- Victoria’s Secret announced that it is extending its store closings and furloughing the majority of its store workers until further notice.
- Some senior employees will also see a temporary 20% cut in their base salary.
- The company noted in its annual report on Monday that if the situation worsens it could have difficulty sourcing the materials it needs from Asia.
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Victoria’s Secret is among the retailers to have been hard hit by the coronavirus outbreak.
The lingerie giant confirmed in a press release on Friday that it would be extending store closings until further notice after initially saying that its stores would reopen on March 29.
At the same time, it announced that it would temporarily layoff the majority of its store workforce along with any other workers that are not supporting its ecommerce platform or who are unable to work from home; these workers would be furloughed from April 5 until further notice, it said.
Its part-owner, L Brands, which recently sold a 55% stake in the company to private equity firm Sycamore Partners, said that it would “make every effort” to bring associates back to work as soon as possible and that impacted workers will continue to receive healthcare benefits during this time.
For the moment, any employees in a senior vice president position or above will see a temporary 20% reduction to their base salary and the board of directors, including chairman emeritus and former L Brands CEO Les Wexner, will not receive any cash compensation.
Earlier this month, Victoria’s Secret also made the decision to temporarily close its online store, an area of business that many retailers are leaning on as brick and mortar locations stay closed.
On March 26, the company announced that its website was back and open for business after introducing a series of safety precautions at its distribution centres to prevent the spread of coronavirus amongst workers.
But in its annual report on Monday, the company noted that should the situation continue to worsen it could have difficulty sourcing the materials it needs as factories in Asia continue to stay closed, therefore putting its ecommerce channel under further stress.
As demand drops across the industry, financial analysts have been highlighting companies with the strongest balance sheets and the best liquidity profiles as those most likely to face the least financial pressure.
In a recent note, a group of Bernstein analysts ranked L Brands as among the more vulnerable companies in their coverage, estimating that the company would be able to continue paying its expenses for just under six months if it pulled in zero revenue during that time.
But L Brands assured investors in its annual report that its $US2 billion cash balance along with its actions to cut its expenses “provides the company with sufficient current liquidity.”