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Victoria’s Secret Sale Marks End of Wexner’s Retail Empire Victoria’s Secret Sale Caps End of Wexner’s Retail Empire
(about 2 hours later)
Leslie H. Wexner will step down as the chief executive and chairman of L Brands as the company announced Thursday that it would sell a majority stake of its crown jewel, the lingerie brand Victoria’s Secret, to a private equity firm. The sale came after months of scrutiny of Mr. Wexner’s close ties to the disgraced financier Jeffrey Epstein and questions about the company’s internal culture. For decades Leslie H. Wexner helped shape the modern shopping mall, his brands populating the space between department stores — Victoria’s Secret, Abercrombie & Fitch, Express, Bath & Body Works and more.
L Brands said it would sell a 55 percent stake of the lingerie brand to Sycamore Partners, a firm that specializes in retailers, for $525 million. Mr. Wexner will become chairman emeritus of L Brands when the deal is finalized, which is expected this spring. Bath & Body Works, also owned by L Brands, will become a separate public company. But as the standards of beauty changed in the fashion industry and the internet spawned new competitors to mall chains, Mr. Wexner, the chairman and chief executive of the retailing empire L Brands, struggled to keep up. At the helm of a company that catered to women but was run largely by men, Mr. Wexner lost touch with what women wanted.
Mr. Wexner, 82, has led L Brands, which began with the clothing chain The Limited, for nearly six decades. In an email to employees on Thursday, he referenced its start through a $5,000 loan from his aunt after a disagreement with his father, who also ran a retail store. On Thursday, he said he would step down from the top job at L Brands and sell a controlling stake in Victoria’s Secret, its crown jewel.
“Today feels very similar to the day that my aunt offered me a new start,” he wrote. “Today is the beginning of an important new chapter in the evolution of the enterprise.” Mr. Wexner’s departure ends an era in retailing and caps a troubled year in which his close ties to the disgraced financier Jeffrey Epstein and revelations about an entrenched culture of misogyny at Victoria’s Secret were thrust into the spotlight. On Thursday, L Brands said it would sell 55 percent of Victoria’s Secret to Sycamore Partners, a private equity firm that has been snapping up struggling retailers.
Mr. Wexner’s business savvy and sharp eye for the tastes of American consumers made him a billionaire and an instrumental force in shaping the nation’s shopping malls. Over the years, he has been described as “one of the great merchant princes of the late 20th century,” a “rag-trade revolutionary” and the “Merlin of the mall.” The longest-serving chief executive in the S&P 500, Mr. Wexner will become chairman emeritus of L Brands when the $525 million purchase is completed, helping oversee just one of what was once a large stable of brands: Bath & Body Works. It is a muted exit for an 82-year-old billionaire who was once called the “Merlin of the mall.”
But the executive’s legacy was tainted by his connection to Mr. Epstein, who died in a Manhattan jail cell in August while facing federal sex-trafficking charges. Mr. Wexner has sought to distance himself from the financier and emphasized that he had no knowledge of Mr. Epstein’s suspected activities. With his keen eye for the evolving tastes of American consumers, Mr. Wexner expanded L Brands into a behemoth from a single clothing store, the Limited, which he started in 1963 in Columbus, Ohio. He helped turn that city into a retail capital, and exerted vast influence in the state, doling out big donations to arts organizations, hospitals, universities and politicians.
Mr. Wexner employed Mr. Epstein as a personal adviser for years, handing him sweeping powers over his finances, philanthropy and private life. Mr. Epstein was empowered to borrow money on behalf of Mr. Wexner and sign Mr. Wexner’s tax returns, as well as hire people and make acquisitions. Over the years, Mr. Epstein obtained a mansion in Manhattan, a luxury estate in Ohio and a private plane — possessions worth roughly $100 million today — that had previously been owned by Mr. Wexner or his companies. He made his most important acquisition in 1982 when he bought Victoria’s Secret, a company that has helped define female sexiness for millions of men and women. For models, becoming one of the brand’s “Angels” all but guaranteed international fame.
After Mr. Epstein’s arrest last summer, L Brands said it had hired the law firm Davis Polk & Wardwell to conduct “a thorough review” of the matter at the request of its board of directors. Tammy Roberts Myers, a spokeswoman for L Brands, said on Thursday that the company did not have an update on the investigation or its future based on the transaction.
