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Victoria's Secret hired a superstar CEO to turn around the flagging brand. But a 50% stock drop has activist investors circling
Victoria's Secret hired a superstar CEO to turn around the flagging brand. But a 50% stock drop has activist investors circling

Yahoo

time28-06-2025

  • Business
  • Yahoo

Victoria's Secret hired a superstar CEO to turn around the flagging brand. But a 50% stock drop has activist investors circling

As bras go, wireless is winning. On Victoria's Secret's latest earnings call earlier this month, CEO Hillary Super explained that the brand's So Obsessed underwire-free push-up bra was a fast-growing hit, calling it 'a standout,' with 30% year-over-year growth and a 'deep resonance with the millennial customer.' Those comments landed well with Morgan Stanley analyst Alexandra Stratton, who wrote in a subsequent research note that Super seemed to have a better handle on fashion trends than the previous management team. 'Super's commentary demonstrated a deeper understanding of how the intimates industry has evolved in recent years,' she wrote. Several other analysts sprinkled their response to the earnings call with optimistic observations about Super, who has led the lingerie shop since last September and was hired to revamp a brand that has spent the past six years careening from one disaster to the next. And yet the CEO is also contending with a host of problems. Like other retail leaders, Super is navigating Trump's tariffs and uncertainty about consumer spending. The company's stock is down 50% since January, following a December surge on signs of a turnaround. (The share price hovers at $20 at the time of writing, compared to $22 when she took over.) She's also still reeling from the effects of a security breach last month that forced the company to shut down its website for three days. And worst of all, two activist investors—Australia's Brett Blundy, the company's largest shareholder, and hedge fund Barrington Capital—have the retailer in their crosshairs, and have called for an overhaul of its board. Barrington Capital also suggested in an open letter that a reconstituted board needed to evaluate whether Super was the right person for the CEO job. In an email to Fortune, the lingerie company said: 'The board has full confidence in Hillary's vision, leadership, and her ability to unlock the potential of our iconic brands.'Super has laid out a turnaround strategy that includes reasserting the brand's authority in bras, and growing categories like youth-focused PINK, beauty, and sport, while reimagining the company's marketing and sales strategy to better suit the way customers are shopping now. But after a rollercoaster few years, Victoria's Secret finds itself once again at a critical inflection point as it tries to reestablish its place in the wallets and boudoirs of American consumers. Hillary Super's arrival at Victoria's Secret 10 months ago was met with enthusiasm from Wall Street. When the leadership change was announced in August, the company's share price jumped 16%. The board poached Super from Rihanna's Savage X Fenty, where she had been CEO for a year, offering her a compensation package that totalled $18 million for the year, including a signing bonus and a one-time award. Super brought a certain cool factor thanks to her role at Fenty. She also brought vast experience, having spent more than three decades in retail leadership roles, including at Anthropologie, a cult-favorite label and subsidiary of Urban Outfitters, where she spent four years in top roles, including president and global CEO. But with Victoria's Secret, Super inherited a beleaguered brand stained by upheaval and scandal. In its mid-aughts heyday, the company reached a market share of over 30%, and raked in around $8 billion in revenue in 2016 under CEO Sharen Turney. But Turney was dismissed in 2017 and replaced by L Brands owner Les Wexner. Under his leadership, and that of his chief lieutenant, longtime senior leader Ed Razek, the company missed important retail trends like athleisure wear. Its marketing also fell out of step with major cultural shifts, and remained overtly sexual and at the height of the #MeToo in 2019 and 2020, Victoria's Secret became the focus of two scandals involving its male leadership. First, Wexner's close relationship with late sex offender Jeffrey Epstein became a PR liability, along with reporting that Epstein posed as a scout for Victoria's Secret to lure and abuse aspiring models. (Wexner has previously said that he is embarrassed by his ties to Epstein, whom he called 'depraved.') Then, in 2020, the New York Times published a bombshell investigative piece outlining allegations of sexual harassment at the company, specifically involving Rezek. By that time, Victoria's Secret's entire ethos had largely fallen out of favor. L Brands decided to spin off the company, which it did in 2021, separating it from its former sister company, Bath & Body Works. (L Brands has since rebranded as Bath & Body Works.) In 2020, Wexner, who purchased Victoria's Secret in 1982 when it was a small chain of stores on the verge of bankruptcy, stepped down. Once known for turbocharging the careers of models like Karlie Kloss and Heidi Klum, Victoria's Secret went about trying to transform its reputation after Wexner's exit. Under Martin Waters, who was named CEO of the spun-off company, the over-the-top fashion shows featuring diamond-studded fantasy bras were out, and the Victoria's Secret Angels, a rotating group of It-girl models who had become synonymous with the label, were disbanded. Instead, the VS Collective, a group of brand ambassadors of various ethnicities and sizes, known for their careers in sports or technology, would become the face for the brand. But while this top-to-bottom revamp sparked a conversation about feminism and the definition of 'sexy,' it didn't ignite much passion in consumers. The rebranding was deemed inauthentic by some critics, and an overcorrection by others. The company's market share had fallen to 18.7% by 2022. The company changed strategies again while Waters was still in the corner office, and began reclaiming some of its supermodel history, hiring Hailey Bieber and Emily Ratajkowski, and bringing back its fashion shows. In a letter about Waters' departure, the board said he had 'established a foundation for VS&Co to enter its next chapter.' Super is now tasked with finding ways to thread the needle between Victoria's Secret's past and future. On the recent earnings call, the CEO said that she felt the company's marketing had become 'too serious' in recent seasons. 