Amid a news report that billionaire Les Wexner is considering stepping down as CEO of L Brands, the parent company of lingerie brand Victoria’s Secret, and that he is discussing selling Victoria’s Secret, shares of L Brands have jumped 12% as of 2 pm ET Wednesday. But Les Wexner’s fortune is only up 2%.
Forbes calculates that more than three quarters of Wexner’s $4.6 billion fortune is outside of L Brands. So a pop in the stock has a limited effect on Wexner’s net worth. The company has struggled over the past five years. The stock of L Brands has dropped by roughly 75% since February 2015, wiping out $3 billion of Wexner’s fortune. At the time, Wexner was worth $7.7 billion, and his stake in L Brands accounted for more than half of his fortune. Now his approximate 17% stake in L Brands makes up less than one quarter of his $4.6 billion net worth. Today’s double-digit percentage boost for L Brands stock resulted in an increase of about $100 million for his fortune. Wexner’s options are still worthless.
But the Ohio magnate has built a substantial portfolio outside of his retail empire, funded by his considerable dividends from L Brands over the years. He owns a billion-dollar art collection, a $500 million real estate company and $240 million in private real estate, Forbes estimates. His stake in L Brands is now worth about $1 billion.
Wexner may make further gains down the road; separating L Brands from Victoria’s Secret could provide a boost to his net worth. Barclays analyst Adrienne Yih’s 2020 year-end price target for L Brands is $30 based on a sum-of-the-parts analysis that assumes the company would restructure. If the share price, around $22.60 at 2:25 pm EST, reached this target, Wexner’s fortune would increase by approximately $300 million.
This is not the first time spin-off rumors have been floated. (L Brands declined to comment on today’s Wall Street Journal report). CNBC reported in November that L Brands had looked into spinning off L Brands and “a private investment in public equity” to help L Brands reduce its debt, which exceeds $5 billion. In March, James Mitarotonda, CEO of activist hedge fund Barington Capital, urged in a letter to Wexner to split the growing Bath & Body Works brand from the ailing Victoria’s Secret through an IPO of Bath & Body Works or a spin-off of Victoria’s Secret.
Mitarotonda also recommended to Wexner that “the Chairman and the CEO roles be held by separate individuals to further improve corporate governance and operating execution.” A recent research note from Deutsche Bank speculated that Bath and Body Works CEO Nick Coe is the most likely candidate to succeed Wexner.
Victoria’s Secret remains the largest player in the lingerie industry, but its underperformance has plagued L Brands’ stock. Victoria’s Secret rang up $7.4 billion in sales in 2018, $400 million down from two years prior, and its bombshell branding has fallen out of favor with customers. Shares dropped 29% in 2019, an embattled year for Wexner. He made headlines when his former confidant and financial manager Jeffrey Epstein was arrested on charges of sex trafficking of minors in July. Epstein died by suicide in prison in August. L Brands maintains that Epstein was never an employee and said it hired an outside law firm to review the company’s ties with him. Wexner has admitted he is “embarrassed” by his former relationship with Epstein, which ended nearly 12 years ago, according to L Brands.
The 82-year-old is one of America’s longest-serving CEOs, with a tenure of 57 years. He started his retail empire in 1963 by opening apparel store The Limited with a $5,000 loan from his aunt. He listed the company on the New York Stock Exchange in 1982, the same year he bought Victoria’s Secret for $1 million when it was still a humble chain of lingerie shops in San Francisco.
