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VS, Pink Sales Fell 8% In 2019 To $6.8 Billion

(Filed Under Financial and General Interest News). Days after announcing the sale of a majority stake in its lingerie divisions, L Brands reported that Victoria’s Secret and Pink store and direct sales for 2019 fell 8% to $6.8 billion, from $7.4 in 2018. Fourth quarter sales fell 10% to $2.3 billion, from $2.5 billion in the same quarter last year.

Fourth quarter comparable store sales in the U.S. and Canada for Victoria’s Secret and Pink fell 10%, as did the combined store and direct comps.

L Brands reported that for the company as a whole, which included Bath & Body Works, net sales were “$12.914 billion for the year ended February 1, 2020, compared to $13.237 billion for the year ended Feb. 2, 2019.”

L Brands also announced the following: “In 2019: Pre-tax, non-cash impairment charges of $725.0 million ($2.58 per share) related to Victoria’s Secret goodwill and store-related assets.” And, “In 2018: A pre-tax charge, principally non-cash, related to the sale of La Senza of $99.2 million ($0.20 per share).”

In announcing its results for the year, L Brands summarized the deal it announced on February 20, 2020 with ”Sycamore Partners, a private equity firm specializing in consumer and retail investments” that is intended to “deliver long-term value to L Brands shareholders by positioning Bath & Body Works as a highly profitable, standalone public company and separating Victoria’s Secret Lingerie, Victoria’s Secret Beauty and Pink (collectively, Victoria’s Secret) into a privately-held entity focused on reinvigorating its market-leading businesses and returning them to historic levels of profitability and growth. Under the terms of the transaction, and after taking into account certain liabilities, Sycamore will purchase a 55% interest in Victoria’s Secret for approximately $525 million. L Brands will retain a 45% stake in Victoria’s Secret to enable its shareholders to meaningfully participate in the upside potential of these businesses. The transaction is the result of a comprehensive review of a broad range of options undertaken by the board of directors, with input from outside financial advisors, designed to best position the company’s brands for long-term success and drive shareholder value. The transaction is expected to close in the second quarter 2020.”

During the conference call to discuss the results, L Brands EVP and CEO Stuart Burgdoerfer explained, “While we recognize that Victoria’s Secret’s performance has deteriorated meaningfully over the last several years, the brand leads the lingerie category in North America and has high levels of global awareness. We believe that Sycamore, which has substantial experience in the retail industry, will bring a fresh perspective and greater focus to the business.”

During the call Ike Boruchow, a senior analyst at Wells Fargo, asked Burgdoerfer, “you talked about the $2.5 billion of lease liabilities that’s going with Victoria’s Secret. Can you talk about any remaining lease liabilities to Victoria’s that will remain on the LB or BBW balance sheet?”

Burgdoerfer replied, “BBW/LB will have some contingent liability exposure related to Victoria’s Secret store leases and some office leases. That exposure in terms of a gross exposure is roundly or roughly $400 million.” In answer to another question he added, “That’s the gross number. We’ll book an estimate of the portion of that we think could be reason - could be a probability based assessment of what our exposure is. That $400 million is a gross number. So, it won’t be on the balance sheet. It will be meaningfully less than that.” — NM

The complete L Brands call transcript can be found here:

more Financial and General Interest News >>

Published 03-09-2020 by Nick Monjo

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