'We have an opportunity to have a more energetic, more joyful expression of VS,' she said. But activists may put a dent in Super's plans. In March of this year, BBRC International Private, an investment company run by Australian billionaire Brett Blundy, increased its stake in Victoria's Secret to about 13%, prompting the retailer to adopt a poison pill to ward off a potential takeover. On June 9, Blundy sent the Victoria's Secret board a letter decrying its oversight of the retailer and its management team. Just a week later, the New York-based hedge fund Barington Capital said it would add to its stake in Victoria's Secret—it's thought to have over 1% now, though the exact figure isn't yet known—as it called for the company to overhaul its board, refocus on the brand's core products, and drop the poison pill. 'Since its spin-off and public listing in 2021, the company has lost over $2.4 billion in shareholder value,' Barington Capital chair and CEO James Mitarotonda wrote in an open letter to the board. Neither Barington Capital nor Brett Blundy's investment company responded to Fortune's request for activist investors feel they know what Victoria's Secret needs. Blundy, the Australian billionaire, has a history in the intimates business and has recently purchased another lingerie brand. His letter to the company called attention to a total stockholder return of -64% since 2021 and what it called 'catastrophic' capital allocation, including the purchase of Adore Me in 2022, which 'has failed to generate meaningful returns.' Barington Capital, meanwhile, has already successfully advocated for changes at Victoria's Secret once, just before it was spun out from L Brands. 'The share price of L Brands increased by 221.5% during our tenure as an advisor to its board of directors,' Mitarotonda wrote in his open letter. Given that Victoria's Secret is one of the world's most iconic brands, the letter said, 'the company should be creating significant long-term value for its shareholders.' 'Victoria's Secret has meaningfully underperformed its peers and the market as a whole since becoming an independent company,' the activist argued, pointing to lackluster growth. He also said Super lacked CEO experience, since her stint at Savage X Fenty only lasted for one year. But Barington's harshest criticisms were for the board and its chair, Donna James, a longtime director at Victoria's Secret. The hedge fund believes the board has the wrong skill sets and needs refreshing. 'Of the current nine directors,' it noted, 'six have presided over the company's decline since its public listing.' Victoria's Secret is pushing back against the activist's claims, pointing to Super's focus on bras, and steady improvements at the company, with momentum growing in its Pink brand, as well as its healthy and beauty division. Although the company lowered its sales guidance for the second quarter when it announced its first quarter results earlier this month, it also reported earnings per share of 9 cents, beating market expectations of 4 cents. At $1.35 billion, sales were slightly ahead of analysts' expectations, while the retailer also reduced its overall losses compared to the same period in the previous year. A Wells Fargo analyst also heralded Super's work at the company, noting that Victoria's Secret saw improved performance in North American sales and PINK brands in the second half of last year, following her hiring. Bloomberg research predicts full-year sales would beat the company's guidance and reach $6.2-$6.3 billion in the second half of this year. And a JPMorgan analyst defined the current moment as 'early in the turnaround.' Some retail-watchers appear ready to give Super the time to prove herself. In a LinkedIn post, Neil Saunders, a retail analyst and consultant, wrote: 'Victoria's Secret is mainly a brand for women. It was run by men for quite some time, and they ultimately made a hash of it.' 'Now Hillary Super is at the helm and is starting to reinvent things. She has been in post for less than a year and has to be given a chance to put her vision into practice. But the carping from activist investors has already begun,' he continued. 'Activist investors are also mostly men. I honestly think that sometimes these finance men should sit down and take a seat, because they don't really understand the women's fashion business.' Other defenders also question whether Super is being judged prematurely. Patricia Lizarraga, managing partner and chief investment officer of Hypatia Capital, which manages an exchange-traded fund invested in public companies run by women, says that she was 'shocked' that activist pressures have arrived so quickly. Then again, she notes, activist investors are more likely to go after women CEOs, according to studies. Interference from activists also appears to be one of many reasons that women have shorter tenures as CEOs. 'We have some real superstars that have turned around fallen brands,' she said, pointing to CEOs like Fran Horowitz, who has led a revival of Abercrombie & Fitch. 'There's a model to follow.' Super has recently hired new senior leaders, including a new chief marketing officer and a new creative director. On the latest earnings call, she referred to her leadership team as the 'super squad,' quoting a fashion magazine's play on her name. Together, the squad will have to move as quickly as possible. This story was originally featured on

