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Victoria’s Secret (VSCO) is struggling with the public glare. Since becoming independent in 2021, the lingerie retailer’s shares have halved. An Australian billionaire who amassed a 13% stake has sparked defensive tactics, but it’s an opportunity for boss Hillary Super to initiate a search for a buyer keen to remake the company in private.

The 48-year-old chain, which gained fame by featuring supermodels in its catalogs and TV ads, had been housed within L Brands. A series of missteps attracted the attention of pushy investor Barington Capital, which successfully urged  a separation from soap seller Bath & Body Works. Neither company has benefited from the split.

Line chart showing rebased share price performance of Bath & Body Works and Victoria’s Secret

Efforts to create a leaner Victoria’s Secret worked, but they have failed to impress investors. It achieved a three-year cost-cutting goal of more than $250 million ahead of schedule. And yet its $7.4 billion sales goal for 2026 is considered too ambitious, based on the $6.3 billion penciled in by analysts, according to Visible Alpha. A cybersecurity breach disclosed on Tuesday, which shut down corporate systems last month and is expected to hit future quarterly results, won’t help either.

Super, who was named CEO last August, is trying to recharge growth, including by bringing back sports-bra brand VSX. It will be difficult to recapture the former glory at Victoria’s Secret, however. Its market share in U.S. women’s underwear tumbled to 18% last year from almost 27% in 2019, per Euromonitor data.

At this stage, it would be better to lean into the outside interest. Victoria’s Secret adopted a poison pill, or the ability to flood the market with shares, in response to the unwanted stake accumulation by Brett Blundy’s Sydney-based investment shop BBRC, accusing the buyer of trying to gain control without paying a premium.

Victoria’s Secret should interest others, too. If a buyout firm paid a 30% premium, it would value the equity at about $2.4 billion. With less than $600 million of net debt and roughly the same amount of EBITDA, there’s also room to borrow to fund an acquisition.

Assume a new owner could lift sales by 2% a year and the operating margin by 1 percentage point, to 10%. At the same 5 times EBITDA valuation in five years, Victoria’s Secret would generate a 24% return, according to Breakingviews calculations. Like lacy undergarments, a company is sometimes better appreciated only after it has been kept under wraps.

Context News
 

• Victoria’s Secret said on June 3 that it had temporarily shut down its website and corporate systems on May 26 after detecting a cybersecurity incident. The website was restored on May 29.
• The lingerie retailer added that it would postpone the release of complete financial results for the first quarter ended May 3, originally slated for June 5. It said it is expecting net sales of $1.4 billion and $32 million in adjusted operating income, and that the breach will affect future results.
• Victoria’s Secret adopted a shareholder rights plan on May 20 after Australian billionaire Brett Blundy’s investment firm increased its stake. As of April, BBRC holds about 10.3 million shares, or about 13% of the lingerie maker.
• The so-called poison pill was put in place to “guard against tactics to gain control of the company without paying all shareholders an appropriate premium for that control,” Victoria’s Secret Chair Donna James said.
• Under the plan, the company said it would issue one right per share on May 29, which would become active if a shareholder acquired at least a 15% stake.

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