An activist shareholder is urging Victoria's Secret parent to update 'tone-deaf' brand image to boost sales
- An activist shareholder sent a letter to L Brands CEO Les Wexner on Tuesday, laying out recommendations to improve growth at Victoria's Secret in order to "unlock substantial value" for shareholders.
- The letter, which was signed by the CEO of Barington Capital Group, said L Brands should focus on fixing past merchandising mistakes at Victoria's Secret and updating the brand image.
- L Brands responded to the letter in a press release later that day, saying that it has taken several steps to address growth issues. These include closing Henri Bendel, selling its La Senza business, and appointing new CEOs for its Victoria's Secret Lingerie and Pink businesses.
An activist shareholder is urging Victoria's Secret parent company to update its brand image and switch up its predominantly male board of directors in order to drive growth.
We believe that "L Brands has a significant value potential that is not being realized," CEO James A. Mitarotonda of Barington Capital Group wrote in a letter addressed to L Brands CEO Les Wexner on Tuesday.
Mitarotonda pointed to the recent collapse in L Brands' share price and three years of sliding sales at its Victoria's Secret brand. Earlier this month, L Brands announced that it would be closing as many as 53 Victoria's Secret stores this year, citing a "decline in performance" as the reason for this.
Mitarotonda continued: "We recommend that the Company take swift action to improve the performance of Victoria's Secret, by, among other things, correcting past merchandising mistakes and ensuring that Victoria's Secret is communicating a compelling, up-to-date brand image that resonates with today's consumers."
Mitarotonda said that "Victoria's Secret's brand image is starting to appear to many as being outdated and even a bit "tone deaf" by failing to be aligned with women's evolving attitudes towards beauty, diversity, and inclusion."
The brand has struggled in recent years and increasingly been accused of losing relevance among shoppers as its hypersexualized ads and racy runway shows have failed to resonate in the era of #MeToo.
This came to a head in November after a Vogue interview with Ed Razek, the chief marketing officer of L Brands, went viral online. Razek told the interviewer that he didn't think the company's annual fashion show should feature "transsexuals" because the show was a "fantasy."
"It's a 42-minute entertainment special," he said. "That's what it is."
His comments sparked an outcry online that prompted him to issue a formal apology.
"In our view, Mr. Razek has done a poor job of stewarding Victoria's Secret's brand by failing to communicate a compelling, up-to-date image that resonates with today's consumers," Mitarotonda said.
He then called out the lack of diversity in its board of directors as being an issue for the brand. Of the 12 board members, nine are men.
"The Board lacks directors with a diversity of backgrounds, skills, and perspectives sufficient to meet the strategic needs of the Company and ensure that it remains competitive in today's challenging marketplace," he said.
Mitarotonda also urged Wexner to split out Bath & Body Works, which has become the more successful arm of the business, saying that it is being dragged down by its sister brand.
"We believe that L Brands can unlock substantial value for shareholders by spinning off Victoria's Secret or pursuing an IPO of Bath & Body Works," he said. "Both have the hallmarks to be a successful stand-alone publicly traded company."
L Brands responded to the letter in a press release later that day, saying that it has taken several steps to address growth issues. These include closing Henri Bendel, selling its La Senza business, and appointing new CEOs for its Victoria's Secret Lingerie and Pink businesses.