Details of the relationship added to the challenges of L Brands, where Victoria’s Secret has been struggling to keep up with changing notions of female beauty and representation in advertising. Victoria’s Secret is the world’s dominant specialty retailer for lingerie, with billions of dollars in annual revenue, and a pop-culture phenomenon. The supermodels selected to represent the brand — known as Angels — had long helped shape the ideals of beauty and sexiness for many Americans.
But it canceled its famous annual fashion show last year, after a nearly two-decade run on broadcast television, and conducted layoffs. The largely male management of L Brands has come under fierce criticism, especially as Victoria’s Secret has struggled.
The New York Times reported this month that Victoria’s Secret has had for years an entrenched culture of misogyny, bullying and harassment. The report was based on interviews with more than 30 current and former executives, employees, contractors and models, as well as court filings and other documents. The culture was presided over by Mr. Wexner and Edward Razek, the chief marketing officer of L Brands who was the subject of numerous complaints that went unheeded. (Mr. Razek said the allegations against him were “categorically untrue.”)
In response to questions from The Times, Ms. Myers provided a statement at the time on behalf of the board’s independent directors. She said that the company was “intensely focused” on corporate governance, workplace and compliance practices and that it had “made significant strides.”
“We regret any instance where we did not achieve this objective and are fully committed to continuous improvement and complete accountability,” she said.
Mr. Wexner is an extraordinarily influential figure in Columbus, Ohio, where L Brands is based. The executive and his wife, Abigail, who have four children, are the biggest individual donors to Ohio State University and have given millions of dollars to the arts and charity. It is hard for residents in the Columbus area to avoid some sort of connection to the Wexners based on their business and philanthropy.
“He’s an icon here,” said Lee Peterson, an executive vice president at WD Partners, a strategy, design and architecture firm, who has lived in Columbus since 1980. “He donated millions and millions of dollars to O.S.U., he started 10 brands here, brought in all these people from all over the world.”
The Limited emerged from a disagreement that Mr. Wexner had with his father, who ran a clothing store named Leslie’s. His father carried a wide variety of merchandise, but Mr. Wexner argued that women really wanted to buy “sportswear” — a term at the time for skirts, sweaters and shirts. He decided to open his own store, with a loan from his aunt, in a Columbus mall at the age of 26 and worked tirelessly to make it a success.
Early on, he developed a reputation for working with his merchants to identify potential hits and moving quickly to put them in stores. Mr. Peterson worked for the Limited in the 1980s and recalled how Mr. Wexner would quiz employees about what items were selling at Monday evening meetings.
“There would be 12 or 13 of us, and we would hold up merchandise and talk about what sold and didn’t sell and he would only be interested in certain things,” Mr. Peterson said. “His first question was always, ‘What’d you pay for that?’ Then, ‘What’d you sell it for? How many did you sell? What would it take for you to sell 10,000 of those?’”
“If you didn’t know all the answers, he’d get super angry, but for Les, the thing was everything was so simple and so clear and easy for him,” Mr. Peterson said. “It was part of his DNA.”
That thinking extended to the organization that he ran. “We think about what women want to wear the way you breathe,” one of his executives told The New York Times in 1986.
The Limited, which was part of a wave of specialty retail chains like Gap and Banana Republic, opened its 100th store in 1976. But Mr. Wexner’s ambitions were bigger than a single label. By 1990, he had purchased Victoria’s Secret, Henri Bendel, Abercrombie & Fitch, and Lane Bryant and opened the Limited Too and Bath & Body Works.
The chains were a core part of American shopping malls, helping populate the space between department stores, and seemed to cater to every age group with different products and fashions.
“There’s no question that, professionally, he has been critical in creating retail as we know it today,” said Simeon Siegel, a managing director at BMO Capital Markets who covers retail and e-commerce. “The amount of companies that owe their existence to his expertise and ability to know what the consumer wanted — or even to tell the consumer what they wanted — cannot be contested.”“There’s no question that, professionally, he has been critical in creating retail as we know it today,” said Simeon Siegel, a managing director at BMO Capital Markets who covers retail and e-commerce. “The amount of companies that owe their existence to his expertise and ability to know what the consumer wanted — or even to tell the consumer what they wanted — cannot be contested.”
