Barington Capital Group, an activist investment firm, is urging Victoria’s Secret to make significant changes to its board of directors and to dismantle its recently introduced shareholder rights strategy.
James Mitarotonda, the CEO of the New York-based hedge fund, which holds over 1% of Victoria’s Secret’s outstanding shares, expressed his concerns in a letter to the company’s Chair, Donna James, on Monday. He criticized the board for failing to capitalize on the company’s potential since it was spun off from its parent company, L Brands, in 2021, asserting that the current leadership has overseen a loss of $2.4 billion in shareholder value.
Mitarotonda contends that the existing leadership, including CEO Hillary Super, lacks the requisite experience and strategic vision to effectively lead a turnaround for the brand. He pointed out Super’s limited history in executive and public company roles, alongside her brief experience in the intimate apparel industry.
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The activist investor further highlighted issues regarding Super’s ability to earn employee trust, criticizing her emphasis on reviving secondary brands like Pink and her push into athletic apparel. He claimed that these initiatives detract from a focus on the company’s core business and its international growth, indicating a “lack of strategic focus.”
Following the publication of the letter on Barington’s website, shares of Victoria’s Secret experienced an uptick on Monday morning.
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Of the nine current board members, six were part of the board during the company’s previous downturn, while the remaining independent directors possess limited expertise in successfully scaling global consumer operations, according to Barington’s claims.
“We believe that Victoria’s Secret requires a reconstituted Board comprised of directors with proven experience in brand revitalization, operational execution, international expansion, and shareholder value creation,” Mitarotonda articulated in his letter. He advocated for a majority, if not all, of the existing board to be replaced with independent directors who possess relevant backgrounds and a solid track record of creating value.
In addition, Barington, which holds a stake in Macy’s, expressed disappointment over Victoria’s Secret’s newly implemented “poison pill” strategy, labeling it as obstructive.
The investor noted, “It poses a significant risk of entrenching management and the Board at a time when substantial change is essential. Academic research and real-world experience suggest that companies with inadequate governance structures and strong anti-takeover measures often trade at lower valuations.”
To assist Victoria’s Secret in regaining its competitive edge, Barington recommended that the company should refocus on its core product lines, particularly bras, revitalize its investments in digital and international markets, and streamline its operational model.
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| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| VSCO | VICTORIA’S SECRET & CO. | 18.57 | +0.38 | +2.06% |
Barington noted its prior collaboration with L Brands, where it helped implement key strategies that resulted in a remarkable 221.5% increase in the company’s stock price during its advisory period.
