The situation wasn’t looking good for L Brands earlier this year. Flagging sales at its Victoria’s Secret business were taking a toll on the retailer. Sycamore Partners came to the rescue with an offer to take a majority stake in the struggling lingerie chain, but relief was short lived. The private equity firm soon dropped the deal amid the heightening coronavirus outbreak.
At this point, we could have expected a grim ending to the L Brands story. Instead, management set into action to turn things around. And so far, it seems L Brands is on the right path. As a result, shares have rebounded more than 300% from their March low. So, is now the time to buy L Brands? Let’s take a closer look.
Go-Forward strategy
L Brands in May announced its Go-Forward strategy. The plan is to operate the stronger Bath & Body Works brand as a pure-play public company, and Victoria’s Secret will become a stand-alone business. L Brands expects to deliver about $400 million in annualized cost savings through efforts including job cuts at the home office, inventory management, and store closures.
About half of those savings should happen in the second half of 2020, the company said during its earnings report this month. As part of the plan, L Brands has closed 239 Victoria’s Secret shops in the U.S. and Canada so far this year. In Hong Kong, the company closed the flagship Victoria’s Secret store. And the retailer restructured lease terms on two flagship stores in mainland China and launched a plan to cut overhead costs there.
