M&A

L Brands Swears Off Secrets

L Brands confirmed yesterday it’s sending Victoria’s Secret to greener pastures: private equity firm Sycamore Partners. Sycamore will purchase a 55% stake in VS for about $525 million in a deal expected to close in Q2.

No more padding. The deal reportedly values VS at roughly $1.1 billion, which would’ve been impressive if it were 1993. But VS is a nearly 43-year-old company that recorded about $7 billion in sales last fiscal year. Meanwhile, a comparable retailer with half the annual revenue, Lululemon, sports a $34 billion valuation. 

And no more boss. L Brands CEO Les Wexner will vacate the role he’s held for over 50 years. 

• At the height of his tenure, Wexner was known for overseeing peak mall brands including Abercrombie & Fitch, Limited Too, and, of course, VS.
• By the end, his legacy was stained by associations with the late accused sexual predator and former financier Jeffrey Epstein and accusations Wexner fostered an unhealthy corporate culture. Consumers also showed a growing distaste for VS’s bombshell marketing. 

So...what’s next? 

The turnaround of all turnarounds 

Sycamore Partners has spent its nine-year history throwing money at failing brands. Past acquisitions included The Limited, a former L Brands property, and Mast Global Fashions, L Brands’s current sourcing business. 

But VS will make Sycamore's work harder. The brand’s image hasn’t held up in the court of Twitter and sales are in a yearslong downward spiral. Sycamore hasn’t revealed its plans for VS yet, but it’ll likely counteract past missteps by patching up VS’s weakspot: inclusivity, in all forms.

Hands = washed  

Without VS’s dirty laundry weighing it down, L Brands has the potential to take off with Bath & Body Works as its headliner. In Q4 2019, comparable sales there rose 10%, marking more than 40 consecutive quarters of growth. It helps that hand sanitizers and body soaps are practically controversy-proof...as far as I know.

The transformation’s already started. Andrew Meslow, Bath & Body Works’s current COO, will become the new L Brands CEO when the VS sale closes. 

D2C

Liquid Death Is Alive and Well

Liquid Death launched last June with a promise to “murder your thirst” via tallboys of water. Yesterday, the canned water startup said it raised a $9 million Series A.

• Liquid Death’s investors are a who’s who of high awareness, questionable operations brands, including GirlBoss founder Sophia Amoruso and Away co-founder Jen Rubio.

Liquid Death also made two more announcements: It’ll arrive in Whole Foods stores nationwide in March (so fans don’t have to wait for water in the mail) and it’s launching sparkling water (just because). 

So where’s the money going? More wholesale, CEO Mike Cessario tells me. “We spent a lot of the last year building our online presence—adding thousands of recurring monthly and weekly subscribers to our D2C channels—but moving forward there will be a bigger focus on traditional retail,” he said. 

Why it matters: Liquid Death’s rise is a branding case study. TechCrunch reports Liquid Death is “perfectly fine water,” but its extreme name and extreme-er online presence are dog whistles for shoppers who want to show off a lifestyle instead of drink from the tap.

SPONSORED BY SHOPTALK

You’re Gonna Buy This Ticket Anyway...

...you might as well save money on your Shoptalk pass and buy it today.

Starting tomorrow—the 22nd of February—Shoptalk attendee prices will increase by two hundred U.S. dollars.

In case you’ve been living under a boulder the size of the Mall of America (who will also be at Shoptalk), Shoptalk is one of the biggest events in retail, and it’s going down in Las Vegas next month. Some of the most influential brands and retailers in the world will be there—Google, Amazon, Whole Foods Market, Glamsquad, Nordstrom, and Ulta Beauty.

There’s more: Shoptalk will feature an elite line-up of speakers, including:

• Kathryn McLay (Sam’s Club, CEO)
• Katrina Lake (Stitch Fix, CEO)
• Caroline Wanga (Target, Chief Culture, Diversity, and Inclusion Officer)
• My Pet Rock (You Paying Attention?)
• Kathleen McLaughlin (Walmart, Chief Sustainability Officer)

So register now before it’s too late. 

See you next month at Mandalay Bay.