He added, “This, presumably, is not the way Les Wexner would have liked, or expected, to see the story of his career end.” But in recent years, the approach that helped establish Mr. Wexner’s success began to seem out of touch. Under his leadership, Victoria’s Secret failed to keep pace with evolving beauty ideals and refused to embrace a broader range of body types and gender identities. Sales have been falling in recent years, and the company has been forced to close stores.
Mr. Wexner has long been a relatively private person, especially compared to others in the retail industry, which is full of larger-than-life personalities. His devotion to L Brands was perhaps his defining characteristic. “If you want to torture me,” Mr. Wexner told The Times in 1986, “take my work away.” Investors and analysts have also criticized Victoria’s Secret for having few women in its top management. A string of female executives who pushed to reposition the brand left or were forced out, according to interviews with dozens of former and current employees.
While the executive built a name by buying up chains, he also earned a reputation for successfully spinning them off at just the right moment. Toward the end of the 1990s, Abercrombie became its own public company, and soon thereafter Mr. Wexner sold Lane Bryant and New York & Co. Last year, Victoria’s Secret canceled its famous annual fashion show after a nearly two-decade run on broadcast television, and cut its headquarters staff by 15 percent.
He was not sentimental about these dispositions: while L Brands spent much of its existence as The Limited Inc. and Limited Brands, the company sold its last remaining ties to the Limited stores in 2010. The timing was right in a challenging marketplace for women’s apparel, as shopping habits changed and fast-fashion chains began expanding more aggressively. Then last summer Mr. Epstein was accused of sex trafficking. The charges put a spotlight on Mr. Wexner’s long relationship with Mr. Epstein, who died in a Manhattan jail cell in August. Mr. Wexner has sought to distance himself from the financier, saying he had no knowledge of Mr. Epstein’s crimes.
In recent memory, the company, which changed its name to L Brands in 2013, has been largely focused on lingerie and home products through Victoria’s Secret and Bath & Body Works. Despite its challenges, L Brands is still a major force in the retail industry. The company brought in $13.2 billion in sales in 2018, according to its most recent annual report, though its profit shrank to $644 million. The two men were unusually close. Mr. Wexner employed Mr. Epstein as a personal adviser for years, handing him sweeping powers over his finances, philanthropy and private life. Mr. Epstein obtained a mansion in Manhattan, a luxury estate in Ohio and a private plane — possessions worth roughly $100 million today — that were previously owned by Mr. Wexner or his companies.
Sycamore has remained relatively under the radar among major financial firms in the past decade, even as it has struck deal after deal to acquire a stable of struggling household names in retail. The firm, led by Stefan Kaluzny, has bought companies like Hot Topic, Talbots and Staples and acquired assets from bankrupt retailers like Coldwater Creek and the Limited. Sycamore was co-founded in 2011 by Mr. Kaluzny and Peter Morrow after they left Golden Gate Capital, another private equity firm with retail investments. Three L Brands executives said Mr. Wexner was alerted in the mid-1990s that Mr. Epstein was posing as a recruiter of young women for Victoria’s Secret, but did not appear to act on the complaints.
Sycamore is no stranger to L Brands. One of its first moves was to buy a 51 percent stake in Mast Global Fashions, now known as MGF Sourcing, L Brands’ sourcing business. “The goal was to have a back office or a sourcing operation that could be leveraged across multiple brands,” Mr. Siegel said. After Mr. Epstein’s arrest, L Brands said its board had hired the law firm Davis Polk & Wardwell to investigate the matter. A spokeswoman for L Brands, Tammy Roberts Myers, declined on Thursday to answer questions about the investigation.
Sycamore has been criticized for some of its cost-cutting and financial maneuvering with certain investments, and it is unclear how its tactics may play out at Victoria’s Secret. The New York Times reported this month that the brand has for years had an entrenched culture of misogyny, bullying and harassment. The report was based on interviews with more than 30 current and former executives, employees, contractors and models, as well as court filings and other documents.
