(Filed Under wholesale Lingerie News). Second quarter sales for Victoria’s Secret and Pink are expected to be down about 40% due to pandemic-forced store closures, while direct channel sales “are up significantly versus last year,” according to parent company L Brands. Results will be announced in mid August.
L Brands also explained that it put its lingerie stores in the UK and Ireland into a form of bankruptcy 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.”
It added that it closed its “unprofitable flagship” Victoria’s Secret store in Hong Kong and “is close to resolution to either close or restructure lease terms on other unprofitable stores and has implemented a significant overhead expense reduction plan.”
As part of its goal to achieve “$400 Million in annualized cost reductions,” L Brands also announced it was firing about 850 people, or about 15% of its home office staff. Other savings will come “through its profit improvement plan for Victoria’s Secret.”
“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.”
Savings will come from “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.” The company said it is also “reducing Victoria’s Secret store selling costs through changes in management structure and the labor model,” as well as by “executing its previously announced plan to close 250 Victoria’s Secret stores in 2020 while also negotiating with landlords for ongoing rent relief.”
Overall, L Brands emphasized its intentions to “drive long-term shareholder value” as it moves to establish “Bath & Body Works as a pure-play public company” and prepares Victoria’s Secret and Pink “to operate as a separate, standalone company.” — NM
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