L Brands is to shutter about 250 Victoria’s Secret across the US and Canada in 2020 as part of its go-forward plan for the business, which also includes an increased focus on inventory management and sourcing cost reductions.
In its first-quarter earnings commentary yesterday (20 May), the owner of the Victoria’s Secret, Pink and Bath & Body Works brands outlined its go-forward plan for Victoria’s Secret/Pink, noting it remains committed to preparing the business to operate as a separate, standalone company.
Included in the strategy is a “substantial increase” in the group’s focus on inventory management, sourcing cost reductions and tariff mitigations, and an increase in full-price selling driven by an improved product assortment.
It is also planning a “meaningful reduction” in store selling costs, which includes what L Brands called a significant rationalisation of the Victoria’s Secret company-owned store footprint.
“We estimate that we will close approximately 250 stores in the US and Canada in 2020,” the company said.
L Brands operates 1,091 Victoria’s Secret stores in the US and Canada, comprised of 909 Victoria’s Secret stores and 144 Pink stores in the US, and 33 Victoria’s Secret stores and five Pink stores in Canada.
According to a report published by USA Today, 235 Victoria’s Secret and three Pink stores are to close in the US, alongside 13 locations in Canada. The article also claims L Brands plans to shutter 50 Bath & Body Works stores in the US and one in Canada.
The news comes after a proposed takeover of the Victoria’s Secret brand by private equity firm Sycamore Partners was axed earlier this month after the two parties reached a “mutual agreement” with regards to terminating the deal.
L brands struck a deal worth US$525m with Sycamore Partners in February, just ahead of nationwide lockdown linked to the coronavirus outbreak. It would have seen Sycamore Partners take a 55% stake in the Victoria’s Secret Lingerie, Victoria’s Secret Beauty and Pink brands and Bath & Body Works, the more profitable of the group’s businesses, repositioned as a stand-alone company. This is something investors have long called for, with Victoria’s Secret blamed for dragging down the performance of Bath & Body Works.
In its earnings release, L Brands said it remains committed to establishing Bath & Body Works as a pure-play public company and is taking the necessary steps to prepare the Victoria’s Secret Lingerie, Victoria’s Secret Beauty and Pink businesses to operate as a separate, standalone company.
As part of its go-forward plan for the business, L Brands is also actively evaluating strategic alternatives to reduce or eliminate losses in the UK and China, alongside a “holistic review” of its home office organisations. This, the firm said, will include the decentralisation of significant functions and services in support of creating standalone companies and a meaningful reduction in overhead expenses, along with a focus on retaining key talent.
The comments come as L Brands noted in a separate SEC filing that Charles McGuigan will no longer serve as CCO, effective as of 4 July.
The group reported net sales of US$1.65bn for the first quarter ended 2 May, compared to sales of $2.63bn in the same period a year ago. Net loss amounted to $296.9m, compared to net income of $40.3m last year.