Proposed Victoria's Secret Sale a "Sign of the Times," Analyst Says

Victoria's Secret Fashion Show-November-H 2018

The embattled store’s parent company, L Brands, is in talks to sell as longtime CEO Leslie Wexner prepares to step down, according to one report.

As Victoria's Secret continues to try regain its footing as the once-premiere lingerie brand, news this week of a potential sale has reignited questions around its ability to bounce back from the blows it's suffered over the past few years. According to The Wall Street Journal, which cites sources close to the company, longtime CEO Leslie Wexner is preparing to leave, and, at the same time, is exploring strategic alternatives for the 43-year-old brand.

Victoria’s Secret has not responded to The Hollywood Reporter's request for comment, nor has it confirmed the sale officially. But if it does go through, it would be the latest in a string of moves to try to improve its image and save its falling sales. Last year, the company said it would shut more than 50 stores, with more expected to close this year.

Additionally, a new report from The New York Times details how the company has allegedly been fostering a toxic culture of inappropriate conduct, from bullying to sexual harassment — mostly carried out, the article claims, by Ed Razek, former chief marketing officer, who resigned from the company last year. One of the biggest accusations comes from the former executive vp of public relations for Victoria’s Secret, Monica Mitro, who accused Razek of verbally abusing her for years.

Among the list of complaints made about Razek include him trying "to kiss models, asking them to sit on his lap, and touching one’s crotch ahead of the 2018 Victoria’s Secret fashion show." Wexner was allegedly aware of Razek’s behavior but, according to the Saturday report, women who came forward lost their jobs in retaliation for speaking up. Razek denied the allegations to The Times, while L Brands says it has made “significant strides" in its corporate practices. L Brands has yet to respond to THR’s request on the details of those strides. 

Over the past year, Victoria's Secret has laid off a number of staffers, and April Holt, who had been with L Brands’ lingerie division for more than 16 years, left in October. At the end of 2018, Victoria’s Secret CEO Jan Singer "left suddenly," according to CNBC, and former Tory Burch president John Mehas stepped in.

The former home to star supermodels such as Naomi Campbell, Heidi Klum and Alessandra Ambrosio, Victoria's Secret has struggled to maintain its once-coveted place in the modeling world as well. Wexner, 82, built the empire of L Brands over six decades to a peak of $29 billion in 2015, with Victoria’s Secret as its crown jewel. But L Brands’ stock has fallen in value for four straight years, with its market value having dropped to below $6 billion dollars as a result of the decrease in revenue from Victoria’s Secret.

At the end of last year, Victoria’s Secret sales had fallen by almost 8 percent to $1.41 billion, after having reported annual sales of between $7 billion and $8 billion in recent years. Various factors have led to this, notably a 20 percent decline in foot traffic over the 2019 holiday season compared with 2018, according to location intelligence firm Cuebiq. Additionally, ratings for its once-popular TV runway show also dropped substantially, leading to the show not being broadcast on network television any longer.

Wexner has faced intense scrutiny for his ties to the late Jeffrey Epstein, who died while in custody on sex trafficking charges. A longtime client of Epstein’s, Wexner told Reuters he was “embarrassed” by his ties to Epstein, but his relationship with the former financier left a deep impact on the company. Last year, Milla Jovovich, Christy Turlington Burns, Iskra Lawrence, Carolyn Murphy and others sent Mehas a petition to urge the company to protect its contractors against sexual misconduct.

As Jon Reily, senior vp and global head of commerce strategy for digital consultancy Isobar, sees it, Victoria’s Secret’s troubles began even before the Epstein connection. “Between shifting consumer sentiment and rapidly changing social constructs thanks to #MeToo and gender awareness, Victoria's Secret has rapidly fallen into almost a 20th-century mind-set for many consumers,” he told The Hollywood Reporter. “That coupled with lack of interest among Gen Z shoppers in the category has made for some pretty stiff headwinds. The Epstein case is just a blip compared to that at the moment.”

Reily does believe Wexner’s departure could be of benefit to the company as a whole. “He’s in his 80s and is the longest serving CEO of an S&P company. If they weren’t in trouble, no one would bat an eyelash at the news. He’s had a long and very successful career. However, it’s another sign of the times and I think that leaving the day-to-day post, even if he does stay on as chairman, which is likely a given, will get some new life in L Brands, which they desperately need.”

But Reily doesn’t think it will be significant enough to change the tide. “They have a lot of debt, both in literal dollars and social capital, to make up. A new owner or private equity could take some of that pressure off, but the brand needs to be revitalized for the 21st century in order to be successful. The days of blacked-out stores with scantily-clad models are over, and if they can’t get past that they probably won’t make it,” he says.

Reily believes Victoria’s Secret needs to find a way to revamp the brand to be more digital-friendly and to have a new default brand positioning. “But that’s a tall order for any brand, much less one that’s got $5 billion in debt to think about,” he adds. Part of that retooling he says, is changing the concept of the Angels too. “Social responsibility is do-or-die now and it’s hard to not be on the wrong side of those conversations when it’s such low hanging fruit to lump the Angels in with #MeToo. I’m surprised it’s lasted as long as it has, really. So that would fall in the category of brand re-tooling.”

Razek caused uproar on social media for once saying that he didn’t believe the Victoria’s Secret fashion show should include transgender models, before apologizing. Last year, the brand’s first transgender model, Brazil’s Valentina Sampaio, came on board, and a lingerie campaign featuring transgender and plus-size models became part of the company’s mission to rebrand. Still, calls for Victoria’s Secret to be more inclusive persist.

One of the biggest criticisms against the company has been that it took too long to catch up to changing consumer wants and needs, and in the interim, brands like Rihanna’s Savage x Fenty and Beyoncé’s Ivy Park took over that interest and need. This is something Reily echoes. “Victoria’s Secret rebranded but didn’t change their core offering,” he says. “To be frank, they sold allure and outdated depictions of beauty. That just won’t fly in this day and age. Whoever winds up with them will have a very valuable brand with a storied history, but will have to change the mind-set people have about the brand from women scantily-clad in over-the-top lingerie to something else. I’m not sure what that is, or what will resonate, I just know that what they have now won’t work."

Feb. 3, 8:50 a.m.: This story has been updated with details from Saturday's New York Times article about how the company has allegedly been fostering a toxic culture of inappropriate conduct.