Restructuring

9 Months Ended

Oct. 31, 2020

Restructuring and Related Activities [Abstract]

Restructuring

Restructuring

The Company remains committed to establishing Bath & Body Works as a pure-play public company and is taking the necessary steps to prepare Victoria's Secret to operate as a separate standalone company. Management of the Company is actively engaged in implementing a comprehensive profit improvement plan that will better position the Company to evaluate the next steps for the separation of the Victoria's Secret business. During the second quarter of 2020, the Company completed its comprehensive review of its home office organizations in order to achieve meaningful reductions in overhead expenses and decentralize significant shared functions and services to support the creation of standalone companies. This resulted in a reduction of the home office headcount by approximately 15%, or about 850 associates. Pre-tax severance and related costs associated with these reductions, totaling $81 million, are included in General, Administrative and Store Operating Expenses in the year-to-date 2020 Consolidated Statement of Loss. Costs of $51 million and $12 million are recorded within the Victoria's Secret and Bath & Body Works segments, respectively, while the remaining $18 million is recorded within Other.

During the third quarter, the Company made payments of $33 million and, as of October 31, 2020, a liability, after accrual adjustments, of $56 million related to these costs, is included in Accrued Expenses and Other on the Consolidated Balance Sheet.

Victoria's Secret U.K.

On October 18, 2020, the Company and Next PLC formed a joint venture for Victoria's Secret U.K. with Next PLC owning 51% and the Company owning 49%. The joint venture acquired the majority of the operating assets, primarily inventory, of Victoria’s Secret U.K. Effective October 19, 2020, the newly formed joint venture began operating all Victoria’s Secret stores in the U.K. and Ireland. As of October 31, 2020, the leases for twelve stores in the U.K. were restructured and transferred to the joint venture. Negotiations with landlords to restructure the remaining store leases in the U.K. are in process as part of the ongoing Administration proceedings. The joint venture will begin operating the U.K. direct business starting Spring 2021.

The Company recognized a pre-tax gain of $30 million as a result of the transaction, primarily related to the derecognition of operating lease liabilities in excess of operating lease assets for the twelve store leases that were restructured and transferred to the joint venture. This gain is included in General, Administrative and Store Operating Expenses in the 2020 Consolidated Statements of Income (Loss).

La Senza

In fiscal 2018, the Company divested its ownership interest in La Senza to an affiliate of Regent LP, a global private equity firm. In conjunction with the transaction, certain of the Company's subsidiaries have remaining contingent obligations related to La Senza lease payments under the terms of existing noncancelable leases. In the third quarter of 2019, the Company recognized pre-tax non-cash charges of $37 million to increase the reserves for potential exposure related to the La Senza business. These charges are included in Other Loss in the 2019 Consolidated Statements of Loss. For additional information, see Note 13, "Commitments and Contingencies."