RESALE

Gap Pulls a Familiar Refab Thread

The resale rideshare just picked up another passenger. Resale platform thredUP is teaming up with Gap in its largest cleanout distribution partner to date. Here’s how it’ll work:

• Starting in April, shoppers can pick up a thredUP clean out bag or shipping label at select U.S. Gap, Athleta, Banana Republic, and Jack and Jane stores.
• Customers can send their items to thredUP in exchange for shopping credit at Gap, Banana Republic, Athleta and Janie and Jack and will receive an additional 15% payout bonus. 

On paper...partnering with thredUP is Gap’s latest sustainability initiative. The company said it hopes to divert more than 30 million pounds of its materials from landfills annually.

In practice...it’s a 2-for-1 loyalty play. 

• Stocking thredUP’s clean out bags could boost Gap’s foot traffic. 
• A payout bonus nudges shoppers to spend their credits back at Gap. But payouts are anywhere from 5%–80% of the item’s already discounted selling price...so those payouts won’t always cover a full purchase.

My caveat: ThredUP already offers similar payout bonuses via partnerships with Reformation, Christy Dawn, and more. Gap has more scale than those brands, but it doesn’t have their cachet.

WHAT ELSE IS BREWING

• Tyler Haney, CEO and founder of Outdoor Voices, is reportedly stepping down. 
• Seven & i, the company that controls 7-Eleven, is in talks to acquire gas station operator Speedway for about $22 billion. 
• Banana Republic is the second Gap Inc. brand to offer clothing delivery via Postmates.
• Wendy’s will pay $400,000 to resolve over 2,100 child labor violations at 46 corporate-owned stores in Massachusetts. 
• Sephora is abandoning its beauty service-oriented small format stores.
• Blue Apron is closing its Arlington, TX, meal prep center, cutting 240 jobs, and reportedly exploring strategic alternatives including a possible sale.

SPONSORED BY LISTRAK

Hey you retail marketers and decision makers. You see all those logos up there? Those are the folks that trust Listrak to handle their email, SMS, and behavioral based triggers to drive engagement, revenue, and loyalty. Wanna see your logo in the bright lights of Retail Brew one day? Yeah? Then use Listrak.

SWAPPING SKUS

You asked for more longreads about D2C brands. Today, I delivered. 

• When Glossier Play debuted last spring, beauty aficionados assumed it would be another hit for the brand. But CEO Emily Weiss said sales of Glossier’s colorful cosmetics line have been disappointing, and the brand is reevaluating how it approaches growth opportunities as a result (Business of Fashion).
• Speaking to a niche community. Ignoring the urge to raise mountains of VC cash at launch. Diverting marketing dollars from Facebook and Google. Those are three of the habits of highly effective digitally native vertical brands (Medium).
• Should a brand with a left-leaning mission accept venture funds from a right-leaning donor? That’s the question D2C feminine care brand Lola is pondering over its ties to RSE Ventures, the firm cofounded by President Trump donor Stephen Ross (Fortune).

FRIEND OR FAUX?

True or false: It’s not Friday without a Retail Brew news quiz. You already know the answer to that question—now let’s see if you know which of the following news stories is fake. 

1. By popular demand, the McDonald’s Shamrock Shake will be sold year-round.
2. Supreme’s latest collab is a line of Oreo cookies.
3. The Cheesecake Factory is ending its ban on reservations.
4. General Mills is trying to upgrade its image with $13 almond cereal.

Keep scrolling for the answer.

FROM THE CREW

On Wednesday, I asked if you’d invest in Starface, an acne sticker brand that raised $2 million in seed funding. I wasn’t sold on covering my breakouts with stars, but the majority of readers who responded to my Twitter poll disagreed. 

52% said you’d invest in Starface while 48% said “pass.” Your reasons for sticking with Starface? The brand potential. 

• “As soon as I read the Retail Brew, I immediately googled them and looked for ways to invest. This is huge IMO, this can be branded so well and blow up.”
• “In a Snapchat crazed world, Gen Z will love these.”

Friendly reminder: If you want to see your opinions shared in Retail Brew, make sure you’re joining the conversation on Twitter. 

My top Spotify playlist might just be “Songs You Always Hear in CVS.” In 59 songs, journalist Carrie Courogen manages to capture the sound of a Cold & Flu aisle errand and it’s...scarily accurate. Give it a listen before we meet again on Monday—Halie.

FRIEND OR FAUX? ANSWER

1. Nope, the Shamrock Shake is still limited-time-only. CNN Business explains why.