Next agrees joint venture with Victoria’s Secret

Fashion retailer Next has agreed a joint venture deal for the UK business of lingerie brand Victoria’s Secret. The joint venture, dubbed “JV”, was announced by L Brands, the US parent company of Victoria’s Secret.

The joint venture is still subject to regulatory approval. If passed, Next Plc will acquire the majority of Victoria’s Secret’s assets and will be the majority shareholder, with 51 per cent to 49 per cent for Victoria’s Secret. At the time of its last available financial accounts, for the year ending February 2019, Victoria’s Secret UK’s assets were valued at £116 million.

Victoria’s Secret entered administration in June, with administrators Deloitte citing the impact of the COVID-19 pandemic on the UK high street. However, the company had significant troubles pre-dating the pandemic, registering operating losses of £170 million for the year ending February 2019.

The company has been impacted by changing tastes and has often been accused of sexism and a lack of diversity in its fashion shows and campaigns. Its 2019 show was cancelled due to low television ratings, while L Brands has previously said the subsidiary needs to “evolve”.

At the time, Victoria’s Secret UK operated 25 leasehold sites and employed around 800 staff, most of whom had been placed on furlough at the time of the administration. Following the administration, Company CEO Stuart Burgdoerfer said administrators would "seek to restructure the UK lease terms, explore options for a sale of that portion of the business, or other alternatives."

The joint venture will operate all of Victoria’s Secret’s UK and Ireland stores, subject to the agreement of terms with landlords, while the UK online business, currently operated by Victoria’s Secret US, will be folded into the JV in spring of next year.

Next CEO Simon Wolfson said: “Next is very pleased at the prospect of working in partnership to expand the Victoria’s Secret brand in the U.K. and Ireland both in stores and online”.

L Brands Executive Vice President and CFO Martin Waters added: “We are pleased to take this next step in our profit improvement plan for Victoria’s Secret. Next’s capabilities and experience in the UK market are substantial, and our partnership will provide meaningful growth opportunities for the business.”

Joint administrator Rob Harding of Deloitte said: “This is an ideal way to secure the future of more than 500 employees in the UK. We are grateful to the creditors for working with us to deliver a solution that enables this business to survive and prosper.”

Next Plc has not been immune to the impact of COVID-19, forecasting that it would see sales drop 40 per cent over the year. In April, it forecast potential lost revenue of £1.2 billion and £1.6 billion. In July, the company completed sale and leaseback deals for its Leicestershire head office and three Doncaster warehouses as it looked to improve its balance sheet.


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