When Aeropostale filed for bankruptcy in 2016, it accused Sycamore of driving the company into an early bankruptcy through a supply deal with the sourcing arm. The company was trying to disqualify Sycamore from bidding for its assets in bankruptcy, but a judge later dismissed the claims. Sycamore also stunned Wall Street last year with a refinancing at Staples, which it bought in 2017, that helped fund a $1 billion dividend for the private equity firm. In a statement issued at the time, the independent directors on the L Brands board said that the company was focused on corporate governance, workplace and compliance practices and that it had made significant strides.
When asked about the controversy that has clouded the last year of Mr. Wexner’s career, Mr. Peterson called it “30 years of brilliance crashing to a halt.” Mr. Wexner’s retailing empire grew out of a modest store he started after a disagreement with his father, who ran a clothing store named Leslie’s. His father carried a wide variety of merchandise, but Mr. Wexner argued that women really wanted to buy “sportswear” — a term at the time for skirts, sweaters and shirts. At the age of 26, he opened the Limited in a Columbus mall with the help of a $5,000 loan from his aunt.
Early on, he developed a reputation for working with his buyers to identify potential hits and moving quickly to offer them to customers. Lee Peterson, an executive vice president at WD Partners, a strategy, design and architecture firm, who worked for the Limited in the 1980s, said Mr. Wexner would quiz employees about what items were selling at Monday evening meetings.
“We would hold up merchandise and talk about what sold and didn’t sell, and he would only be interested in certain things,” Mr. Peterson said. “His first question was always, ‘What’d you pay for that?’ Then: ‘What’d you sell it for? How many did you sell? What would it take for you to sell 10,000 of those?’”
Mr. Peterson added: “If you didn’t know all the answers, he’d get super angry, but for Les, the thing was everything was so simple and so clear and easy for him. It was part of his DNA.”
The Limited, which was part of a wave of specialty chains like Gap and Banana Republic, opened its 100th store in 1976. But Mr. Wexner’s ambitions were bigger than a single label. By 1990, he had also purchased Henri Bendel, Abercrombie & Fitch and Lane Bryant and opened the Limited Too and Bath & Body Works.
But unlike some other retail moguls, Mr. Wexner, who has four children with his wife, Abigail, has long been a relatively private person. He did not appear in ads or write books about his business philosophy. He expressed an almost slavish devotion to L Brands. “If you want to torture me,” Mr. Wexner told The Times in 1986, “take my work away.”
While Mr. Wexner built a name by buying up chains, he also earned a reputation for spinning them off at just the right moment, taking Abercrombie public and selling Lane Bryant and New York & Company.
He was not sentimental about these transactions: While L Brands spent much of its existence as Limited Inc. and Limited Brands, the company sold its last remaining stake in the Limited chain to a private equity firm in 2010. The timing was right as shopping habits changed and fast-fashion chains like H&M began expanding aggressively.
L Brands has mainly focused on lingerie and home products in recent years. Despite its challenges, the company is still a major force. Sales totaled $13.2 billion in 2018, according to its most recent annual report, though its profit fell about 34 percent to $644 million. Bath & Body Works, which will remain public, has fared better than Victoria’s Secret.
In selling control of Victoria’s Secret to Sycamore, Mr. Wexner has turned his prized asset over to a financial firm that has struck deal after deal to acquire struggling brands. The firm, led by Stefan Kaluzny, has bought Hot Topic, Talbots and Staples and acquired assets from bankrupt retailers like Coldwater Creek. One of Sycamore’s first acquisitions was a 51 percent stake in Mast Global Fashions, now known as MGF Sourcing, L Brands’ sourcing business.
Some analysts and people who have done business with Sycamore have criticized it for excessively cutting costs and engaging in risky financial maneuvers. Sycamore surprised Wall Street last year by refinancing the debt of Staples in a transaction that helped pay for a $1 billion dividend to the private equity firm.
Sycamore has said little about its plans for Victoria’s Secret, and it is unclear how it might go about turning around the business.
Through the L Brands board, Mr. Wexner could continue to influence the successful Bath & Body Works chain, but he will not have any direct involvement with Victoria’s Secret. The L Brands board, which has been criticized for being too close to Mr. Wexner, will also replace three longtime directors, further reducing his influence.
When describing the last year of Mr. Wexner’s career, Mr. Peterson, his former employee, called it “30 years of brilliance crashing to a halt.”
He added, “What a tragic ending to a really brilliant story.”He added, “What a tragic ending to a really brilliant story.”