Victoria's Secret faces fresh activist fight from Barington Capital, source says

Barington Capital, holding over 1% of Victoria's Secret (VSCO.N), plans an activist campaign to overhaul the board and eliminate the recently implemented shareholder rights plan, citing the company's 55% stock decline this year and underperformance since its 2021 spin-off. The hedge fund believes Victoria's Secret should refocus on core brands, accelerate digital and international growth, and replace the board due to concerns about CEO Hillary Super's experience; the firm also sees significant value in the company's beauty business. Victoria's Secret acknowledged they are aware of Barington's position and are open to discussing their views.

Analysis

Victoria's Secret & Co. (VSCO.N) is confronting a significant activist challenge from Barington Capital Group, which possesses over 1% of the company's stock. Barington's push for a board overhaul and the rescission of a shareholder rights plan is rooted in the perception of VSCO's underperformance relative to peers and a substantial loss of value since its 2021 spin-off from L Brands, highlighted by an approximate 55% decline in its share price this year, bringing its market capitalization to around $1.45 billion. The activist fund advocates for a strategic pivot towards core brands, such as bras and the Angels campaign, and an acceleration of digital and international market growth, while also expressing concerns about CEO Hillary Super's public company experience and the board's overall suitability to revitalize the brand. Barington notably identifies significant potential in Victoria's Secret's beauty business, suggesting its value could rival the company's total market capitalization. While Victoria's Secret has stated it has not been directly contacted by Barington yet, it remains open to discussions, expressing confidence in its current strategy and leadership to unlock shareholder value. The adopted 'poison pill' was a defensive measure against BBRC International Private Limited, which had accumulated a stake of around 13%. The overall sentiment surrounding this development is moderately negative, with a specific very negative sentiment directed towards VSCO, signaling market apprehension regarding the company's current state and the impending activist battle.

Key Decisions for Investors

• Investors should closely monitor the evolving activist situation at Victoria's Secret, as Barington Capital's pressure could lead to significant board and strategic changes, potentially impacting the stock's trajectory.
• Consider the implications of the 'poison pill' and Barington's efforts to dismantle it, as its removal could make the company more susceptible to takeovers or force a more shareholder-friendly approach from management.
• Evaluate Barington's assertion regarding the undervaluation of Victoria's Secret's beauty segment, as this could become a key point of contention and a potential catalyst for value realization through strategic review or divestment.
• Given the stock's 55% year-to-date decline and Barington's critique of leadership, assess the risk-reward profile, considering both the potential for a turnaround driven by activist intervention and the downside risk if current strategies fail to reverse underperformance.