L Brands takes nearly $700 million writedown

L Brands Inc. took a nearly $700 million charge to write down the value of its Victoria’s Secret chain, an accounting hit that pushed the retailer into a loss for the holiday quarter.

The company agreed last week to sell a 55% stake in the lingerie business, which includes the Pink chain, to private-equity firm Sycamore Partners for $525 million. The deal valued the business at $1.1 billion and will create a separate private company.

Victoria’s Secret, which long dominated the U.S. lingerie market, recently has struggled with slumping sales and has been losing customers to upstarts with more inclusive sizing and marketing. Revenue in the U.S. and Canada dropped about 8% to $6.8 billion last year and the business’s operating income plunged 78%.

L Brands, which also owns the Bath & Body Works chain, reported a loss of $192.3 million for the quarter ended Feb. 1, compared with a profit of $540 million in the year-ago period. Total quarterly revenue slipped 3% to $4.71 billion, as gains at Bath & Body Works largely offset declines at Victoria’s Secret.

The latest quarter’s results included a $689.6 million goodwill charge and a $35.4 million charge related to the impairment of Victoria’s Secret stores. L Brands took nearly $250 million worth of charges related to Victoria’s Secret in the third quarter.

The company said Wednesday it expects to post another loss in the current quarter, including a hit from the closure of stores in China due to coronavirus. L Brands said it currently expects production delays of two to four weeks for some items, primarily lingerie and spring apparel. "While we have a diversified finished goods sourcing base by country, China is a critical source of raw materials," the company said.

Write to Khadeeja Safdar at [email protected]

Source: Read Full Article