L Brands spinning off Victoria’s Secret, Bath & Body Works

On Tuesday, L Brands announced it would split Victoria’s Secret into two independent, publicly listed companies. Julie Hyman, Myles Udland, and Brian Sozzi explain the changes at the company.

Video transcript

MYLES UDLAND: Let's make a hard pivot here, Sozzi, and we'll come to one of your favorite areas, which is what's happening over at L brands. Finally today, the announcement that they will be splitting the Bath & Body Works and Victoria's Secret brands. We're not seeing a spinoff. We're not seeing a sale of one of these entities to PE, at least not yet. And we'll see what happens when they are separately traded public companies.

But Sozz, the division here, I suppose the natural conclusion of what was almost a year long review process for management over at L Brands.

BRIAN SOZZI: Yeah. Really drawn out here. And I have to give a hat tip to Simeon Siegel over at BMO Capital Markets. I mean, he's been all over the stock, really modeling out very nicely what a separation of the companies could be. You know, I caught up with him this morning real briefly. He said a standalone Bath & Body Works could be valued at $21 billion. Maybe Victoria's Secrets in that $5 to $6 billion range. Put that together, that's about $27 to $28 billion in total worth. L Brand's market cap, according to Yahoo Finance Plus data, is only $21 billion. So you've had a lot of value held inside this company.

And the spinoff certainly makes very sense-- makes a lot of sense, especially for Bath & Body Works, which really has come back into popularity during the pandemic. People are out there buying very nice smelling hand sanitizers and candles. What I would be concerned about is a stand-alone Victoria's Secret. I mean, you've seen the clothing that they sell has gone completely against them. You see what American Eagle has done with the Aerie intimates brand, more inclusive. Victoria's Secret is not inclusive, I would argue. And I would really be concerned about how that company performs out of the gate as a public company, when it does go public. This split is supposed to happen in August of this year.

JULIE HYMAN: Yeah. One of the things, Brian, one of the other things that to me is consistently maintained with Victoria's Secret is that the brand is viable. It was just too big. And indeed, we have seen Victoria's Secret shrink a lot. And that has helped its numbers. I agree with you, though, that it still has an image problem. And even though it has made some steps to try to correct that image problem, even if it's doing the work in real time, if people don't know it's doing the work, it might as well not be, right? It has to communicate to people that it is a brand for 2021 and not for 2005, which I think is in many ways where it's mired, or even earlier than that. So we'll see what a liberated Victoria's Secret looks like.

MYLES UDLAND: We will indeed. I think, again, though they are being split off in this transaction, one imagines that they are not both long for individual public company life. There are probably certain dry powder out there that might be interested in taking over one of these assets.