Columbus-based L Brands announced it will separate the company into two independently-run, public companies — Victoria’s Secret will stand alone and Bath & Body Works will remain under L Brands.
The move comes a year after an agreement to sell Victoria’s Secret fell apart as the pandemic emptied malls nationwide.
L Brands has been shopping the struggling chain elsewhere since the collapse of that deal and said it had held talks with a number of potential buyers, but it appears it could not come to an agreement on price.
Victoria’s Secret was to be sold to Sycamore Partners last year but the private equity firm sued to get out of the deal citing the coronavirus pandemic.
Victoria’s Secret, which sells women’s lingerie, has been losing money over the past few years.
In comparison to Bath & Body Works, it has not been doing well. L Brands closed 233 brick and mortar Victoria’s Secret locations in 2019. First quarter 2021 sales decreased 7% compared to the first quarter of 2019.
Bath & Body Works is the best-performing brand under L Brands, increasing sales by 60% from the first quarter of 2019 to the first quarter of 2021. Bath & Body Works sells bath, body and fragrance products.
The company wants to create these companies through a tax-free spin-off of Victoria’s Secret to L Brands’ shareholders.
In a press release, L Brands Board Chair Sarah Nash said the company has been working hard to make Victoria’s Secret a profitable business that can stand alone.
“As a result of these efforts, Victoria’s Secret is now well-positioned to operate as a standalone, public company,” Nash said in the statement. “Further, both Bath & Body Works and Victoria’s Secret are leaders in their respective markets, and, as separate businesses, each will be ideally positioned to benefit from a sharpened focus on pursuing growth strategies best suited to each company’s customer base and strategic objectives.”
The L Brands Board had been deciding whether to create a spin-off or sell Victoria’s Secret with input from its financial advisors, Goldman Sachs and JP Morgan.
L Brands CEO Andrew Meslow will also lead Bath & Body Works following the spin-off. Victoria’s Secret CEO Martin Waters will continue to lead the new standalone company.
L Brands expects the spin-off to qualify as tax-free for itself and its shareholders for U.S. federal income tax purposes. The transaction is currently expected to be completed in August 2021.
The Associated Press contributed to this story.
