friday, february 21 , 2020. the washington post eZ re K A
BY ABHA BHATTARAI
AND RACHEL SIEGELLeslie Wexner, the billionaire
who turned Victoria’s Secret into
a household name but who more
recently has been scrutinized for
his ties to convicted sex offender
Jeffrey Epstein, is stepping down
as chief executive of the retail
giant he founded nearly 60 years
ago.
Parent company L Brands is
ceding control of the lingerie
brand to private-equity firm Syca-
more Partners, the companies an-
nounced Thursday. The roughly
$1.1 billion deal comes as Victo-
ria’s Secret battles falling sales
and criticism that its provocative
messaging is out of touch with
today’s consumer.
Sycamore will acquire a 55 per-
cent stake in Victoria’s Secret for
about $525 million, while L
Brands will retain the remaining
45 percent. According to a news
release, L Brands will use the
money from the deal, along with
roughly $500 million in excess
balance sheet cash, to cut down
on debt.
Bath & Body Works, which was
responsible for the vast majority
of L Brands’ 2019 operating in-
come, will become a stand-alone
public company. Wexner will re-
main a member of the board as
chairman emeritus.
“We believe the separation of
Victoria’s Secret Lingerie, Victo-
ria’s Secret Beauty and PINK into
a privately held company pro-
vides the best path to restoring
these businesses to their historic
levels of profitability and
growth,” Wexner said in a state-
ment. “Sycamore, which has deep
experience in the retail industry
and a superior track record of
success, will bring a fresh per-
spective and greater focus to the
business.”
Wexner, 82, has come under
fire for his personal ties to Ep-
stein, the financier who commit-
ted suicide in a New York jail in
August while awaiting trial on
charges of child sex trafficking.
The son of Russian immi-
grants, Wexner founded the Lim-
ited in a Columbus, Ohio, shop-
ping center in 1963 and took it
public six years later. He pur-
chased Victoria’s Secret in 1982
for $1 million before buying a
number of other specialty chains
including Lane Bryant, Henri
Bendel and Abercrombie & Fitch.
In the 1980s and ’90s, Wexner
forged lucrative deals with devel-
opers as they built hundreds of
shopping malls around the coun-
try
“He’d go in and say, ‘We’ll put
three stores — the Limited, Ex-
press and Victoria’s Secret — in
every one of your malls and we’ll
only pay this much in rent,’ ” s aid
Lee Peterson, an executive vice
president at WD Partners who
worked as a merchant for
L Brands between 1980 and 1991.
The plan worked: All three
chains ballooned into household
names. By the time L Brands
opened the first Bath & Body
Works store in 1990, the company
was making more than $5 billion
a year in sales.
But by the 2000s, Peterson
says, it became clear that con-
sumer habits were shifting. More
people began shopping online,
and the malls that Wexner had
staked his fortune on became lessrelevant.
“You look at what it takes to
reach customers now, and it is
just not the same ballgame that it
used to be,” Peterson said. “We’re
talking about social influencers,
Gen Z, e-commerce — there are so
many different methods now to
promote a brand and it doesn’t
have a whole lot to do with stores.
To be in a mall right now is like
being in a prison.”
L Brands has sold or spun off
many of its businesses in recent
years, leaving it with just three
chains: Victoria’s Secret, Pink
and Bath & Body Works. It had
$13.2 billion in sales last year.
“Les Wexner created specialty
retail as we know it,” s aid Simeon
Siegel, an analyst for BMO Capi-
tal Markets. “He had this idea
that selling clothing is inherently
about selling a fantasy. But to-
day’s customer doesn’t need — or
want — to be told what their
fantasy should be.”
Still, there’s s kepticism that thesale will be enough to lift L
B rands or Victoria’s Secret. Syca-
more owns a number of well-
known retailers, including Ta l-
bots, Staples and Belk depart-
ment stores. In 2017, it purchased
the Limited’s online business in-
tellectual property in a bankrupt-
cy auction from another private-
equity firm, Sun Capital.
“A partial sale and this low
price won’t help the company’s
massive debt load and shows just
how desperate [L Brands] has
become to try to unload [Victo-
ria’s Secret],” Randal Konik, an
analyst for Jefferies said in a note
to clients Thursday. The lingerie
company, he added, “isn’t even
worth much. Profits are evaporat-
ing. The brand has lost its way.”
L Brands has stumbled in re-
cent years in its struggle to shore
up sales at Victoria’s Secret. The
lingerie brand known for its
push-up bras and sexualized ad-
vertising has posted sales de-
clines for 12 of the past 13 quar-ters and recently laid off about 15
percent of its corporate employ-
ees. Analysts said the brand’s
provocative messaging and over-
the-top fashion shows have failed
to resonate with today’s shop-
pers, who value comfort over
corsets.
“There’s been a real shift in
how people, especially young
women, think about beauty and
desire,” said Kalinda Ukanwa, a
marketing professor at the Uni-
versity of Southern California
Marshall School of Business.
“We’re in the age of #MeToo.
Ideals are changing, and people
want diversity and representa-
tion, ethnically and racially, but
also in terms of shape and body
type.”
Online start-ups like Third-
Love, True & Co. and Rihanna’s
Savage X Fenty line — all founded
by women — have emerged as
formidable competitors by mar-
keting their bras and underwear
as comfortable and practical al-ternatives to Victoria’s Secret.
They also offer a broader range of
sizes and emphasize diversity and
inclusion, which analysts say Vic-
toria’s Secret has largely failed to
do.
The company got blowback in
2018 after former chief marketing
officer Ed Razek said he did not
want to cast “transsexual” models
in the company’s annual fashion
show “because the show is a
fantasy.” Razek stepped down in
August, around the same time
that the company hired its first
transgender model, Valentina
Sampaio.
In November, L Brands an-
nounced it was ending its fashion
show — a televised spectacle of
gemstone-encrusted bras and be-
dazzled angel wings — in an effort
to “evolve the marketing of Victo-
ria’s Secret.”
The company has also sought
to distance itself from Epstein,
who managed Wexner’s billions
and was closely involved with his
charitable foundation for more
than a decade. In July, L Brands
said it had hired an outside law
firm to review its relationship
with the disgraced financier. It
has not publicly shared the re-
sults of that investigation. An
L Brands spokesman said the two
had parted ways in 2007 and
called Epstein’s alleged crimes
“abhorrent.”
“We do not believe he was ever
employed by nor served as an
authorized representative of the
company,” the company said in
July.
In addition to his role as a
money manager, Epstein was also
a trustee for the Wexner Founda-
tion, as well as two other family
trusts, including one named for
Wexner’s f our children, according
to documents filed with the U.S.
Securities and Exchange Com-
mission. Epstein’s Upper East
Side mansion, which authorities
have seized, was originally owned
by Wexner.
“Being taken advantage of by
someone who was so sick, so
cunning, so depraved is some-
thing that I am embarrassed that
I was even close to, but that is in
the past,” Wexner told investors
in September.
Wexner has a net worth in
excess of $7 billion, according to
the Bloomberg Billionaires Index.
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[email protected]CEO at Victoria’s Secret parent is out as private-equity firm takes big stake
giulia marchi/bloomberg News
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