L Brands will sell its struggling Victoria's Secret brand to the private equity firm Sycamore Partners, the company announced Feb. 20.
The sale, which values Victoria's Secret at $1.1 billion, leaves Bath & Body Works as the sole brand of the Columbus company.
Under the terms of the deal, approved by the L Brands board Feb. 19, Sycamore Partners will buy 55% of Victoria's Secret and Pink for $525 million and operate the brands as a private company, according to the announcement. L Brands will own 45% of the lingerie company.
The deal otherwise separates L Brands founder and CEO Leslie H. Wexner from Victoria's Secret, a move long sought by many analysts. Wexner, an 82-year-old New Albany resident, will remain chairman emeritus of L Brands but will step down as chairman and as the nation's longest-serving CEO of an S&P 500 company.
"We believe the separation of Victoria's Secret Lingerie, Victoria's Secret Beauty and Pink into a privately held company provides the best path to restoring these businesses to their historic levels of profitability and growth," Wexner said in announcing the decision. "Sycamore, which has deep experience in the retail industry and a superior track record of success, will bring a fresh perspective and greater focus to the business. As a private company, Victoria's Secret will be better able to focus on longer-term results."
Andrew Meslow, chief operating officer of Bath & Body Works, was named CEO of L Brands and CEO of Bath & Body Works. Meslow also will join the L Brands board when the deal closes.
Nick Coe, CEO of Bath & Body Works, was named vice chairman of Bath & Body Works Brand Strategy and New Ventures.
Victoria's Secret value in the deal was well below some analysts' estimates of $2 billion to $3 billion. In announcing the deal, L Brands also said it expected to report a 10% fourth-quarter sales decline for Victoria's Secret. Shares of L Brands were down 2% on the news in early trading.
The sale, which was anticipated in January, is the culmination of several years of challenges at Victoria's Secret, which has widely been criticized as being out of touch with today's shoppers. Criticisms of Wexner mounted after his longtime associate, Jeffrey Epstein, was charged with sex trafficking in July.
Sales of the lingerie company have fallen for three years, and the company's share of the U.S. women's underwear market has slipped from 31.7% in 2013 to 24% in 2018.
Despite the problems, the brand remains the single-largest lingerie brand in the country, with sales around $7 billion. But L Brands' inability to grow Victoria's Secret has led many analysts to call for Wexner to sell the brand.
In an open letter last year, investor Barrington Capital Group called on Wexner to split off Victoria's Secret and accused Wexner of being "tone deaf" to today's consumers.
Under the terms of the deal, Barrington will remain an adviser to L Brands for another 12 months.
"We are pleased to have worked with the L Brands board and management team and I congratulate them on the steps they have taken to address the operational, financial and governance objectives we first outlined last year," Barrington chairman and CEO James Mitarotonda said in a news release. "We are confident that today's announcements will position the company for future success."
Victoria's Secret's new owner, Sycamore Partners, is a New York equity firm specializing in troubled mall-based retailers. Among its brands are Aeropostale, Coldwater Creek, Staples, Belk, Talbots, Nine West and Hot Topic.
While the company has had success with some brands, such as Zales, it has been criticized for dismantling other companies.
"We have long had great respect and admiration for L Brands and its success in building a world-class portfolio of lingerie and beauty brands," said Sycamore Partners managing director Stefan Kaluzny said in a news release Feb. 20. "With unmatched global brand awareness and customer loyalty, we believe there is a significant opportunity to reinvigorate growth and improve the profitability of Victoria's Secret."
Sycamore Partners has one deep connection to Wexner: One of its brands is the Limited, Wexner's original company.
Wexner started his career with a single Limited store in Upper Arlington's Kingsdale Shopping Center. From that store, he grew an operation that eventually included Abercrombie & Fitch, the Limited, Structure, Express, Lerner New York, Lane Bryant, Bath & Body Works, Henri Bendel, La Senza and others.
While some, such as Abercrombie & Fitch, were split into separate companies years ago, Wexner has spent the past years dismantling his once-huge retail empire.
"Les Wexner is a retail legend who has built incredible brands that are household names around the globe," said Allan Tessler, an L Brands board member who served on the transaction committee.
The decision to spin off Victoria's Secret leaves Wexner, famous for his fashion instincts, with his one brand, Bath & Body Works, and no clothing component.