LB - L Brands to split into two independent publicly traded companies
L Brands Inc. (NYSE: LB) cancelled its plans of selling Victoria’s Secret as its Board of Directors authorised splitting the company on Tuesday into two independent, publicly traded companies, Victoria’s Secret and Bath & Body Works.
L Brands shares were a little under 5% down in premarket trading on Tuesday. The stock is now trading at £47 per share versus £28 per share at the start of the year.
The transaction is likely to complete in August
The intimates and beauty products retailer will be separated through a tax-free spin-off to L Brands’ shareholders. The transaction is likely to complete later this year in August. Chair of the Board Sarah Nash expressed confidence that the spin-off will help both companies maximise financial flexibility and deliver profitable growth. Nash said:
“In the last ten months, we have made significant progress in the turnaround of Victoria’s Secret business, implementing merchandise and marketing initiatives to drive top-line growth, as well as executing on a series of cost reduction actions, which together have dramatically increased profitability. As a result of these efforts, Victoria’s Secret is now well-positioned to operate as a standalone, public company.”
Following the spin-off, the current CEO of Victoria’s Secret, Martin Waters, will continue to lead the lingerie business as an independent, public company. L Brands CEO Andrew Meslow, on the other hand, will take charge of Bath & Body Works.
L Brands’ forecast for first-quarter sales
L Brands expects £2.14 billion of sales in the first quarter that concluded on 1 st May versus the year-ago figure of a significantly lower £1.17 billion and the quarter-ago figure of £3.41 billion . The American fashion retailer is confident that both its business will see sharp growth in Q1 revenue. Nash further added in a press release on Tuesday:
“Both Bath & Body Works and Victoria’s Secret are leaders in their respective markets, and, as separate businesses, each will be ideally positioned to benefit from a sharpened focus on pursuing growth strategies best suited to each company’s customer base and strategic objectives. With this in mind, the Board believes that this path forward will return the highest value to shareholders and that the separation will allow each business to achieve its best opportunities for growth.”
L Brands performed massively upbeat in the stock market last year with an annual gain of close to 100%. At the time of writing, it is valued at £13.57 billion and has a price to earnings ratio of 22.90.
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