A pedestrian walks past a Victoria’s Secret storefront closed and boarded up on Robson Street during the COVID-19 crisis on April 17, 2020 in Vancouver, Canada.

Andrew Chin | Getty Images

Victoria’s Secret owner L Brands said Tuesday it is preparing to cut 15% of its corporate workforce, or about 850 jobs, in a bid to trim costs as its business takes a hit from the coronavirus pandemic

The company said it hopes to save about $400 million annually through its cost-cutting efforts, which include the layoffs. L Brands expects to see about $175 million of savings in fiscal 2020. It also expects to record about $75 million of pretax severance costs in the second quarter of 2020, specifically tied to the job cuts. 

Shares of the company shot up more than 6% in after-hours trading, having closed the day down less than 1%. 

“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,” L Brands Chief Executive Andrew Meslow said in a statement, adding that the company is working toward improving the profitability of its embattled Victoria’s Secret lingerie business. 

As of Feb. 1, the company employed about 94,400 employees, 68,900 of those being part-time, according to L Brands’ latest annual filing. 

Other cost-cutting measures include closing stores, slimming down inventory and negotiating with landlords for rent relief, the retailer said Tuesday. 

L Brands in May said it planned to shut permanently about 250 Victoria’s Secret and Pink stores in the U.S. and Canada in 2020, or roughly a quarter of its shops in North America. 

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“We would expect to have a meaningful number of additional store closures beyond the 250 that we’re pursuing this year … meaning there will be more in 2021 and probably a bit more in 2022,” Stuart Burgdoerfer, the interim CEO of Victoria’s Secret, said at the time. 

The company on Tuesday also offered a preliminary look at its second-quarter financial results, which are expected to be released on Aug. 19. 

L Brands expects total net sales for the second quarter to come in about 20% lower than a year ago, despite a roughly 10% increase at Bath & Body Works. The company is expecting to post a 40% decline at Victoria’s Secret. 

It said most of its stores in North America are open after being temporarily shut due to the Covid-19 crisis. 

“Sales at both businesses have been strong and have exceeded the company’s expectations,” the company said in its press release. 

According to BMO Capital Markets analyst Simeon Siegel, L Brands will be much healthier as it becomes leaner. 

“It’s a classic example of a brand that stretched too far in pursuit of growth,” he said. “But its revenues are the confirmation it still has tremendous buy-in from consumers.” 

L Brands, as of July 24, had a cash balance of more than $2.5 billion, with no amounts drawn down under its $1 billion asset-backed loan facility, the company added. 

L Brands shares are up about 6% this year. The retailer has a market cap of $5.3 billion. 

Find the full press release from L Brands here. 

Via CNBC