Victoria's Secret is plotting a major turnaround as a private company. Here's what went wrong with America's lingerie darling.

Victoria's Secret

ESBP/STAR MAX/IPx

Victoria's Secret 2017 runway show in Shanghai.

  • Victoria's Secret is preparing itself for a major turnaround after several years of sliding sales.
  • On Thursday, its parent company L Brands said it would be selling a 55% stake in the lingerie retailer to private-equity firm Sycamore Partners. Under the terms of the deal, Victoria's Secret will go private.
  • In its heyday in the mid-1990s to mid-2000s Victoria's Secret was considered America's lingerie sweetheart, and it had a powerful role in defining what "sexy" is in the modern day.
  • But a series of product misses and a reticence to update its brand image, among other issues, have taken their toll on sales in recent years.
  • Here's what went wrong with the brand.
  • Visit Business Insider's homepage for more stories.

Victoria's Secret is preparing for a major turnaround as a private company under new leadership after years of declining sales and ongoing criticism over its brand image.

On Thursday, its parent company, L Brands, announced that it would be selling a majority share in the company to private-equity firm Sycamore Partners, which has a history of turning around struggling retailers. Advertisement

L Brands founder Les Wexner simultaneously announced his resignation from his long-held role as the company's CEO, though he will stay on the L Brands board of directors as chair emeritus.

In a press release announcing the news, Wexner said that turning Victoria's Secret into a privately held company would be "the best path to restoring these businesses [Victoria's Secret Lingerie, Victoria's Secret Beauty, and Pink] to their historic levels of profitability and growth."

He added that Sycamore, which has acquired a 55% stake in Victoria's Secret, "has deep experience in the retail industry and a superior track record of success" and "will bring a fresh perspective and greater focus to the business."
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Wexner's resignation and the news of these changes at Victoria's Secret follow several tumultuous years at the company and its gradual fall from being considered America's lingerie darling. Here's what went wrong.

Overtly sexualized ads, controversial comments from executives, and sliding sales

Four years ago, Victoria's Secret was the toast of Wall Street. The lingerie giant was on a four-year run of record sales growth under the leadership of longtime CEO Sharen Turney while other mall-based stores were spiraling toward a meltdown. But in 2016, the tide began to turn. Turney abruptly left the company, and Wexner replaced her as interim CEO.Advertisement

Former executives who held longtime positions at Victoria's Secret previously told Business Insider that Wexner, who hadn't previously been involved in the day-to-day running of the brand, suddenly became a formidable force. These executives wished to remain anonymous in order to speak frankly about their time there, but their identities were verified by Business Insider. They said Wexner made a series of quick and fast changes: killing the catalog and swim and apparel categories to focus solely on lingerie, the core part of the business.

"The biggest mistake [Wexner] ever made was getting rid of Sharen. The stock just tanked," a former employee who worked in a senior management role at Victoria's Secret for over a decade and was laid off told Business Insider.

"Everything started to crash," another former executive who worked at Victoria's Secret's New York office for nine years and was laid off in mid-2017 told Business Insider. "It was the beginning of the end."Advertisement

When Business Insider reached out to L Brands for comment on this story and asked whether the company felt it had made mistakes over the years, a spokesperson pointed to the company's investor relations website and presentations discussing its quarterly results and sales issues throughout 2019.

Between 2016 and 2018, sales had begun to falter. Victoria's Secret was slow to adjust to a shift from padded and push-up bras toward bralettes and sports bras, missing out on a major fashion trend. Increasingly, more body-positive brands such as Aerie, ThirdLove, and Lively started to crop up and lure away shoppers.

Victoria's Secret's US market share dropped from 33% to 24% between 2016 and 2018. And around the same time, the brand started to encounter product issues as shoppers complained that the quality of the lingerie had slipped. Advertisement

Things came to a head in 2018 as the #MeToo movement progressed and Victoria's Secret's marketing and brand image were increasingly criticized as oversexualized and out-of-date.

Teen-centric brand Pink, which as one of Victoria's Secret's lifelines had previously reported strong sales growth, started to be impacted by the oversexualized ads in stores.

"It's basically pornography," one shopper Jessie Shealy wrote on Victoria's Secret's Facebook page in February 2018, referring to the photos on display in her local store in South Carolina.Advertisement

And analysts became more critical of the brand for the level of promotions in its stores, highlighting them as evidence that the company was struggling.

At the end of 2018, L Brands came under intense scrutiny after its chief marketing officer Ed Razek, who was also one of the company's longest-standing employees, made controversial comments about transgender and plus-size models in an interview with Vogue. Razek said that he didn't think the company's annual fashion show should feature "transsexuals" because the show is a "fantasy." The interview went viral almost instantly, which led to Razek making a formal apology; he stepped down from the company just under a year later.Advertisement

In March 2019, L Brands shareholder Barington Capital published a strongly worded public letter to Wexner, which laid out its recommendations to improve growth at the brand.

Barington CEO James A. Mitarotonda described the company's brand image as "outdated and tone-deaf" in the letter and said that it failed to align with evolving attitudes toward diversity and inclusion. He also called for a shake-up of the board.

In the period since that letter was published, Victoria's Secret has made some significant changes, adding two female directors to its board and postponing its annual fashion show. Barington Capital has since become a special advisor to L Brands.Advertisement

The Epstein connection

Epstein/Wexner

Astrid Stawiarz/Stringer and Patrick McMullan/Getty Images

Les Wexner (left) and Jeffrey Epstein (right).

In the background to these potentially positive changes, Wexner came under significant scrutiny in the summer of 2019 over his friendship to convicted sex offender Jeffrey Epstein.

Epstein managed Wexner's money for several years and was considered a "close friend" of Wexner's. But as the scandal unfolded, reports emerged that Epstein had used his connection to Victoria's Secret to coerce victims into sexual acts. As a result, L Brands hired an outside law firm to review its relationship with Epstein.Advertisement

In early 2020, the company faced a fresh scandal after a New York Times report described a culture "of misogyny, bullying, and harassment" at Victoria's Secret, which it said was created by Razek and Wexner.

The news of Wexner stepping down marks a significant shift for the company. He is is the longest-serving CEO of any Fortune 500 company, reaching a nearly six-decade tenure at L Brands.

The former executives who held longtime positions at Victoria's Secret's corporate offices told Business Insider in early 2019 that with Razek and Wexner at the helm of the business, it would be difficult for any CEO of Victoria's Secret's brands to make their mark and enact real change.Advertisement

"They have this antiquated idea of what sexy is," a former executive who worked at Victoria's Secret New York office for nine years said. "It's changing, we are all changing and without making the right adjustments to the product and the voice you put out there, I don't know what their future is."

But now, with Razek out of the company and Wexner out as CEO, and with new leadership in place, analysts are eagerly awaiting what is it come. Sycamore "will bring new thinking and ultimately a new positioning for the brand," Neil Saunders, managing director of GlobalData Retail, said in a note to clients on Thursday.Advertisement

"We expect this to be more authentic, less sexualized, and more attuned to the way most consumers now think," he said.

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