Victoria’s Secret Targets Higher Valuation in New Sale Talks

L Brands Inc.’s Victoria’s Secret has restarted talks with buyers about a potential sale, and is seeking more than double the $1.1 billion value it had last year in a failed deal, according to people familiar with the matter.

After strong recent sales, the company could now target a valuation of at least $2 billion to $3 billion in a potential sale, said the people, who asked not to be identified discussing private negotiations. L Brands agreed last year to cancel a deal giving private equity firm Sycamore Partners 55% control of the lingerie chain for around $525 million.

The chain might be valued even higher, according to Chief Financial Officer Stuart Burgdoerfer, who cited analyst estimates in an emailed statement to Bloomberg Thursday.

“As a result of the substantial improvement in performance at Victoria’s Secret, various sell-side analysts have valued the business at as much as $5 billion,” Burgdoerfer said.

Performance Boost

Notes from Wells Fargo & Co. and Credit Suisse Group AG analysts this year have given the chain a potential value of more than $4 billion, and Citigroup Inc. in a February note calculated it at a possible $5 billion.

L Brands has said it aims to complete either a sale or spinoff of Victoria’s Secret by August. Its stock price has climbed about 78% this year, and last traded up slightly near $66.20 per share.

“The board and our management team continue to evaluate both a potential spinoff of the Victoria’s Secret business into a separate public company and a sale of the business,” Burgdoerfer said in the statement. “The board is committed to pursuing the option that will return the highest value to shareholders.”

Unusual Demand

Victoria’s Secret has seen an “unusual” surge in demand in recent quarters, according to its financial statements. Strong sales and the success of its online business led it to boost its quarterly profit outlook twice in March, landing at $1 a share for the period that runs through April.

Victoria’s Secret Targets Higher Valuation in New Sale Talks

The numbers point to a sharp turnaround for the lingerie chain, which had grappled for years with declining sales and struggled to recalibrate after losing the Sycamore investment just as coronavirus shutdowns began.

Sycamore sued in April 2020 to terminate the deal it had struck in February, arguing L Brands violated the terms of the agreement by failing to pay rent and furloughing thousands of workers amid the pandemic.

The loss cast doubt on the future of the brand, deepened by the controversy surrounding the company and its former Chairman Les Wexner’s associations with convicted sex offender Jeffrey Epstein.

Wexner, 83, relinquished his chairman seat in February 2020 and he and his wife, Abigail, won’t run for re-election at the annual shareholder meeting in May, the company has said.

Victoria’s Secret also abruptly replaced its CEO in November, with Martin Waters taking the place of John Mehas less than two years after Mehas took that role.

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