COLUMBUS, Ohio, July 28, 2020 (GLOBE NEWSWIRE) L Brands, Inc. (NYSE: LB) today provided an update on actions the company is taking to drive long-term shareholder value and toward establishing Bath & Body Works as a pure-play public company and preparing the Victoria’s Secret Lingerie, Victoria’s Secret Beauty and PINK businesses (collectively, Victoria’s Secret) to operate as a separate, standalone company.

Expense Reductions

The company today announced that it expects to deliver approximately $400 million in annualized cost reductions through its profit improvement plan for Victoria’s Secret and actions to decentralize and streamline shared corporate and other functions. Approximately $175 million of savings are expected to be achieved in fiscal 2020. In the second quarter of fiscal 2020, the company expects to record pre-tax severance costs of approximately $75 million related to the headcount reductions described below.

The company expects to generate these annualized cost reductions through the following:

• A reduction of its home office headcount by approximately 15%, or about 850 associates, following completion of the previously announced review of its home office organizations in order to achieve meaningful reductions in overhead expenses and decentralize significant shared corporate and other functions and services in support of creating standalone companies. The company is providing a comprehensive benefits package for its departing associates, including severance, continuing access to health benefits and outplacement services, among other support.
• Managing inventory with discipline, including working with suppliers to identify opportunities to reduce merchandise costs in order to increase merchandise margin rates at Victoria’s Secret.  As a result of this effort already underway, Spring inventory receipts for Victoria’s Secret were down approximately 45% compared to last year, and Fall receipts are expected to be down approximately 50% compared to last year.
• Reducing Victoria’s Secret store selling costs through changes in management structure and the labor model.
• Executing its previously announced plan to close 250 Victoria’s Secret stores in 2020 while also negotiating with landlords for ongoing rent relief.
• Actively working to reduce operating losses in the company-owned businesses in the U.K. and China. In the U.K., the company entered into ‘Light Administration’ in June in order to restructure lease agreements and explore the sale of the business to a joint venture or franchise partner. The company subsequently signed Heads of Terms with a major fashion retailer and is in an exclusive period of negotiation. In China, the company closed its unprofitable flagship store in Hong Kong, is close to resolution to either close or restructure lease terms on other unprofitable stores and has implemented a significant overhead expense reduction plan.

Andrew Meslow, CEO of L Brands, commented, “The Board and management remain committed to separating the Bath & Body Works and Victoria’s Secret businesses, as well as improving the profitability of the Victoria’s Secret business. During the second quarter, we made meaningful progress toward these goals. Decisions relating to our workforce are incredibly difficult and not taken lightly, but these actions are necessary to best position our company for the long-term. On behalf of the Board and management team, I’d like to extend our deepest appreciation to the impacted associates for their contributions and dedication over the years.”

Business Update

As of today, most Bath & Body Works and Victoria’s Secret stores in North America have reopened.  Sales at both businesses have been strong and have exceeded the company’s expectations. Total company net sales for the second quarter are expected to be down approximately 20% compared to last year, including an increase of roughly 10% at Bath & Body Works and an approximate 40% decline at Victoria’s Secret. Total direct channel sales at both businesses are up significantly versus last year, offset by a decline in store sales, as stores were closed for periods of time during the quarter due to the COVID-19 pandemic.

The company’s cash and liquidity position also remains strong.  Its cash balance, as of July 24, was more than $2.5 billion, with no amounts drawn under its $1 billion asset-backed loan facility.

Meslow stated, “We are pleased to have reopened most of our retail stores in North America and to be able to serve our customers both online and in person. Our teams are focused on safely welcoming our customers to our Bath & Body Works and Victoria’s Secret locations and providing merchandise to meet their needs, while continuing to adhere to evolving local and state guidelines.”

Second Quarter 2020 Earnings

The company will report its second quarter earnings results on Aug. 19 and will conduct its second quarter earnings call at 9 a.m. Eastern on Aug. 20.

ABOUT L BRANDS:
L Brands, through Bath & Body Works, Victoria’s Secret and PINK, is an international company.  The company operates 2,897 company-owned specialty stores in the United States, Canada, the United Kingdom and Greater China, and its brands are also sold in more than 700 franchised locations worldwide.