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Victoria’s Secret Sale Caps End of Wexner’s Retail Empire

Leslie Wexner, who built L Brands into a retailing force, had come under scrutiny for his ties to the disgraced financier Jeffrey Epstein.

Leslie H. Wexner turned Victoria’s Secret into the world’s most recognizable lingerie brand before facing serious questions about his leadership.Credit...Fred Squillante/The Columbus Dispatch, via Associated Press

For decades Leslie H. Wexner helped shape the modern shopping mall, his brands populating the space between department stores — Victoria’s Secret, Abercrombie & Fitch, Express, Bath & Body Works and more.

But as the standards of beauty changed in the fashion industry and the internet spawned new competitors to mall chains, Mr. Wexner, the chairman and chief executive of the retailing empire L Brands, struggled to keep up. At the helm of a company that catered to women but was run largely by men, Mr. Wexner lost touch with what women wanted.

On Thursday, he said he would step down from the top job at L Brands and sell a controlling stake in Victoria’s Secret, its crown jewel.

Mr. Wexner’s departure ends an era in retailing and caps a troubled year in which his close ties to the disgraced financier Jeffrey Epstein and revelations about an entrenched culture of misogyny at Victoria’s Secret were thrust into the spotlight. On Thursday, L Brands said it would sell 55 percent of Victoria’s Secret to Sycamore Partners, a private equity firm that has been snapping up struggling retailers.

The longest-serving chief executive in the S&P 500, Mr. Wexner will become chairman emeritus of L Brands when the $525 million purchase is completed, helping oversee just one of what was once a large stable of brands: Bath & Body Works. It is a muted exit for an 82-year-old billionaire who was once called the “Merlin of the mall.”

With his keen eye for the evolving tastes of American consumers, Mr. Wexner expanded L Brands into a behemoth from a single clothing store, the Limited, which he started in 1963 in Columbus, Ohio. He helped turn that city into a retail capital, and exerted vast influence in the state, doling out big donations to arts organizations, hospitals, universities and politicians.

He made his most important acquisition in 1982 when he bought Victoria’s Secret, a company that has helped define female sexiness for millions of men and women. For models, becoming one of the brand’s “Angels” all but guaranteed international fame.

“There’s no question that, professionally, he has been critical in creating retail as we know it today,” said Simeon Siegel, a managing director at BMO Capital Markets who covers retail and e-commerce. “The amount of companies that owe their existence to his expertise and ability to know what the consumer wanted — or even to tell the consumer what they wanted — cannot be contested.”

But in recent years, the approach that helped establish Mr. Wexner’s success began to seem out of touch. Under his leadership, Victoria’s Secret failed to keep pace with evolving beauty ideals and refused to embrace a broader range of body types and gender identities. Sales have been falling in recent years, and the company has been forced to close stores.

Investors and analysts have also criticized Victoria’s Secret for having few women in its top management. A string of female executives who pushed to reposition the brand left or were forced out, according to interviews with dozens of former and current employees.

Last year, Victoria’s Secret canceled its famous annual fashion show after a nearly two-decade run on broadcast television, and cut its headquarters staff by 15 percent.

Then last summer Mr. Epstein was accused of sex trafficking. The charges put a spotlight on Mr. Wexner’s long relationship with Mr. Epstein, who died in a Manhattan jail cell in August. Mr. Wexner has sought to distance himself from the financier, saying he had no knowledge of Mr. Epstein’s crimes.

The two men were unusually close. Mr. Wexner employed Mr. Epstein as a personal adviser for years, handing him sweeping powers over his finances, philanthropy and private life. Mr. Epstein obtained a mansion in Manhattan, a luxury estate in Ohio and a private plane — possessions worth roughly $100 million today — that were previously owned by Mr. Wexner or his companies.

Three L Brands executives said Mr. Wexner was alerted in the mid-1990s that Mr. Epstein was posing as a recruiter of young women for Victoria’s Secret, but did not appear to act on the complaints.

After Mr. Epstein’s arrest, L Brands said its board had hired the law firm Davis Polk & Wardwell to investigate the matter. A spokeswoman for L Brands, Tammy Roberts Myers, declined on Thursday to answer questions about the investigation.

The New York Times reported this month that the brand has for years had an entrenched culture of misogyny, bullying and harassment. The report was based on interviews with more than 30 current and former executives, employees, contractors and models, as well as court filings and other documents.

