The company announced that it sees annualized cost reductions of $ 400 million through a profit improvement plan for Victoria’s Secret. The company also announced that it has reopened most of Bath & Body Works and Victoria’s Secret stores in North America.
Management said in late May that BBW’s same-store sales at reopened brick-and-mortar stores rose 20%, but that could have improved to 80% despite growth of approximately 90% on the digital channel, the analyst wrote. Double-digit compensation could be maintained in the future compared to 7.2% five-year average compensation growth prior to COVID.
Meanwhile, the reopened Victoria’s Secret stores are operating at a low store productivity rate of 90% (implies single-digit negative comps) and the online channel maintained a growth rate of 30% in the second quarter.
L Brands also reiterated its plans to close 250 VS stores in 2020 and announced annualized cost reductions of $ 400 million. The math behind these figures implies an extra $ 1 in EPS and increases the research firm’s current EPS base by 2021 of $ 1.07.
In a nutshell, L Brands is taking the necessary steps to establish BBW as a pure public gaming company while focusing on improving earnings at the independent VS, the analyst wrote.
Latest ratings for LB
| Date | Firm | Action | Of | TO |
|---|---|---|---|---|
| July 2020 | B of A Securities | Maintains | To buy | |
| July 2020 | Credit Suisse | Maintains | Neutral | |
| July 2020 | JP Morgan | Updates | Neutral | Over weight |
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