Investor asks L Brands to consider Victoria’s Secret spin-off or Bath & Body Works IPO

L Brands Inc. (LB) is facing pressure from one of its investors to overhaul its business and make changes to its board of directors. The hedge fund Barington Capital, in a letter to L Brands Chairman and CEO Leslie Wexner, pointed out that the company’s stock had underperformed its peer group and the market substantially over the past couple of years.

Barington attributed the share price decline to the lacklustre financial performance of the Victoria’s Secret division. The hedge fund believes the division’s failure to maintain a compelling brand image, combined with merchandising missteps, has hurt its performance.

Barington indicated that multiple changes to its management team harmed the Victoria’s Secret business. Moreover, the division was slow to adapt to the changing trends in the market and also failed to capitalize on the massive boom in activewear.

Barington also said that Victoria’s Secret has not evolved with the times and is losing touch with customers. The investor added that the brand needs to bring in more diversity and inclusion into its marketing. On the other hand, Barington appreciated the company’s decision to reenter the swimwear category.

While voicing concerns on Victoria’s Secret, Barington stated that the performance of the Bath & Body Works division has been exceptional but the personal care division’s strong momentum was being overshadowed by the lingerie chain’s dismal numbers.

To address these issues, Barington asked L Brands to take the necessary measures to improve the performance of Victoria’s Secret through fresh branding and better merchandising efforts. The activist investor asked the company to also consider either spinning off Victoria’s Secret or taking Bath & Body Works public in order to create more value for shareholders.

Barington also called for changes to the board of directors at L Brands and for the roles of Chairman and CEO to be given to different individuals to improve governance.

L Brands’ shares have dropped over 38% over the past one year. The stock was down slightly by 0.26% in afternoon trade on Tuesday.

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