What happened
Shares of L Brands (BBWI 0.30%) soared 27.8% in January, according to data from S&P Global Market Intelligence, following an initial report from The Wall Street Journal that the consumer discretionary company was weighing whether to sell its Victoria's Secret subsidiary.
So what
It was no mystery that the Victoria's Secret concept has weighed down L Brands as a whole in recent quarters, with its persistently declining same-store sales and profits amid an increasing number of consumers turning to the wares of trendier competitors.
So L Brands stock unsurprisingly popped 13% on Jan. 29 alone when the Journal broke the news. According to the Journal's sources, CEO Leslie Wexner was in talks to sell Victoria's Secret, retire from his position, or both amid pressure from activist investors. They want to maximize shareholder value by separating the outperforming Bath & Body Works concept from the rest of the business.
Image source: Getty Images.
Now what
Sure enough, on Feb. 9, CNBC separately cited people familiar with the matter as saying L Brands is close to a deal to sell Victoria's Secret to private equity firm Sycamore Partners, and could even announce a formal agreement by the end of this week.
Nothing is set in stone at this stage, however. So I think investors would do well not to incorporate a potential divestment as a core piece of their bull thesis for L Brands stock. But given the prospect of separating this struggling piece of its business from its stronger retail concepts, it was no surprise to see L Brands shares climbing higher in response.