In a statement issued at the time, the independent directors on the L Brands board said that the company was focused on corporate governance, workplace and compliance practices and that it had made significant strides.

Mr. Wexner’s retailing empire grew out of a modest store he started after a disagreement with his father, who ran a clothing store named Leslie’s. His father carried a wide variety of merchandise, but Mr. Wexner argued that women really wanted to buy “sportswear” — a term at the time for skirts, sweaters and shirts. At the age of 26, he opened the Limited in a Columbus mall with the help of a $5,000 loan from his aunt.

Early on, he developed a reputation for working with his buyers to identify potential hits and moving quickly to offer them to customers. Lee Peterson, an executive vice president at WD Partners, a strategy, design and architecture firm, who worked for the Limited in the 1980s, said Mr. Wexner would quiz employees about what items were selling at Monday evening meetings.

“We would hold up merchandise and talk about what sold and didn’t sell, and he would only be interested in certain things,” Mr. Peterson said. “His first question was always, ‘What’d you pay for that?’ Then: ‘What’d you sell it for? How many did you sell? What would it take for you to sell 10,000 of those?’”

Mr. Peterson added: “If you didn’t know all the answers, he’d get super angry, but for Les, the thing was everything was so simple and so clear and easy for him. It was part of his DNA.”

The Limited, which was part of a wave of specialty chains like Gap and Banana Republic, opened its 100th store in 1976. But Mr. Wexner’s ambitions were bigger than a single label. By 1990, he had also purchased Henri Bendel, Abercrombie & Fitch and Lane Bryant and opened the Limited Too and Bath & Body Works.

But unlike some other retail moguls, Mr. Wexner, who has four children with his wife, Abigail, has long been a relatively private person. He did not appear in ads or write books about his business philosophy. He expressed an almost slavish devotion to L Brands. “If you want to torture me,” Mr. Wexner told The Times in 1986, “take my work away.”

While Mr. Wexner built a name by buying up chains, he also earned a reputation for spinning them off at just the right moment, taking Abercrombie public and selling Lane Bryant and New York & Company.

He was not sentimental about these transactions: While L Brands spent much of its existence as Limited Inc. and Limited Brands, the company sold its last remaining stake in the Limited chain to a private equity firm in 2010. The timing was right as shopping habits changed and fast-fashion chains like H&M began expanding aggressively.

L Brands has mainly focused on lingerie and home products in recent years. Despite its challenges, the company is still a major force. Sales totaled $13.2 billion in 2018, according to its most recent annual report, though its profit fell about 34 percent to $644 million. Bath & Body Works, which will remain public, has fared better than Victoria’s Secret.

In selling control of Victoria’s Secret to Sycamore, Mr. Wexner has turned his prized asset over to a financial firm that has struck deal after deal to acquire struggling brands. The firm, led by Stefan Kaluzny, has bought Hot Topic, Talbots and Staples and acquired assets from bankrupt retailers like Coldwater Creek. One of Sycamore’s first acquisitions was a 51 percent stake in Mast Global Fashions, now known as MGF Sourcing, L Brands’ sourcing business.

Some analysts and people who have done business with Sycamore have criticized it for excessively cutting costs and engaging in risky financial maneuvers. Sycamore surprised Wall Street last year by refinancing the debt of Staples in a transaction that helped pay for a $1 billion dividend to the private equity firm.

Sycamore has said little about its plans for Victoria’s Secret, and it is unclear how it might go about turning around the business.

Through the L Brands board, Mr. Wexner could continue to influence the successful Bath & Body Works chain, but he will not have any direct involvement with Victoria’s Secret. The L Brands board, which has been criticized for being too close to Mr. Wexner, will also replace three longtime directors, further reducing his influence.

When describing the last year of Mr. Wexner’s career, Mr. Peterson, his former employee, called it “30 years of brilliance crashing to a halt.”

He added, “What a tragic ending to a really brilliant story.”

Sapna Maheshwari covers retail. She has won reporting awards from the Society of American Business Editors and Writers and the Newswomen’s Club of New York and was on Time’s list of “140 Best Twitter Feeds of 2014.” More about Sapna Maheshwari

Jessica Silver-Greenberg is an investigative reporter on the business desk. She was previously a finance reporter at the Wall Street Journal. More about Jessica Silver-Greenberg

A version of this article appears in print on  , Section B, Page 1 of the New York edition with the headline: Wexner Says He’s Leaving A Pioneer Of Retailing. Order Reprints | Today’s Paper | Subscribe

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