not to mention why the deal requires its head honcho to step down after more than 50 years at the helm.

Why should I care?

L Brands has got rid of a bunch of brands in recent years, and it’ll now only be left with Bath & Body Works, which makes up 35% of its total sales 🛁 That strategy – of encouraging a company to separate its top-performing brands from its poorly performing ones – is a hedge fund favorite. And since buying a stake in L Brands last year, it’s exactly what activist hedge fund* Barington Capital Group* has been pushing L Brands to do. Take a bow, Barington.

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While investors have been shying away from traditional retail, Sycamore Partners has been all too happy to buy up troubled brick-and-mortar chains like The Limited, Hot Topic, Nine West, and Staples 🧱 The firm’s then been selling off their most valuable parts and cutting costs at whatever’s left over. And the technique seems to be working: Sycamore Partners’ first fund made an annual post-fee return of 43%.

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