L Brands stock price erupts 20% on corporate job cuts

L Brands stock price erupts 20% on corporate job cuts
Written by:
Michael Harris
29th July, 12:19
Updated: 30th July, 03:26
  • The owner of Victoria’s Secret announces plans to cut 850 of its corporate workforce at Ohio HQ
  • The company is hoping to save $400 million on an annual basis as sales expected to drop by 20% in Q2
  • L Brands stock price gained more than 20% to trade around the $23 mark in premarket

Shares of Limited Brands Inc (NYSE: LB) erupted more than 20% in after-hours trading after the owner of Victoria’s Secret announced plans to cut 850 of its corporate workforce. Shares have surged to over $23 to hit a new 5-month high.

Fundamental analysis: Victoria’s Secret impact the most

L Brands, the owner of Victoria’s Secret and Bath & Body Works brands, said it will remove 850 workers from its home office at Columbus, Ohio. Bath & Body Works will see 10% of its corporate workforce go while Victoria’s Secret will lose 40% corporate jobs.

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A huge cost-cutting campaign has been initiated to mitigate the impact of the pandemic. The company is hoping to save $400 million on an annual basis, out of which $175 million will be achieved in the fiscal year 2020.

“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. On behalf of the Board and management team, I’d like to extend our deepest appreciation to the impacted associates for their contributions and dedication over the years,” said CEO Andrew Meslow in a statement. 

L Brands expects to record a 20% fall in net sales for the second quarter of the year. The fashion company will continue to work on the separation of Bath & Body Works and Victoria’s Secret businesses. 

“The Board and management remain committed to separating the Bath & Body Works and Victoria’s Secret businesses, as well as improving the profitability of the Victoria’s Secret business. During the second quarter, we made meaningful progress toward these goals,” added Meslow. 

In April, Invezz reported that L Brands’ agreement to sell Victoria’s Secret business to Sycamore Partners fell apart. 

Technical analysis: Shares surge 20%

L Brands stock price gained more than 20% to trade around the $23 mark in premarket on news that Victoria’s Secret owner plans to cut corporate jobs. Investors see this as a positive step towards the higher profits. 

L Brand stock daily chart (TradingView)

Today’s move also means that L Brands share price has now almost erased all coronavirus-related gains. A gap higher will translate into a new 5-month high for the stock as buyers set their sight on 2020 high above the $25 handle. 

Summary

L Brands stock price surged more than 20% in the after hours market on plans to cut 850 of its corporate workforce at Ohio’s home office. This news led the stock price to a new 5-month high. 

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