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L Brands (LB) Approves Business Split, Corporate Name Change

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After prolonged analysis, L Brands, Inc.’s board has finally approved the separation of the Victoria’s Secret business into a standalone, publicly-traded company. The newly-formed company will be named Victoria’s Secret & Co. The board also approved a corporate name change for L Brands, Inc. to Bath & Body Works, Inc. Post separation, the companies will trade under new stock symbols. Let’s take a closer look at these developments.

Separation Details

L Brands has long been mulling over the split of Bath & Body Works and Victoria’s Secret businesses into separate entities. The company believes that a spin-off is likely to enhance growth prospects and boost shareholders’ value. Post separation, the newly-formed Victoria’s Secret & Co. will consist of the operation related to Victoria’s Secret Lingerie, PINK and Victoria’s Secret Beauty.

L Brands will carry on with its Bath & Body Works business and will therefore be adopting a new corporate name to reflect the same. The name change to Bath & Body Works, Inc. is expected to be effective from Aug 2, 2021. The company’s stock symbol will change from “LB” to “BBWI.” It is expected to begin trading with the new symbol from Aug 3, 2021.

In order to complete the separation, shares of Victoria’s Secret will be offered to L Brands shareholders. For every three shares of L Brands’ common stock held at the close of business on Jul 22, 2021, shareholders will receive one share of Victoria’s Secret common stock. This distribution is expected to be completed after market close on Aug 2, 2021. Following this, Victoria’s Secret will become an independent, publicly-traded company. Management highlighted that Victoria’s Secret received approval for listing of its common stock with the symbol “VSCO.” Trading of Victoria Secret’s common stock is likely to begin from Aug 3, 2021.

The distribution of the common stock in relation to the separation is subject to a number of customary conditions. Prior to the distribution, L Brands will issue a detailed information statement to all stockholders entitled to receive shares of Victoria’s Secret’s common stock. The statement will include details regarding the spin-off and the risks of owning Victoria’s Secret’s common stock. L Brands also expects to obtain an opinion from its tax advisor confirming the tax-free status of the spin-off.

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Wrapping Up

Splitting of the legacy fashion company — L Brands — is likely to help maximize financial flexibility and boost strategic focus. As previously stated by the company, the separation will enable Bath & Body Works and Victoria’s Secret to thrive better in an evolving retail landscape. The company made significant progress in achieving a turnaround in the Victoria’s Secret business, by enhancing merchandising and marketing, driving top-line growth as well as undertaking actions to reduce costs. Backed by prudent growth efforts, Victoria’s Secret is now well positioned to thrive as a standalone public company and continue with its global growth momentum.

During first-quarter fiscal 2021, Bath & Body Works and Victoria’s Secret business units delivered better-than-expected sales and margin rates. Momentum in both businesses was driven by customer’s positive response to assortments, which led to lower promotional activity and higher merchandising margin rates. Also, relaxation in pandemic-induced restrictions and government stimulus payments favorably impacted performance. Going ahead, the Bath & Body Works and Victoria’s Secret businesses are likely to keep gaining from strategic growth efforts like boosting store experience and speed-to-market initiatives.

L Brands currently sports a Zacks Rank #1 (Strong Buy). Shares of the company have gained 11.8% in the past three months compared with the industry’s rise of 3.2%.

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