The coronavirus pandemic has jeopardized the global economy, with the retail sector suffering a massive blow. Retailers have taken measures like closing stores or trimming job hours or permitting employees to work remotely. Now, they are taking additional measures to cope with the heightened uncertainty tied to the pandemic. Women's apparel retailer, L Brands, Inc. LB has also taken further action apart from store closure and withdrawal of first-quarter fiscal 2020 announcements.
Recently, management suspended its quarterly dividend beginning the second quarter. However, it is focused on paying out dividends in the long term. Moreover, the company has been largely curbing expenses and capital expenditures, including decrease in forward inventory receipts. It has also temporarily cut down base compensation by 20% for senior vice presidents and above. Notably, the cash compensation of CEO and other board members is suspended. It has also deferred annual merit increases and furloughed majority of its store associates effective Apr 5, till further notice.
Earlier, management had drawn down $950 million from its revolving credit facility to reinforce financial flexibility. It had access to a $1-billion secured revolving credit facility, expiring in May 2024. L Brands currently has cash of more than $2 billion. It had earlier announced closures of its entire Bath & Body Works, Victoria’s Secret and PINK stores across the United States and Canada through Mar 29, 2020. Management has informed that it is unable to ascertain when the stores will reopen and has extended the closure beyond Mar 29. Its direct channels and e-commerce sites will continue to operate in the interim.
A glance at the Columbus, OH-based company’s share price reveals that it has lost 30.3% compared with the industry’s 48.2% decline in the past three months.
We note that the novel coronavirus has shaken most companies across the United States. Apart from retailers shuttering stores, many of them withdrew their initial guidance as they are unable to ascertain the impact on revenues and margins. Abercrombie & Fitch ANF withdrew its initial outlook.
Incidentally, few other players have also suspended their shareholder-friendly moves for the time being. Macy's M and Best Buy BBY have also followed suit. While Macy's has decided to suspend its second-quarter fiscal 2020 dividend, Best Buy has put its entire share buyback on hold.
Coming back to L Brands, the company presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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