How activist Barington Capital can collaborate with Victoria's Secret to improve shareholder value
How activist Barington Capital can collaborate with Victoria's Secret to improve shareholder value

CNBC

time21-06-2025

  • Business
  • CNBC

How activist Barington Capital can collaborate with Victoria's Secret to improve shareholder value

Business: Victoria's Secret & Co. is a specialty retailer of women's apparel and beauty products marketed under the Victoria's Secret, Pink and Adore Me brand names. Victoria's Secret brand offers intimate apparel, casual sleepwear, swim, lounge and sport, as well as fragrances and body care. Pink is a lifestyle brand for young women providing variety of collections and heritage pieces, including intimate apparel, loungewear, activewear, accessories, beauty and more. Adore Me is a direct-to-consumer lingerie and apparel brand that is focused on serving women of all sizes and budgets. Stock Market Value: $1.5B ($18.83 per share) Ownership: > 1% Average Cost: n/a Activist Commentary: Barington was founded in 1992 by James A. Mitarotonda as a boutique, full-service investment bank to serve the needs of emerging growth and smaller capitalization companies. The success of the firm and its investments led to the wind-down of the investment bank and the launch of an activist hedge fund in 2000. In its history, Barington has taken material action at 38 other companies and has averaged a 38.18% return on these investments versus 14.74% for the Russell 2000 over the same period. Barington is advocating for Victoria's Secret to (i) replace at least a majority, if not all, of the board with directors who have proven experience in brand revitalization, operational execution, international expansion and shareholder value creation (six of the nine current directors have been on the board since its public listing); (ii) have the reconstituted board consider whether CEO Hillary Super has the experience and strategic clarity necessary to engineer a turnaround; (iii) dedicate additional focus to its core brand; (iv) accelerate growth in digital and international markets; and (v) streamline the operating model eliminating underperforming and distracting initiatives. Victoria's Secret & Co. ("VSCO") is a specialty retailer of lingerie, clothing and beauty products through its flagship Victoria's Secret brand, Pink and Adore Me. The company began trading on the New York Stock Exchange in summer 2021 following a spin-off from L Brands (which is now Bath & Body Works). The company's nearly four-year stint in the public markets has been marked by difficulties. Trading at an all-time high of roughly $76 per share not long after its debut, shares have fallen more than 75% to around $18 per share. Investor BBRC International PTE Limited converted from a 13G to a 13D in February 2024 and built its position to nearly 13% as VSCO shares continued to tumble. Earlier this month, BBRC sent a letter to Victoria's Secret Chair Donna James in which it lambasted the board for its history of value destruction. BBRC's letter is short on support and detail and long on allegation, negativity and second guessing with the benefit of hindsight. The only suggestion the investor makes states the obvious: "constructing a confidence-inspiring Board and generating positive financial returns to drive value creation." Thankfully for Victoria's Secret and its shareholders, a more constructive and experienced activist showed up: Barington Capital. On June 16, Barington sent a letter to the board of VSCO notifying the company of its more than 1% position. Then in its very next paragraph, Barington uses words like "constructively," "collaboratively" and "helpful." The firm does not just claim to have industry experience, but cites its engagement with L Brands, the former parent company of VSCO, which led to an increase in the stock price by 221.5% during its tenure as an advisor to the board of directors. Like BBRC, Barington criticizes the company's dismal underperformance, trailing its peers by 47.4 percentage points since its IPO. But while BBRC was content with just being critical, Barington specifically identifies several reasons for the underperformance such as declining revenue, shrinking gross margins, growing inventory, high senior management turnover, a lack of marketing and merchandising focus and an apparent failure to articulate or execute a compelling brand vision. Had Barington just left it there, the firm would have been more helpful than BBRC. However, as a responsible and experienced shareholder activist, Barington takes it to the next integral step – suggestions on a path forward. Specifically, Barington recommended that Victoria's Secret: (i) replace at least a majority, if not all, of the board with directors who have proven experience in brand revitalization, operational execution, international expansion and shareholder value creation (six of the nine current directors have been on the board since its public listing); (ii) have the reconstituted board consider whether CEO Hillary Super has the experience and strategic clarity necessary to engineer a turnaround; (iii) dedicate additional focus to its core brand; (iv) accelerate growth in digital and international markets; and (v) streamline the operating model eliminating underperforming and distracting initiatives. Barington is no stranger to VSCO. In fact, the firm was a vocal proponent of the spin in a previous 2019 campaign at L Brands. At the time, Barington recommended that the company take swift action to improve the performance of VSCO by correcting merchandising mistakes and launching a strategic review to unlock value through a separation of VSCO from Bath & Body Works. The two parties eventually entered into an agreement pursuant to which L Brands appointed Barington as a special advisor to the company, and Barington agreed to withdraw its proposed nominees to the board. Ultimately, VSCO was spun and Barington generated a return of over 221.5% during its tenure as an advisor to the board. Barington may not be a household name in the investor world like many activists, but it has as much experience as any activist today. The firm's activism dates back to 2000, and much of it was focused on the retail sector, targeting companies like Hanesbrands, Chico's FAS and Dillard's. Of its 46 campaigns, 19 have been at consumer discretionary companies, at which the firm has had an average return of 13.86% versus 8.56% for the Russell 2000 over the same period. Barington does not like spending what it takes to win a proxy fight, preferring to gain representation through settlements. Its recent proxy fight and loss at Matthews International was evidence of this, but also showed that Barington is still willing to take a proxy fight to the distance. Barington is not likely to go through that again so soon, but given its experience in this industry and at Victoria's Secret (two of the current directors, including Chair Donna James, were directors when Barington successfully collaboratively engaged in 2019), we would expect that the firm would have a good opportunity to work constructively and amicably with the board to create shareholder value.

