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Nov. 23, 2019, 9:57 a.m. EST

Victoria’s Secret Fashion Show canceled as talk of a spinoff or Bath & Body Works IPO arises again

Breaking up L Brands has it its pros and cons, analysts say

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By Tonya Garcia, MarketWatch


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The viewership for the Victoria’s Secret Fashion Show had sunk in recent airings

The catwalk has gone dark for Victoria’s Secret, with L Brands Inc. canceling the fashion show this year amid efforts to turnaround the ailing brand.

Viewership for the show had sunk in its most recent outings.

On the Thursday earnings call Stuart Burgdoerfer, L Brands /zigman2/quotes/202062875/composite LB -2.51%   chief financial officer, said the company is examining different ways to position the brand.

“[W]e’ll be communicating to customers, but nothing that I would say is similar in magnitude to the fashion show,” he said.

As L Brands takes steps to get Victoria’s Secret back to growth, chatter has arisen again about a possible spinoff of the lingerie label, or an IPO of the Bath & Body Works brand.

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Talk of a spinoff or IPO began in March, when Barington Capital Group sent a letter to L Brands demanding major changes at the company to improve performance.

“[W]e recommend that the company take swift action to improve the performance of Victoria’s Secret, by, among other things, correcting past merchandising mistakes and ensuring that Victoria’s Secret is communicating a compelling, up-to-date brand image that resonates with today’s consumers,” the letter said.

“We also recommend that the board of directors of the company retain a financial advisor to help explore opportunities to unlock the tremendous value of Bath & Body Works, such as through a spinoff of Victoria’s Secret or an initial public offering of Bath & Body Works.”

Barington Capital ultimately appointed a special advisor to L Brands.

Victoria’s Secret has struggled as competition in the women’s underwear category grows and the brand’s super-sexy, hyper-stylized marketing has lost favor.

To regain its footing, there’s been a renewed focus on product at both Victoria’s Secret and the Pink brand, which is geared towards younger women. Behind the scenes, the company is focused on maintaining the “appropriate” level of promotions and inventory during the holidays.

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With the Victoria’s Secret turnaround still a work in progress, analysts were largely neutral third-quarter earnings and sales in line with expectations were announced on Wednesday. And they’re once again considering whether a spinoff or IPO is a good idea.

“Our hold [stock rating] reflects Bath & Body Works stellar comps (+9%) and potential that L Brands will succumb to investor (and activist) pressure and spin off Victoria’s Secret (comps -7%) or IPO Bath & Body Works,” wrote CFRA’s Camilla Yanushevsky in a note.

/zigman2/quotes/202062875/composite
US : U.S.: NYSE
$ 17.85
-0.46 -2.51%
Volume: 14.75M
June 4, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$67.19 million
Rev. per Employee
$148,898
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