L Brands (NYSE:LB) shares tumbled early Tuesday morning after the company announced it struck an agreement with Sycamore Partners to terminate its Victoria’s Secret deal.
The company said it is "implementing significant cost reduction actions and performance improvements at Victoria’s Secret," which will include "proactive measures" to ensure liquidity "in light of the ongoing COVID-19 pandemic." Like many other retailers, L Brands has been forced to shutter its stores as restrictions are implemented to halt the spread of the coronavirus.
In February, private equity firm Sycamore had agreed to acquire a 55% share in Victoria’s Secret for $525 million, allowing the brand to go private. L Brands was hoping to focus on running its better-performing store, Bath & Body Works.
Sycamore then tried to end the deal with L Brands in April, citing store closures and missed rent payments in April, according to a lawsuit filed in a Delaware court.
The retailer announced that it is still interested in "establishing Bath & Body Works as a pure-play public company" and it hopes to prepare its Victoria’s Secret businesses to operate as a standalone company.
Bath & Body Works has shown a consistent track record of delivering strong results, the company said. Even though nearly all stores closed temporarily to curb the spread of the coronavirus, the brand continues to serve customers online.
LB shares dropped 11 cents to $11.93.