Investor slams Victoria's Secret ‘super squad' leadership as inexperienced, ineffectual
Investor slams Victoria's Secret ‘super squad' leadership as inexperienced, ineffectual

Yahoo

time21-06-2025

  • Business
  • Yahoo

Investor slams Victoria's Secret ‘super squad' leadership as inexperienced, ineffectual

This story was originally published on Retail Dive. To receive daily news and insights, subscribe to our free daily Retail Dive newsletter. Victoria's Secret & Co.'s CEO Hillary Super is under fire just nine months into her tenure from an investor who would like to see the lingerie giant step back into the past. In a letter to the retailer's board chair this week, Barington Capital Group Chairman and CEO James Mitarotonda advocated for bringing back the lingerie giant's 'iconic Angels campaign' and shaking up its board, and against its adoption of a poison pill last month to stave off a hostile takeover. He criticized Super as having limited leadership experience, especially at a public company or in intimates, and has demonstrated 'a troubling lack of strategic focus.' Super arrived in September after serving as Savage x Fenty CEO for about a year. In April she brought on Adam Selman, previously chief design officer for Savage X Fenty, to be executive creative director. Victoria's Secret & Co. in an email to Retail Dive expressed confidence in its 'strategy under the new and experienced leadership team' and said that, while Barington hasn't sought to engage with the company, it was open to a discussion. Mitarotonda gave Barington Capital props for L Brand's stock performance of several years ago. The firm was advising the L Brands board until the once-mammoth apparel conglomerate formally spun off Victoria's Secret in 2021. Since then the lingerie company has lost over $2.4 billion in shareholder value, he wrote. As of Friday Barington owned more than 1% of Victoria's Secret & Co.'s outstanding common stock. 'We can't bring back the Angels because we're not in that time, and that's what shot down Victoria's Secret in the first place." Jessica Ramírez Co-founder and Managing Director, The Consumer Collective The company was losing market share back then, too, however, and Barington's idea to revive the old Angels campaign would be shortsighted, according to Jessica Ramírez, co-founder and managing director of The Consumer Collective advisory firm. The brand's share losses continued through its most recent quarter. 'We can't bring back the Angels because we're not in that time, and that's what shot down Victoria's Secret in the first place,' she said. 'They didn't catch up with the times, they didn't want to innovate. To want to bring back the exact same model, the exact same messaging, from when it was successful — you have to understand that the '90s and the 2000s were a different time. That go-to-market strategy isn't going to work today.' The Angels did return last fall after a six-year hiatus, but that was a lower-key, more inclusive event, she said by phone. Mitarotonda also had linguistic criticisms, slamming 'internal rhetoric referring to senior leadership as a 'super squad'' as 'arrogant and unjustified given the company's declining performance.' He said it was surprising that executives 'expressed satisfaction' during the company's most recent earnings call, counting 14 mentions of being 'pleased' or 'proud.' Barington is unlikely to let up the pressure any time soon, according to Jason Schloetzer, a professor at Georgetown University's McDonough School of Business, who called the firm's letter 'a shot across the bow to an underperforming management team.' 'Underperforming management typically strikes a tone of seriousness and concern, so Barington may be pointing out that routinely mentioning how 'proud' management is with the company's current performance, which appears to be less than super, is well out of step with reality,' Schloetzer said by email. 