Victoria’s Secret Needs a Different Kind of Angel

(Bloomberg Opinion) — Among the demands of Barington Capital Group, one of two activist investors seeking to shake up Victoria’s Secret & Co., is that the company bring back the “angels” — the glamorous supermodels once synonymous with America’s biggest underwear retailer.

But what Victoria’s Secret really needs is a different kind of angel: a buyer. Ideally, one that can offer a decent bid premium to long-suffering shareholders and enable the company to do the hard work needed to adapt to a new lingerie landscape, away from the glare of quarterly earnings. The agitators and the retailer should stop trading barbs, and instead work together to deliver value to all investors.

If Victoria’s Secret puts itself up for sale, the activists could facilitate a take-private by joining forces with the bidder or backing its offer.  

Both Barington Capital, which holds more than 1% of the retailer, and BBRC International Pte, which has acquired a 12.9% stake, are urging Victoria’s Secret to make changes to its board and strategy to address the underperformance of its shares. They have a point. Since the company was spun out of L Brands Inc. four years ago, the stock has lost more than half of its value.

For years, Victoria’s Secret led the underwear market. But amid the #MeToo era, the company looked increasingly male-dominated and out of touch. The scandal sparked by the association of former L Brands’ Chairman and Chief Executive Officer Leslie Wexner with the disgraced late financier Jeffrey Epstein only hurt the brand further. As it prepared for life as a separately listed company, Victoria’s Secret replaced the angels with a group of women recognized for their accomplishments and opinions. But the VS Collective, as it was known, failed to turbo-charge sales and was quietly disbanded.

Last fall, under new CEO Hillary Super, the company staged an updated version of its fashion show, an annual marketing extravaganza that was once a cultural force. It was a step in the right direction. But Victoria’s Secret is still struggling to find its place in a market populated by nimbler rivals, such as Kim Kardashian’s Skims and Rihanna’s Savage X Fenty, which Super previously led.

Victoria’s Secret needs to find a modern version of sexy, one that embraces different body sizes, but also changing underwear tastes. This includes the shift away from underwire bras to softer bralettes and sports bras, which have moved out of the gym into the everyday wardrobe. 

There are some encouraging signs. For example, Victoria’s Secret has been dressing pop superstar of the moment Sabrina Carpenter. Amid a return to offices and anxiety about the job market, more formal clothing that requires structured undergarments is making a comeback. And the retailer remains the biggest underwear retailer not just in the US but also globally, notes Mary Ross Gilbert, an analyst at Bloomberg Intelligence. The core brand — as well as sister line Pink — both have huge recognition, including with Gen-Z consumers, while other mall brands of yesteryear, such as Gap Inc., are proving it’s possible to ride a wave of nostalgia to improved sales.

But making the most of this potential — the company should go further in updating its image and stores, and foster closer ties with Carpenter  — requires significant investment. With President Donald Trump’s tariffs, which will cost the company $50 million this year, and growing pressure on US consumers, committing to an overhaul spells short-term financial pain. 

Victoria’s Secret has introduced a so-called shareholder rights plan, a poison pill designed to stop an investor building a controlling stake without paying a premium. But it does not preclude the company considering an offer.

Nor is Victoria’s Secret too big a morsel to tempt a buyer. The company’s market value has shrunk to about $1.5 billion. The 30% premium that is the standard in takeover deals would value the company’s equity at about $2 billion. But given how far the shares have sunk, a 50% premium looks more appropriate. Add in expected net debt excluding lease liabilities of $600 million at the end this fiscal year, and the enterprise value would still be under $3 billion — not out of reach for many private equity groups.

Assuming a successful repositioning lifts sales in the core underwear business, alongside progress with beauty, Pink, and relaunched swimwear and activewear units, the company could eventually be relisted at a higher valuation.

Indeed, there is a precedent for how this could play out: Breitling AG. Like Victoria’s Secret, the Swiss watchmaker had a lot of baggage, thanks to its sexist marketing. But since a majority stake was acquired by CVC Capital Partners in 2017, it has ditched the tasteless ads and introduced a suite of revamped products. It’s paying off: Breitling’s 2024 revenue is estimated at about 820 million Swiss francs ($1.02 billion), roughly double its 2016 sales. The company’s valuation has soared from 800 million francs in 2017 to 4.2 billion in 2022, when CVC sold a majority stake in the watchmaker. Of course, the luxury market has slumped since then, but if the new owner of Victoria’s Secret could stage a similar reinvention, it would be looking at healthy returns.

Putting yourself up for sale can be seen as a sign of weakness. But some private equity buyers won’t come knocking without the encouragement of an open door. And a deal to go private, which pays shareholders some of the recovery value in a takeover premium, looks like the best outcome. Its time for Victoria’s Secret to pivot from selling lingerie to selling a lingerie company.

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This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andrea Felsted is a Bloomberg Opinion columnist covering consumer goods and the retail industry. Previously, she was a reporter for the Financial Times.

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