It doesn't take genius to understand the appeal of beautiful girls parading in their underwear. From the 1990s onwards, Limited Brands, the company behind Victoria's Secret, turned lingerie marketing into a fine art, or at the very least high fashion. During the 1980s Leslie Wexner made The Limited into a fixture in shopping malls across the US with flashy but moderately priced women's fashion for style-conscious shoppers. He built on that success by transforming Victoria's Secret from a tiny mail order firm into a global brand. The group also extended its presence with the launch of sub-brand PINK, the purchase of Canadian competitor La Senza, and the positioning of personal care and beauty chain Bath & Body Works as its #2 brand. The company changed its name to L Brands in 2013 following the sale of The Limited chain. However, a backlash against "sexy" marketing in the wake of the #MeToo movement has prompted a brutal re-evaluation of Victoria's Secret's positioning, including the cancellation of its flagship annual TV fashion show special. There was also growing unease among investors about the considerable influence wielded by Wexner, still CEO and controlling shareholder in his 80s. Among other black marks, Wexner was closely associated for several years with convicted sexual predator Jeffrey Epstein. In particular, there were concerns over potential fallout from the troubles affecting Victoria's Secret on sister brand Bath & Body Works. In a dramatic change of strategy, L Brands agreed in 2020 to sell majority control of Victoria's Secret and its associated lingerie brands to private equity investor Sycamore Partners. That arrangement was subsequently cancelled in the wake of the Coronavirus pandemic, but separation of the brands is still on the cards. Other brands have already been dropped: smaller lingerie brand La Senza was sold in 2019 and fashion store Henri Bendel closed. Ultimately, it is intended that Bath & Body Works will become the main business within the group, which would then change its name. Bath & Body Works chief Andrew Meslow was appointed as L Brands new CEO. Group revenues for ye Jan 2020 fell 3% to $12.9bn, but a $720m impairment against Victoria's Secret resulted in a net loss of $366m. Victoria's Secret had 1,180 retail outlets by the end of 2019, as well as a substantial ecommerce business, but revenues slumped 9% to $6.8bn. Bath & Body Works had 1,740 stores in the US and Canada and revenues rose 5% to $5.2bn.
Capsule checked 14th January 2020
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Adbrands Daily Update 22nd May 2020: Seeking an alternative strategy to recovery following the collapse of its sale to Sycamore Partners, Victoria's Secret said it will close around 250 stores in the US and Canada this year. That's equivalent to almost a quarter of its current estate in North America. Interim CEO & CFO Stuart Burgdoerfer told investors that the group will also continue to restructure the lingerie business as an independent company "that one could reasonably market for a sale".
Adbrands Daily Update 5th May 2020: L Brands and Sycamore Partners agreed an out of court settlement to cancel the transfer of a majority shareholding in Victoria's Secret to the investment firm. Terms were not disclosed, but neither side will pay a termination fee. In a statement, L Brands said it is in the best interests of the company to navigate the challenging current environment rather than engage in costly and distracting litigation to force a partnership with Sycamore. Instead L Brands will seek an alternative method for separating the troubled lingerie brand from its more stable Bath & Body Works business.
Adbrands Daily Update 23rd Apr 2020: In a potentially devastating blow to L Brands, investment firm Sycamore Partners has filed suit to cancel its proposed acquisition of a controlling stake in Victoria's Secret. It claims that L Brands' decision to close its US stores, furlough the majority of workers and skip April rent payments are violations of the proposed transaction. "Sycamore's current position is pure gamesmanship," said L Brands in its legal response, and follows an unsuccessful attempt to lower the price it had originally agreed to acquire control of Victoria's Secret.
Adbrands Daily Update 20th Feb 2020: With the backlash against Victoria's Secret's over-sexy positioning threatening to overwhelm sister brand Bath & Body Works, parent company L Brands has announced a dramatic change of strategy. The group has agreed to sell a 55% stake in Victoria's Secret and affiliated brands Victoria's Secret Beauty and Pink to private equity firm Sycamore Partners, a specialist in troubled retail turnarounds. The deal values VS at $1.1bn. L Brands will retain the remaining 45% of VS. Following closure of the transaction, Bath & Body Works will form the core business within L Brands, with its leader Andrew Meslow becoming group CEO. Leslie Wexner steps down as chairman & CEO but will retain the title of chairman emeritus.
Adbrands Daily Update 22nd Nov 2019: In a startling reversal of fortunes in the #MeToo era, Victoria's Secret has cancelled its annual fashion show, once a landmark broadcast TV special. Attitudes towards the blatant sexuality of brands such as VS have been gradually evolving in recent years, and sentiment turned sharply against the Victoria's Secret Fashion Show, and indeed the brand itself, at the end of 2018 following comments from longtime CMO Ed Razek about his habit of employing only traditionally beautiful sleek female supermodels. He was widely misquoted as saying, in an interview with Vogue, that "no one has any interest" in plus-sized models - his actual words were slightly less incendiary - and he also ruled out the use of transexual models. The media backlash was exacerbated by several quarters of declining sales, a new ratings low for the 2018 fashion show and then a pushback from investors. One leading shareholder Barington Group wrote to L Brands CEO Les Wexner this year complaining that Razek "has done a poor job of stewarding Victoria's Secret's brand by failing to communicate a compelling, up-to-date image that resonates with today's consumers. While we recognise that Victoria's Secret cannot be all things to all people, we believe that the Company should be delivering a more inclusive marketing message that promotes a more expansive view of beauty." That prompted Razek's departure from the company a few months later. After that the cancellation of the annual fashion special was only a matter of time. "We think it's important to evolve the marketing of Victoria's Secret," CFO Stuart Burgdoefer told investors this week. "There will be more to come as that continues to get evaluated.... [The show] was a very important part of the brand building of this business and was an important aspect of the brand and a remarkable marketing achievement. With that said, we're figuring out how to advance the positioning of the brand and best communicate that to customers."
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