- L Brands, the owner of Victoria’s Secret, announced it will close Henri Bendel in January 2019.
- The closure is a small piece of a much bigger problem at L Brands, Jefferies says.
- L Brands should take further actions, such as cutting its dividend, closing more stores, and reducing capital expense, the analysts said.
- L Brands shares are up more than 4% on the news.
- Watch L Brands trade in real-time here.
L Brands, the owner of Victoria’s Secret, announced Friday it is shutting down Henri Bendel in January to “increase shareholder value.” The company estimates that Henri Bendel will have $US85 million revenues and a $US45 million operating loss in 2018.
“We have decided to stop operating Bendel to improve company profitability and focus on our larger brands that have greater growth potential,” CEO Leslie Wexner said in a company statement.
“This decision is right for the future growth of our company, but not easy because of the impact to our L Brands family. I want to thank our Bendel associates for their dedication to this iconic brand and to our loyal Bendel customers.”
And while Wall Street welcomed the news, sending L Brands shares up more than 4%, a team of Jefferies analysts says the closure solves just a small piece of a bigger problem.
“Closing money-losing Henri Bendel stores and e-commerce is a smart short-term strategy BUT major LT problems remain across the company,” they wrote.
The team says management should take further actions, such as cutting its dividend, closing more stores, and reducing capital expense in an effort to conserve cash ahead of the next recession, when it says “a heavydebt load combined with declining EBITDA$ will come to roost.”
The analysts noted that L Brands’ Victoria’s Secret and Pink businesses are promoting heavily, but that the consumer is not responding. Meanwhile, its Bath & Body Works brand is seeing declining segment margins even with solid sales numbers.
Henri Bendel, acquired by L Brands in 1985, opened its doors in New York’s Greenwich Village at the end of the 19th century. Its flagship store on New York’s 5th Avenue, steps away from Trump Tower, is a landmark in Manhattan.
L Brands shares are down 53% this year.
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