L Brands, the parent company of Victoria’s Secret and Bath & Body Works, announced it will be cutting 15% of its corporate workforce. The COVID-19 pandemic has caused massive losses for the company, as unemployment and closures have caused a huge sales decline.
The Plans to Shore Up Profits
L Brands is desperately trying to minimize its costs with a multi-part plan for 2020. In its first phase, the company will be laying off 850 people from its headquarters in Columbus, Ohio. Many middle management and marketing employees will be affected.
CEO Andrew Meslow said of the tough choice,
“Decisions relating to our workforce are incredibly difficult and not taken lightly, but these actions are necessary to best position our company for the long-term.”
The company expects to pay $75 million in severance costs, but it will be a long-term money saving move. At the same time the company likely won’t be paying severance to those who work in the closing stores.
Aside from the corporate layoffs, the company is looking to limit locations and reduce production costs to help increase their profits. L Brands plans to close about 250 stores permanently. Pandemic-related closures only hurried along this change — most retail brands have been trying to shift away from bricks-and-mortar shopping to focus more energy on their online customers. This change saves money in a couple ways. It saves rent and the costs required for running a store like personnel.
The company also said it will be “working with suppliers to identify opportunities to reduce merchandise costs.”
The Company’s 2020 Performance
L Brands Claims that these changes will help the company save $175 million in the 2020 fiscal year. That’s an impressive, yet necessary plan, amid a crisis that’s shuttering so many retail businesses.
Right now, Victoria’s Secret’s 2020 performance is mostly to blame for dragging down L Brand’s profits. The lingerie company experienced a 40% decline this year, bringing L Brand’s overall earnings down 20% from this time last year. Bath & Body Works helped to soften this blow, miraculously reporting a 10% increase in profits compared with last year.
As so many companies call it quits, L Brands is using cutthroat business practices as its way of handling this uncertain economic environment.