L Brands Provides Update on Progress in Executing Go-Forward Strategy
July 28 2020 - 4:45PM
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. The company’s products are also
available online at www.BathandBodyWorks.com and
www.VictoriasSecret.com.
Safe Harbor Statement Under the Private Securities
Litigation Reform Act of 1995
We caution that any forward-looking statements
(as such term is defined in the Private Securities Litigation
Reform Act of 1995) contained in this press release or made by our
company or our management involve risks and uncertainties and are
subject to change based on various factors, many of which are
beyond our control. Accordingly, our future performance and
financial results may differ materially from those expressed or
implied in any such forward-looking statements. Words such as
“estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,”
“intend,” “planned,” “potential” and any similar expressions may
identify forward-looking statements. Risks associated with the
following factors, among others, in some cases have affected and in
the future could affect our financial performance and actual
results and could cause actual results to differ materially from
those expressed or implied in any forward-looking statements
included in this press release or otherwise made by our company or
our management:
- general economic conditions, consumer confidence, consumer
spending patterns and market disruptions including severe weather
conditions, natural disasters, significant health hazards or
pandemics, terrorist activities, financial crises, political crises
or other major events, or the prospect of these events;
- divestitures or other dispositions, including any divestiture
of Victoria’s Secret and related operations, could negatively
impact our business, and contingent liabilities from businesses
that we have sold could adversely affect our financial
statements;
- the seasonality of our business;
- difficulties arising from turnover in company leadership or
other key positions;
- our ability to attract, develop and retain qualified associates
and manage labor-related costs;
- liabilities arising from divested businesses;
- the dependence on mall traffic and the availability of suitable
store locations on appropriate terms;
- our ability to grow through new store openings and existing
store remodels and expansions;
- our ability to successfully expand internationally and related
risks;
- our independent franchise, license and wholesale partners;
- our direct channel businesses;
- our ability to protect our reputation and our brand
images;
- our ability to attract customers with marketing, advertising
and promotional programs;
- our ability to protect our trade names, trademarks and
patents;
- the highly competitive nature of the retail industry and the
segments in which we operate;
- consumer acceptance of our products and our ability to manage
the life cycle of our brands, keep up with fashion trends, develop
new merchandise and launch new product lines successfully;
- our ability to source, distribute and sell goods and materials
on a global basis, including risks related to:
- political instability, environmental hazards or natural
disasters;
- significant health hazards or pandemics, which could result in
closed factories, reduced workforces, scarcity of raw materials,
and scrutiny or embargoing of goods produced in infected
areas;
- duties, taxes and other charges;
- legal and regulatory matters;
- volatility in currency exchange rates;
- local business practices and political issues;
- potential delays or disruptions in shipping and transportation
and related pricing impacts;
- disruption due to labor disputes; and
- changing expectations regarding product safety due to new
legislation;
- our geographic concentration of vendor and distribution
facilities in central Ohio;
- fluctuations in foreign currency exchange rates;
- stock price volatility;
- our ability to pay dividends and related effects;
- our ability to maintain our credit rating;
- our ability to service or refinance our debt;
- shareholder activism matters;
- the ability of our vendors to deliver products in a timely
manner, meet quality standards and comply with applicable laws and
regulations;
- fluctuations in product input costs;
- our ability to adequately protect our assets from loss and
theft;
- fluctuations in energy costs;
- increases in the costs of mailing, paper and printing;
- claims arising from our self-insurance;
- our ability to implement and maintain information technology
systems and to protect associated data;
- our ability to maintain the security of customer, associate,
third-party or company information;
- our ability to comply with laws and regulations or other
obligations related to data privacy and security;
- our ability to comply with regulatory requirements;
- legal and compliance matters; and
- tax, trade and other regulatory matters.
We are not under any obligation and do not
intend to make publicly available any update or other revisions to
any of the forward-looking statements contained in this press
release to reflect circumstances existing after the date of this
press release or to reflect the occurrence of future events even if
experience or future events make it clear that any expected results
expressed or implied by those forward-looking statements will not
be realized.
For further information, please contact:
L Brands: |
|
Investor Relations |
Media Relations |
Amie Preston |
Tammy Roberts Myers |
(614) 415-6704 |
(614) 415-7072 |
apreston@lb.com |
communications@lb.com |
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