Victoria’s Secret Sells Minority Stake in China Business for $45 Million

·4 min read

Victoria’s Secret is coupling up in China.

On Tuesday, the lingerie and innerwear retailer revealed that it has partnered with Chinese intimate apparel manufacturer Regina Miracle International (Holdings) Ltd. in a $45 million joint venture that will allow Regina Miracle to operate all Victoria’s Secret stores and its related e-commerce business in China.

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Victoria’s Secret’s 2022 Valentine’s Day campaign. - Credit: Courtesy Photo Zoey Grossman
Victoria’s Secret’s 2022 Valentine’s Day campaign. - Credit: Courtesy Photo Zoey Grossman

Courtesy Photo Zoey Grossman

Under the terms of the agreement, Victoria’s Secret will maintain a 51-percent majority stake in the business, while Regina Miracle will own the remaining 49 percent.

“I am delighted to announce this partnership with Regina Miracle, who has been a valued merchandise supplier partner for more than 20 years,” Martin Waters, Victoria’s Secret Lingerie’s chief executive officer, said in a statement. “Together with Regina Miracle, we aim to grow the China business through joint investment in product development, distribution and marketing. We expect the partnership will positively impact the speed and agility of the business to benefit consumers and provide us with a platform for a strong future in this important market. This [joint venture] with Regina Miracle in China completes a multiyear repositioning of the international business of the company and we believe establishes a platform for accelerated sales and earnings growth in the market over the next several years.”

YY Hung, chairman, chief executive officer and executive director of Regina Miracle added: “We are honored and excited to be elevating our long-standing partnership with Victoria’s Secret through the formation of this joint venture in the promising China market. We are confident that our highly complementary strengths — Regina Miracle’s industry-leading innovation capabilities and market foresights as an innovative design manufacturer and Victoria’s Secret’s undisputed brand leadership, retailing and marketing expertise — will perfectly position this partnership in capturing the growth opportunities in China.”

The transaction is expected to close during fiscal year 2022’s first quarter and is subject to regulatory clearance. Victoria’s Secret added that it does not expect the transaction to impact its previously mentioned current-quarter earnings guidance.

The retailer has been in transformation mode over the last few years as it attempts to win back both market share and consumers, many of whom left for digital lingerie brands that emphasized inclusivity and comfort.

Last August, Victoria’s Secret — which includes the Lingerie, Beauty and Pink divisionsseparated from Bath & Body Works to become its own publicly traded company on the New York Stock Exchange and help unlock shareholder value.

The company generated $1.4 billion in total revenues in its most recent quarter, helping it log $75 million in net profits and increase its full fiscal-year 2021 revenues guidance by 25 percent compared with 2020’s full-year sales results, to be in the range of $6.7 billion to $6.8 billion, despite an expected $100 million in additional supply chain expenses. Victoria’s Secret reaffirmed its guidance the following month, calling strength across all categories and an exceptionally strong Thanksgiving shopping weekend.

Victoria’s Secret also unveiled its first VS Store of the Future in Chicago in November, the first of three set to open in coming months, continues to update its assortment, increase its size range and add new members to its VS Collective — an initiative that includes women from diverse backgrounds who share their stories by way of partnerships and collaborations. Last fall, Victoria’s Secret told WWD exclusively that tennis star Naomi Osaka had joined the VS Collective.

In December, the retailer agreed to buy back $250 million in common stock.

“Over the past few months, we have stabilized our business and created a platform for future growth while generating significant cash flow,” Waters said at the time. “We believe this share repurchase reflects our confidence in the company and is another step on our journey to create long-term, sustainable value for our shareholders.”

Most recently, Victoria’s Secret executives attending the National Retail Federation’s Big Show in New York spoke about the company’s continued international expansion plans.

But the investment community doesn’t seem to be convinced. News of the Regina Miracle-China deal sent shares of Victoria’s Secret stumbling nearly 3 percent on Wall Street at the start of Tuesday’s session, ultimately closing down 0.77 percent to $54.04 apiece.

Perhaps because this is not the first time Victoria’s Secret’s China business has been in the spotlight. In 2020, Victoria’s Secret said it was reevaluating its China business, which included closing the Hong Kong flagship, which the company estimated would help it save roughly $25 million from the store closure alone. In addition, continued supply chain woes and volatility throughout the retail industry have left investors on edge.

Shares of Victoria’s Secret & Co. are down about 7.2 percent since its Aug. 3 debut on the public market. Meanwhile, the Dow Jones Industrial Average has fallen 2.4 percent since July.

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