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L Brands' Victoria's Secret Works on Revival, Cuts Jobs

Zacks Equity Research

L Brands, Inc.’s LB prominent brand, Victoria’s Secret, has cut the workforce to the tune of roughly 15% of the brand’s staff at its Columbus, OH-based headquarters, per media reports. The move has reduced around 50 headcounts, ranging from people at senior positions to junior employees. Industry experts believe that with this move, the company aims to simplify the organizational structure.

Also, the departure of Victoria's Secret's executive vice president and head of stores, April Holt, came as a huge blow to L Brands. Early this year, the company’s chief marketing officer, Edward Razek, stepped down. It has now announced new leadership positions. Per sources, Becky Behringer will replace Holt on an interim basis.

L Brands have been struggling for a while due to sluggishness in the Victoria’s Secret brand, which was once a popular lingerie brand in the United States. Some experts believe that the problem lies in the fact that the brand has constantly stereotyped the glamourous image when body positivity is the need of the hour. These apart, obsolete product assortment, stiff competition and brand-related issues acted as headwinds.

Nevertheless, per sources, the company is trying hard to revive Victoria’s Secret’s performance. It is considering introducing new merchandise and intends to roll out new marketing strategy ahead of the holidays. Further, the brand recently signed a transgender model. It has also put an end to its annual fashion show, owing to declining viewership.

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The company concentrates on improving Victoria’s Secret’s performance by remaining customer-focused, enriching assortments, and improving store and online experiences. These apart, relaunch of the swimwear category is likely to be fruitful.

We believe that L Brands’ sustained focus on cost containment, inventory management, merchandise and speed-to-market initiatives will help it compete better. Moreover, an increased focus on tapping international markets is likely to present the company with long-term growth opportunities and generate increased sales volume.

We note that the company’s Bath & Body Works brand is the only bright spot as it continues to score high on products — including body care, home fragrance, and soaps & sanitizers. During the second quarter of fiscal 2019, the brand delivered a solid show and surpassed management’s expectations. Total sales for the brand grew 10% to $1,060.9 million, with 8% rise in comparable sales and 4% improvement in comparable store sales.

Management expects the Bath & Body Works brand to experience another robust year, which will in turn help cushion the stock. Notably, the Zacks Rank #3 (Hold) company has fallen 46.4% in a year compared with the industry’s decline of 42.1%.

 

 

That said, we hope that these well-chalked out plans will help L Brands in regaining its sheen.

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