A pedestrian passes a closed and boarded Victoria’s Secret store on Robson Street during the COVID-19 crisis on April 17, 2020 in Vancouver, Canada.
Andrew Chin | fake pictures
Victoria’s Secret owner L Brands said Tuesday that he is preparing to cut 15% of his corporate workforce, or about 850 jobs, in a bid to cut costs as his business is hit by the pandemic. of coronavirus.
The company said it expects to save about $ 400 million annually through its cost reduction efforts, which include layoffs. L Brands expects to see about $ 175 million in savings in fiscal year 2020. It also expects to record about $ 75 million in pre-tax severance costs in the second quarter of 2020, specifically linked to job cuts.
The company’s shares soared more than 6% in off-hours trading, having closed the day below 1%.
“Decisions regarding our workforce are incredibly difficult and are not made lightly, but these actions are necessary to better position our company in the long term,” L Brands CEO Andrew Meslow said in a statement, adding that the company is working to improve the profitability of its embattled Victoria’s Secret lingerie business.
As of February 1, 2020, the company employed approximately 94,400 employees, 68,900 of them part-time, according to L Brands’ latest annual filing.
Other cost-cutting measures include closing stores, reducing inventory and negotiating with owners for rental relief, the retailer said Tuesday.
L Brands in May had said it planned to permanently close some 250 Victoria’s Secret and Pink stores in the US and Canada in 2020, or about a quarter of its stores in North America.
“We would expect to have a significant number of additional store closings beyond the 250 we are looking for this year … meaning there will be more in 2021 and probably a little more in 2022,” Stuart Burgdoerfer, interim CEO of Victoria’s Secret, said at that moment.
The company also provided a preview of its second-quarter financial results on Tuesday, which are expected to be released on August 19.
L Brands expects total second quarter net sales to be approximately 20% lower than a year ago, despite an approximately 10% increase in Bath & Body Works. The company expects to post a 40% decrease in Victoria’s Secret.
He said that most of its stores in North America reopen after being temporarily closed due to the Covid-19 crisis.
“Sales in both businesses have been strong and have exceeded the company’s expectations,” the company said in its press release.
According to BMO Capital Markets analyst Simeon Siegel, L Brands will be much healthier as he gets slimmer.
“It is a classic example of a brand that went too far in search of growth,” he said. “But his earnings are confirmation that he still has tremendous consumer acceptance.”
L Brands, as of July 24, had a cash balance of more than $ 2.5 billion, with no amounts withdrawn under its $ 1 billion asset-backed line of credit, the company added.
L Brands shares are up 6% this year. The retailer has a market capitalization of $ 5.3 billion.
Find the full press release for L Brands here.