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L Brands, Inc. (NYSE: LB) immediately introduced its Board of Directors has unanimously permitted a plan to separate the corporate into two unbiased, public firms: Bath & Body Works, one of many world’s main bathtub, physique and residence perfume retailers, and Victoria’s Secret, together with Victoria’s Secret Lingerie, PINK and Victoria’s Secret Beauty, a number one retailer of intimates and magnificence merchandise. The firm expects to create these firms by means of a tax-free spin-off of Victoria’s Secret to L Brands’ shareholders. The spin-off will allow every firm to maximize administration focus and monetary flexibility to thrive in an evolving retail setting and ship worthwhile progress.“In the final ten months, we’ve made important progress within the turnaround of the Victoria’s Secret enterprise, implementing merchandise and advertising initiatives to drive high line progress, in addition to executing on a sequence of value discount actions, which collectively have dramatically elevated profitability,” mentioned Sarah Nash, Chair of the Board. “As a results of these efforts, Victoria’s Secret is now well-positioned to function as a standalone, public firm. Further, each Bath & Body Works and Victoria’s Secret are leaders of their respective markets, and, as separate companies, every can be ideally positioned to profit from a sharpened concentrate on pursuing progress methods finest suited to every firm’s buyer base and strategic aims. With this in thoughts, the Board believes that this path ahead will return the very best worth to shareholders and that the separation will enable every enterprise to obtain its finest alternatives for progress.”As beforehand introduced, the L Brands Board has been evaluating the opportunity of both a spin-off or sale of Victoria’s Secret with enter from its monetary advisors, Goldman Sachs and JP Morgan. Throughout the evaluate course of, the corporate obtained curiosity from and held discussions with a number of potential consumers.Ultimately, the Board concluded that the spin-off of Victoria’s Secret right into a separate, public firm would supply shareholders with extra worth than a sale. The advantages of separating these two companies embody distinct strategic and administration concentrate on particular operational and progress priorities and tailor-made capital deployment methods based mostly on every firm’s working and monetary mannequin, and the flexibility for the funding neighborhood to worth every enterprise independently and create important worth and certainty for our clients, staff and shareholders. The proposed transaction will create two extremely targeted firms:Bath & Body Works (L Brands): Leading Bath, Body and Home Fragrance RetailerBath & Body Works is among the world’s main specialty retailers. Home to America’s Favorite Fragrances®, Bath & Body Works presents a breadth of unique fragrances for the physique and residence, together with top-selling collections for physique lotion and physique cream, physique wash, hand cleaning soap, hand sanitizers, perfume diffusers, tremendous perfume mist and candles. The enterprise has a demonstrated document of constant gross sales and working earnings progress, in addition to a confirmed capability to reply rapidly to evolving buyer tastes with a high-speed sourcing and logistics mannequin. With excessive model consciousness and a loyal buyer base, the enterprise is properly positioned for continued progress in North America, in addition to globally.Victoria’s Secret: Iconic Lingerie and Beauty RetailerVictoria’s Secret is an iconic international model of ladies’s intimate and different attire, private care and magnificence merchandise. It sells merchandise by means of two manufacturers, Victoria’s Secret and PINK. Victoria’s Secret is a category-defining international lingerie model with a number one market place and a wealthy, 40-year historical past of serving ladies throughout the globe. PINK is a way of life model for the college-oriented buyer, constructed round a powerful intimates core. It additionally sells magnificence merchandise underneath each the Victoria’s Secret and PINK manufacturers. Together, Victoria’s Secret, PINK and Victoria’s Secret Beauty assist, encourage and have a good time ladies by means of each section of their life. The enterprise not too long ago carried out a revenue enchancment plan, and took actions to enhance its product assortment, stock combine and advertising to meet clients’ wants and evolve to extra numerous and inclusive model positioning. As a results of these efforts, Victoria’s Secret delivered a 2020 fall season (third