'If there isn't some combination of a change to strategic direction, modest evidence of leadership change, and a tweak to board composition after this letter, I suspect Barington will make another move to shake up the company.' But it's too soon to judge Super, according to Ramírez. It will be a full year before the results of her team's efforts will be truly evident, she said. 'Victoria's Secret still has large market share, and it's a big brand, but the reality is, it has definitely lost a lot of the market and it is out of touch. They have a bunch of issues with quality, design, marketing — and while it's better, it's still not the best,' she said. In its email Wednesday, Victoria's Secret acknowledged the need for further improvement but said it's making inroads. 'As outlined on our March and June earnings calls, bras and beauty are at the center of the Victoria's Secret Path to Potential strategy, and these efforts are showing momentum in spite of the challenging market environment,' the company said. 'While we have more work to do, we are already delivering meaningful progress, including exceeding revenue and adjusted operating income guidance in the first quarter.' Recommended Reading Adidas says its Yeezy partnership is 'under review' Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

Investor demands Victoria's Secret overhaul its board
Investor demands Victoria's Secret overhaul its board

Express Tribune

time17-06-2025

  • Business
  • Express Tribune

Investor demands Victoria's Secret overhaul its board

Activist investor Barington Capital Group is pushing Victoria's Secret to alter its board and end a recently adopted "poison pill" plan, according to a letter to the lingerie maker's shareholders on Monday. The New York-based hedge fund, which owns more than 1 per cent of the company, said Victoria's Secret has underperformed its competitors and lost over $2.4 billion in shareholder value since its spin-off in 2021 from former parent company L Brands. On Sunday, Reuters reported, citing sources, that Barington wants the company to replace most or all of its board and end the "poison pill" plan that it adopted in May to protect the company from hostile takeovers. "Barington has not sought to engage with us, but we look forward to discussing their views with them," a Victoria's Secret spokesperson said. "We are confident that executing our strategy under the new and experienced leadership team will continue to unlock value for our shareholders," the spokesperson added. Its shares, which have lost more than half of their value so far this year amid waning demand, were up about 3 per cent in morning trade. Victoria's Secret requires a reconstituted board comprising directors with "proven experience in brand revitalisation, operational execution, international expansion, and shareholder value creation," James Mitarotonda, Barington's founder and CEO, said in the letter. The investment firm said the retailer should focus on core categories and initiatives, like bras and the Angels campaign, and accelerate growth in digital and international markets. Barington highlighted concerns about the company's leadership, and said Chief Executive Hillary Super, who took over in September 2024, has limited public company experience, and that the rest of the board lacks the necessary experience to revitalise the iconic brand. Victoria's Secret, with a market capitalisation of about $1.45 billion currently, adopted the poison pill plan to fend off Brett Blundy's investment firm, which increased its stake in the company to around 13 per cent. Barington's pressure puts Victoria's Secret in a "precarious position" as it tries to fend off other activist investors and restore confidence in CEO's turnaround plan, eMarketer analyst Rachel Wolff said, adding that investors' growing dissatisfaction with leadership could force a change at the company's management level. Barington previously pushed for changes at L Brands, which split into Victoria's Secret and Bath & Body Works. Earlier this year, Barington mounted its first full-blown boardroom challenge since 2015 when it tried to put three directors on the board of casket maker Matthews International but ended up losing the vote.

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