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Restructuring Activities
12 Months Ended
Jan. 29, 2022
Restructuring and Related Activities [Abstract]  
Restructuring Activities Restructuring Activities
During the second quarter of 2020, management reduced home office head count as a result of completing a comprehensive review of the home office organizations in order to achieve meaningful reductions in overhead expenses and to decentralize significant shared functions and services to support the creation of standalone companies. Pre-tax severance and related costs associated with these reductions, totaling $51 million, are included in General, Administrative and Store Operating Expenses in the 2020 Consolidated and Combined Statement of Loss.
During 2021, the Company made payments of $13 million related to severance and related costs associated with these reductions. As of January 29, 2022, a liability of $1 million related to these reductions is included in Accrued Expenses and Other on the Consolidated and Combined Balance Sheet.
Victoria's Secret U.K.
Due to challenging business results for our business in the U.K., the Company entered into administration in June 2020 to restructure store lease agreements and reduce operating losses in the U.K. business. In October 2020, the Company entered into a joint venture with Next for the business in the U.K. and Ireland. Under this agreement, the Company owns 49% of the joint venture, and Next owns 51% and is responsible for operations. The Company accounts for its investment in the joint venture under the equity method of accounting.
The joint venture acquired the majority of the operating assets, primarily inventory, and the restructured leases were transferred to the joint venture. Effective October 19, 2020, the newly formed joint venture began operating all Victoria’s Secret stores in the U.K. and Ireland. The Company recognized non-cash pre-tax gains of $90 million related to the derecognition of operating lease liabilities in excess of operating lease assets for the 24 store leases that were restructured and transferred to the joint venture. In addition, the Company recognized a $25 million non-cash pre-tax impairment charge to fully write-off all remaining long-lived store assets in the U.K. Finally, as a result of the transition to a joint venture business model in the U.K. and the substantially complete liquidation of the Company’s investment in the U.K., the Company recognized a $36 million non-cash pre-tax loss related to accumulated foreign currency translation adjustments that were reclassified into earnings, which were previously recognized as a component of equity.
The above items relating to Victoria's Secret U.K. are included in General, Administrative and Store Operating Expenses in the 2020 Consolidated and Combined Statement of Loss as they all relate to the Company's transition to a joint venture business model in the U.K.
Victoria's Secret China
In January 2022, the Company announced a partnership agreement with Regina Miracle related to its existing company-owned business in China. The Company and Regina Miracle have formed a joint venture to operate all Company stores and the related online business in China. Under the terms of the agreement, which remains subject to regulatory clearance, the Company will own 51% of the joint venture with Regina Miracle owning the remaining 49%. Upon obtaining regulatory clearance, the transaction will be completed and the Company will receive $45 million in cash from Regina Miracle as consideration for its investment in the joint venture.