The UK business of lingerie, loungewear, and beauty products retailer Victoria’s Secret has fallen into administration in a move that could potentially put some 800 jobs at risk.
Rob Harding and Dan Butters, restructuring partners at Deloitte, were today (5 June) appointed as joint administrators to Victoria’s Secret UK Limited (VSUK) as part of a “light touch” administration.
The company is part of the global Victoria’s Secret group, which is owned by US firm L Brands.
The Victoria’s Secret group, which owns and operates the UK stores, has 25 leasehold sites and employs over 800 people. A total of 785 employees were on furlough at the time of the joint administrators’ appointment.
Victoria’s Secret’s online operations, which are not owned or operated by the company, will continue unaffected by the administration.
“We are taking a number of actions across Victoria’s Secret and Victoria’s Secret Pink to strengthen and position the business to succeed as a separate standalone company,” says Stuart Burgdoerfer, L Brands’ CFO and interim CEO of Victoria’s Secret. “As part of that profit improvement plan, we are addressing the operating losses in our 25 UK stores by appointing Deloitte to work with VSUK in a “light touch” administration during which they will seek to restructure the UK lease terms, explore options for a sale of that portion of business or other alternatives.
“This action has no impact on our stores in any other part of the world, and our UK online activities will continue to operate as normal. We continue to be energised and intensely focused on turning the Victoria’s Secret business around.”
Harding says the move is “yet another blow” to the UK high street and a further example of the impact the Covid-19 pandemic is having on the entire retail industry.
“The effect of the lockdowns, combined with broader challenges facing bricks and mortar retailers, has resulted in a funding requirement for this business, resulting in today’s administration. We will now work with the existing management team and broader stakeholders to assess all options available for the future of the business.”
Lack of inclusivity
Sofie Willmott, lead retail analyst at data and analytics company GlobalData, says the move is yet another blow to retail landlords as clothing and footwear spend continues to shift online.
“The underwear specialist’s e-commerce channel has been excluded from the administration, with the brand able to continue selling online only with lower costs, piggybacking on its US digital operations.
“As Covid-19 continues to have a devastating impact on the UK clothing and footwear market with spend forecast to decline 31.6% this year, the online channel will outperform, acting as a lifeline for many retailers whose stores have been forced to close.
“With Victoria’s Secret stores primarily in flagship shopping centre locations, the administration brings more bad news for landlords that are struggling to collect rent payments. Although administrators are looking for a buyer, if one is not found other retailers are unlikely take on these empty units given even those performing well pre-Covid-19 have experienced a significant slump in sales and are cutting costs.”
Despite being a desirable yet expensive underwear brand when it launched in the UK in 2012, Willmott says Victoria’s Secret has since lost its appeal for many shoppers due to a lack of inclusivity.
“Its famous catwalk show was cancelled last year after much debate, but for many of its target customer base it was too little too late and they had already gone elsewhere.”
Last month, L Brands said it would shutter about 250 Victoria’s Secret across the US and Canada in 2020 as part of its go-forward plan for the business, which also includes an increased focus on inventory management and sourcing cost reductions.
The news comes after a proposed takeover of the Victoria’s Secret brand by private equity firm Sycamore Partners was axed last month after the two parties reached a “mutual agreement” with regards to terminating the deal.
Victoria’s Secret UK is just the latest to have been pushed to the brink by the coronavirus crisis. Earlier this week, the UK arm of footwear retailer Aldo was placed into administration, while UK-based fashion and accessories retailer Monsoon Accessorize is understood to be teetering on the edge.