After COVID-19 derailed its attempt to sell the Victoria's Secret brand earlier this year, L Brands (NYSE:LB) announced today that Victoria's Secret U.K. will be acquired under a joint venture between Victoria's Secret and Next PLC, the U.K.'s biggest clothing retailer. Next PLC will have a 51% stake in the joint venture. Store operations in the U.K. and Ireland and the corresponding online businesses will come under the control of the joint venture by spring 2021, rather than being directly managed by L Brands.
L Brands made an impressive second-quarter comeback after sustaining heavy first-quarter sales losses and a $275 million net loss, but Victoria's Secret remained the weakest link in its lineup of brands. Bath & Body Works saw comparable store sales, or comps, rocket 123% during Q2, with an operating margin of approximately 23% that contrasted sharply with Victoria's Secret's sub-2% operating margin.
L Brands hopes the new joint venture will help Victoria's Secret return to the growth it once enjoyed. In the press release, L Brand International CEO Martin Waters described the joint venture's launch as the "next step in our profit improvement plan for Victoria's Secret." Next PLC CEO Lord Simon Wolfson anticipates the brand's expansion in England and Ireland both in terms of brick-and-mortar stores and e-commerce.
The Daily Mail reported that in June 2020, Victoria's Secret U.K. went into "administration," a British legal condition similar to bankruptcy that can lead to sale or liquidation, among other outcomes. The joint venture will see the brand's creditors satisfied and restore its operational viability.