L Brands forecasts smaller-than-expected sales decline, shares surge

A woman passes covered mannequins at a Victoria's Secrets boutique amid the coronavirus disease (COVID-19) outbreak in Singapore May 27, 2020. REUTERS/Edgar Su

(Reuters) - L Brands Inc LB.N on Tuesday forecast a smaller-than-expected drop in quarterly sales on strong demand for its Bath & Body Works hand sanitizers and other personal care products, and said it would cut 15% of its corporate staff.

Shares of the company surged 17% in extended trading after the Victoria’s Secret owner also said its cost-cutting efforts, including layoffs and inventory management, would help it save about $400 million annually.

L Brands is focusing on its high-margin Bath and Body Works division as the COVID-19 pandemic drives customers to stock up on personal care products such as hand sanitizers.

Columbus, Ohio-based L Brands estimated a 10% rise in second-quarter revenue for the brand, even as it expects total net sales to be down about 20% from a year earlier.

Analysts on average were expecting total net sales to decline about 35% to $1.9 billion, according to IBES data from Refinitiv.

“BBW is being helped by hand sanitizer while its candle sales slow. Sanitizer has been a lifesaver,” Jefferies analyst Randal Konik said.

The company projected a drop of about 40% in sales at its Victoria’s Secret unit, which it plans to run as a separate, standalone company after failing to sell a majority stake to private-equity firm Sycamore Partners.

L Brands has reopened most Bath & Body Works and Victoria’s Secret Stores in North America after the easing of coronavirus-induced lockdowns.

The company is expected to report results on Aug. 19.

Reporting by Aditi Sebastian and Praveen Paramasivam in Bengaluru; Editing Maju Samuel and Anil D’Silva