L Brands (NYSE:LB) has had a rough year. Retail sales suffered through a global pandemic and the rising dominance of e-commerce brands. The C-Suite saw high-profile turnover. Lastly, L Brands watched its relationship with Sycamore Partners crumble, and its chance of spinning off Victoria’s Secret fall through. Now, a Victoria’s Secret SPAC merger could be in the works. What would that mean for LB stock?
Investors should start with the basics. L Brands is the company behind old-school mall retail outlets. In other words, it is behind chains Victoria’s Secret and Bath & Body Works. Through those stores, it offers brands Victoria’s Secret, PINK, Bath & Body Works, White Barn, C.O. Bigelow and more. While those are all certainly household names, business has not been booming, at least not for every part of the company. LB stock is down about 40% over the last five years.
As it turns out, sales have been slumping at VS while Victoria’s Secret loses market share. That is why L Brands concocted a clever plan in February 2020. Sycamore Partners would take Victoria’s Secret private for $525 million, leaving LB stock with a 45% stake. Bath & Body Works would be allowed to shine and grow as the only brand in the portfolio. Essentially, as Daphne Howland wrote for Retail Dive, the quality continues to improve at Bath & Body Works and sales continue to grow. Victoria’s Secret sales, despite any quality improvements, no longer come at a premium.
Unfortunately, the pandemic dashed that breakup plan. Sycamore Partners backed out of the deal, and even the best efforts of L Brands could not convince the private equity firm to stay. That means right now, L Brands is still responsible for Victoria’s Secret and Bath & Body Works.
However, a Victoria’s Secret SPAC merger could be coming for LB stock.
LB Stock and a Victoria’s Secret SPAC Merger
Last week, L Brands reminded investors that its lingerie and loungewear retailer will soon be looking for a new home. With CFO Stuart Burgdoerfer retiring, the company is committed to focusing on Bath & Body Works and spinning out Victoria’s Secret. While in days past it was looking to private equity firms like Sycamore, a new stock market trend may make things easier.
Although sales are starting to tick up at Victoria’s Secret and L Brands raised its fourth-quarter guidance, Burgdoerfer is going to see the spinoff or sale through. In fact, he says he will make sure it happens before he retires, something he also announced plans for last week.
Right now, we do not have a ton of insight as to what is ahead for LB stock. However, the company acknowledges that it is committed to separating Victoria’s Secret and Bath & Body Works. Additionally, the company says it will be harder to sell Victoria’s Secret as the business gets stronger, meaning the clock is ticking. As it preps for the sale or spin off, it is working on restructuring the business. And lastly, the company did acknowledge that SPACs are a “wildcard” option. Does that mean a Victoria’s Secret SPAC merger is on the way? It just might.
Keep your eye on the news and on LB stock. A SPAC deal for the household brand could rally investor attention.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer with InvestorPlace.com.