and fourth quarters) adjusted working earnings improve of greater than 300 p.c and is properly positioned to proceed to drive international progress.Management Structure Both companies have sturdy, well-tenured management groups with important business expertise, properly suited to lead the 2 firms going ahead of their distinct markets.Andrew Meslow, Chief Executive Officer of L Brands, will proceed to maintain this place and lead Bath & Body Works following the spin-off.Martin Waters, Chief Executive Officer of Victoria’s Secret, will proceed to lead the brand new standalone Victoria’s Secret enterprise following the separation.Additions to the administration groups and the composition of the boards of administrators for each firms can be named sooner or later.Transaction Details The spin-off is predicted to be effected by means of a pro-rata distribution to L Brands shareholders of widespread inventory of a newly-formed entity holding sure property and liabilities comprising the Victoria’s Secret enterprise. The spin-off is mostly anticipated to qualify as tax free to L Brands and its shareholders for U.S. federal earnings tax functions. The transaction is presently anticipated to be accomplished in August 2021, topic to sure customary circumstances, together with last approval of the L Brands Board and effectiveness of a Form 10 registration assertion filed with the U.S. Securities and Exchange Commission.Preliminary First Quarter 2021 ResultsL Brands expects to report first quarter earnings per share of roughly $0.97, which features a cost associated to the early extinguishment of debt of $0.28 per share. Excluding this cost, the corporate expects to report adjusted earnings per share of roughly $1.25 versus its earlier steering of $0.85 to $1.00. The improve displays persevering with sturdy gross sales and margin outcomes at each Bath & Body Works and Victoria’s Secret, which benefitted from stimulus funds and the comfort of COVID-19 restrictions, as beforehand reported. For the primary quarter, the corporate expects to report complete working earnings of roughly $570 million, together with roughly $380 million at Bath & Body Works and roughly $245 million at Victoria’s Secret. The firm will report its first quarter earnings outcomes after the shut of the market on May 19.Meslow commented “We anticipate L Brands will ship a document first quarter earnings consequence, pushed by continued energy and distinctive efficiency at Bath & Body Works and a major enchancment at Victoria’s Secret. We are assured within the progress alternatives for every enterprise and are excited to share our imaginative and prescient for every enterprise as we proceed to work towards the August separation.”The firm reported web gross sales of $3.024 billion for the primary quarter ended May 1, 2021, in contrast to web gross sales of $1.654 billion for the primary quarter ended May 2, 2020. First quarter 2020 gross sales have been negatively impacted by the closure of shops for about half the quarter due to the COVID-19 pandemic. First quarter 2021 gross sales elevated 15 p.c in contrast to gross sales of $2.629 billion within the first quarter of 2019.At Bath & Body Works, web gross sales have been $1.469 billion for the primary quarter ended May 1, 2021, in contrast to web gross sales of $760.6 million for the primary quarter ended May 2, 2020. First quarter 2021 gross sales elevated 60 p.c in contrast to the primary quarter of 2019. First quarter 2021 U.S. and Canada retailer gross sales elevated 47 p.c to $1.050 billion in contrast to $714.3 million in 2019. First quarter 2021 gross sales within the direct channel have been $349.2 million, a rise of 21 p.c in contrast to 2020 and a 123 p.c improve in contrast to 2019.At Victoria’s Secret, web gross sales have been $1.554 billion for the primary quarter ended May 1, 2021, in contrast to web gross sales of $893.6 million for the primary quarter ended May 2, 2020. First quarter 2021 gross sales decreased 7 p.c in contrast to the primary quarter of 2019 and replicate the online closure of 233 company-operated shops for the reason that first quarter of 2019. Comparable U.S. and Canada retailer gross sales for the primary quarter of 2021 decreased 3% in contrast to the primary quarter of 2019. First quarter 2021 gross sales within the direct channel have been $520.9 million, a rise of 69 p.c in contrast to 2020 and a 44 p.c improve in contrast to 2019.AdvisorsGoldman Sachs and JP Morgan are serving as monetary advisors and Davis Polk & Wardwell is serving as authorized counsel to L Brands. Wachtell, Lipton, Rosen & Katz is serving as authorized counsel to the unbiased administrators of the Board.
