By CultureBanx Team
- Sycamore Partners wants to cancel its plan to acquire a 55% majority stake of Victoria’s Secret
- Rihanna’s Savage X Fenty’s digital subscription business model has annual revenue estimated at $150M
If Victoria’s Secret had paid more attention to Rihanna’s Savage X Fenty’s digital subscription business model, perhaps Sycamore Partners wouldn’t want to end its deal with the legacy lingerie company. The buyout firm wants to cancel its plan to acquire a 55% majority stake of Victoria’s Secret, after it closed stores and furloughed employees due to the coronavirus pandemic, putting more pressure on its e-commerce business. In turn, L Brands (LB -3.01%), Victoria’s Secret’s parent company filed a legal complaint against Sycamore claiming the agreement was still valid while its brick and mortar stores remain closed, and Savage X Fenty continues to gain market share on the dying lingerie brand.
Why This Matters: Victoria’s Secret is running out of lifelines to calm investor fears as this is the first high-profile U.S. legal fight over the termination of a merger contract due to the coronavirus pandemic. The main issue at stake here is whether or not the business adjustments L Brands made during the pandemic changed Victoria’s Secret beyond what would ordinarily be expected. Interestingly enough the contract between L Brands and Sycamore specifically stated that “the existence, occurrence or continuation of any pandemics” wouldn’t relieve L Brands of its duties.
Victoria’s Secret is running out of lifelines to calm investor fears as this is the first high-profile U.S. legal fight over the termination of a merger contract due to the coronavirus pandemic
Investors had hoped the $525 million deal with Sycamore was going to help save the legacy brand from extinction, as companies like Savage X Fenty’s sales continue to grow. Victoria’s Secret’s sales have continued to decline with stores that were open last year falling 10% during Q4. There’s a lot that can be learned from Rihanna’s lingerie brand that sits squarely at the center of business and culture in the $13.1 billion U.S. women’s underwear sector, leaving Victoria’s Secret hard pressed to replicate this model.
Rihanna’s Savage x Fenty received $50 million in new funding, bringing total investment in the company to $70 million since its launch in May 2018. The singer has leveraged her social media power to quickly grow the online-native brand to an annual revenue estimated at $150 million. Victoria’s Secret should see if Rihanna is willing to tell some of her secrets on how to raise money by building a brand people are enamored with.
What’s Next: The company which gave you the push up bra has about $5.5 billion in net debt, so the $525 million from selling Victoria’s Secret could have knocked that down significantly. L Brands said it “will vigorously defend the lawsuit” as the future of the company is a stake.
CBx Vibe: “Lingerie” Lizzo