Struggling retailer L Brands Inc. (LB) - Get Report shares fell in after-hours trading Monday after the company said it was calling off its deal to sell a controlling interest in its Victoria’s Secret unit to Sycamore Partners.
The $525 million deal had been announced in February, just weeks before the coronavirus pandemic forced widespread shelter-in-place orders that have devastated much of the U.S. and global economy.
Sycamore sued in April to halt the deal, claiming store closings and failure to pay rents were violations of the agreement.
Incoming chairman of L Brands board, Sarah Nash, said in a statement “Our board believes that it is in the best interests of the company, our stockholders and our associates to focus our efforts entirely on navigating this environment to address those challenges and positioning our brands for success rather than engaging in costly and distracting litigation to force a partnership with Sycamore.” L Brands is “implementing significant cost reduction actions and performance improvements at Victoria’s Secret,” according to the statement.
L Brands will continue to pursue establishing its Bath & Body Works unit “as a pure-play public company,” according to the statement.
The board appointed Stuart Burgdoerfer, current chief financial officer of L Brands, as interim CEO of Victoria’s Secret, effective immediately.
The company said Andrew Meslow, CEO of Bath & Body Works, will become CEO of L Brands and join the board.
Burgdoerfer will also continue to serve as CFO of L Brands and will have a dual reporting relationship to Nash as the incoming board chair and Meslow as the new CEO of L Brands.
Retailer J. Crew filed for bankruptcy Monday, becoming the first victim of the coronavirus in the sector.
Shares of L Brands fell $1.69, or 14%, to $10.35 in after-hours trading.