Victoria's Secret sold as women demand comfort; Les Wexner to step down as CEO

NEW YORK -- Victoria's Secret, which once defined sexy with its leggy supermodels in their lacy bras and oversized angel wings, has a new owner.

Now, the big question is whether the once sought after but now struggling brand can be reinvented for a new generation of women demanding more comfortable styles.

The company's owner, L Brands, said Thursday that the private-equity firm Sycamore Partners will buy 55% of Victoria's Secret for about $525 million. The Columbus, Ohio, company will keep the remaining 45% stake. After the sale, L Brands will be left with its Bath & Body Works chain and Victoria's Secret will become a private company.

Les Wexner, 82, who founded the parent company in 1963, will step down as chairman and CEO after the transaction is completed and become chairman emeritus. Wexner has been grappling with his own troubles, including questions over his ties to the late financier Jeffrey Epstein, who was indicted on sex-trafficking charges.

The selling price for Victoria's Secret signifies a marked decline for a brand with hundreds of stores that booked about $7 billion in revenue last year. Shares of L Brands slid more than 7% Thursday though they recovered somewhat by late afternoon. Shares were down nearly 4%, or 88 cents, to close at $23.42.

In a statement, Wexner said the deal will provide the best path to restoring Victoria's Secret's businesses to their ''historical levels of profitability and growth.'' The deal will also allow the company to reduce debt and Sycamore will bring a "fresh perspective and greater focus to the business, '' he said.

To successfully turn around Victoria's Secret, Sycamore will need to change up the corporate culture, reinvent the fashions and redesign the stores to make them more contemporary, experts say. Sycamore manages a $10 billion portfolio including such struggling retailers as Belk, Hot Topic and Talbots.

The management team at Victoria's Secret essentially was designing what men want, not what women want, said Neil Saunders, managing director of GlobalData Retail.

"The brand is very embedded in the past," said Saunders. "It was always about men feeling good. It should be about making women feel good about themselves."

Victoria's Secret had a long unparalleled run of success. The brand was founded by the late Roy Larson Raymond in the late 1970s after he felt embarrassed about purchasing lingerie for his wife. Wexner, the founder of the then Limited Stores Inc., purchased Victoria's Secret in 1982 and turned it into a powerful retail force. By the mid-1990s, Victoria's Secret lit up runways and later filled the internet with its supermodels and an annual television special that mixed fashion, beauty and music.

That glamour has faded and so have sales in the last few years. The show was canceled last year, and shares of Victoria Secret's parent have gone from triple digits less than five years ago to a quarter of that today.

Victoria's Secret struggled to keep up with competition and failed to respond to changing tastes among women who want more comfortable styles. Rivals like Adore Me and ThirdLove, which have sprouted up online and marketed themselves heavily on social media platforms like Instagram, have focused on fit and comfort while offering more options for different body types. Meanwhile, American Eagle's Aerie lingerie chain, which partners with women activists like Manuela Baron, has also lured customers away from Victoria's Secret.

And in the era of the #MeToo movement, women are looking for brands that focus on positive reinforcement of their bodies.

''Victoria's Secret will need to empower women, not make them spectacles,'' said Jon Reily, senior vice president and global head of commerce strategy at digital consultancy Isobar.

Stacey Widlitz, president of SW Retail Advisors, a retail consultancy, said that Victoria's Secret designs in the last few years were going in the opposite direction of what women wanted, ever sexier and poorer quality.

And while last year Victoria's Secret started featuring more diverse models, including its first openly transgender model, the moves fell short.

Victoria's Secret suffered a 12% drop in same-store sales during the most recent holiday season. L Brands said Thursday that same-store sales declined 10% at Victoria's Secret during the fourth quarter. Bath & Body Works, which has been a bright spot, enjoyed a 10% increase. The skincare chain represents more than 80% of L Brands' operating profit.

"The (Victoria's Secret) brand has lost its way, while the lingerie market is not large or high growth, and has become commoditized," Randal Konik, an analyst at Jefferies, wrote Thursday. "Furthermore, with athleisure taking over, the need for regular bras continues to wane."

The company has also been beset by allegations of a toxic work environment and its founder recently apologized for his ties to Epstein, who was found hanged in his jail cell after his indictment. L Brands' Chief Marketing Officer Ed Razek resigned last August after making controversial comments about why transsexuals shouldn't be models at its annual fashion event.

Epstein started managing Wexner's money in the late 1980s and helped straighten out the finances for a real estate development backed by Wexner in a wealthy suburb of Columbus. Wexner has said he completely severed ties with Epstein nearly 12 years ago and accused him of misappropriating "vast sums" of his fortune.

Wexner offered an apology at the opening address of L Brands' annual investor day last fall, saying he was "embarrassed" by his former ties with Epstein.

Wexner is the longest-serving CEO of an S&P 500 company. He founded what would eventually become L Brands in 1963 with The Limited retail chain, according to the company's website. Wexner owns approximately 16.71% of L Brands, according to FactSet.

Mike Robbins, a San Francisco-based corporate culture expert who has advised such chains as Gap and Sephora, said the team at Victoria's Secret will have to retrain workers and have more people with diverse voices.

"'They have a lot of work to do - within the company and also outside with the customers, " Robbins said. "The companies that are able to have great culture attract the best employees.''