Good morning. My name is Angela, and I will be your conference operator today. At this time, I would like to welcome everyone to the L Brands First Quarter 2020 Earnings Conference Call. Please be advised that today's conference is being recorded. Any objections, you may disconnect at this time. I will now turn the call over to Ms. Amie Preston, Chief Investor Relations Officer of L Brands. You may begin.

Thanks. Good morning, and welcome to L Brands first quarter earnings conference call for the period ending May 2, 2020. As a matter of formality, I need to remind you that any forward-looking statements we may make today are subject to our safe harbor statement found in our SEC filings and in our press releases. Joining me on the call today are Andrew Meslow, CEO of L Brands; and Stuart Burgdoerfer, Interim CEO of Victoria's Secret and CFO of L Brands. All results we discussed on the call today are adjusted results and exclude the special items described in our press release. Thanks. And now I'll turn the call over to Andrew.

Thank you, Amie, and good morning, everyone. I'm honored to be joining you this morning on my first earnings call as L Brands' CEO. I'd first like to thank Les Wexner for all that he has done to build this business and for all the time that he has devoted to mentoring and coaching me and other leaders of our business. We're extremely grateful that we will continue to benefit from his input as Chairman Emeritus of the Board. I am also thrilled to be working with Sarah Nash, our new Board Chair and the other experienced leaders on our Board and management team. I'd like to acknowledge the unprecedented time we are living through right now and the uncertainty that the COVID-19 pandemic creates. We have taken actions to manage the business through the crisis successfully, with the primary prioritization on safety for our associates, our customers, and our communities. We have great appreciation for the smart and difficult work that all of our associates and partners around the world are doing on our behalf. We are all focused and energized by our opportunities to drive long-term shareholder value, including implementing a profit improvement plan at Victoria's Secret, separating the Victoria's Secret and Bath & Body Works businesses, and continuing to drive strong growth at Bath & Body Works. In the prepared commentary, which we released last night, we provided more detail on our response to the COVID-19 pandemic, our first quarter results, our go-forward plan for Victoria's Secret and PINK, and our outlook for the second quarter. We won't repeat those comments this morning in order to leave more time for your questions. Thank you, and back over to you, Amie.

Thanks, Andrew. That concludes our prepared comments. At this time, we'd be happy to take any questions you might have. [Operator Instructions] Now I -- thanks, and now I'll turn it back over to Angela.

[Operator Instructions] Our first question comes from Lorraine Hutchinson with Bank of America.

I was just hoping that you could provide an update on the reopened Bath & Body Works stores, how those are performing, how e-commerce is doing in those markets. And then if you could also speak to any stock-outs or talk to your ability to get back into the product that has been selling out online?

Thanks, Lorraine. We'll go to Andrew for that question.

Thank you, Lorraine. First, let me remind everyone that our first priority in any store reopening has been focused on the safety of our associates and our customers. I'd also say that while we made the incredibly difficult but appropriate decision to close all of our stores on March 17, we immediately began working on what would be required to reopen stores as quickly as possible and as safely as possible. And so we actually were able to have 2 pilot stores reopen here in the local Columbus market on April 3. So we have now over a month, 1.5 months of actual experience with these stores. Again, emphasizing safety has meant that our store operating model is almost completely different from what it was prior. What do I mean by that? We start each day by taking the temperature of all of our associates. We require that our associates wear masks either that we provide or that they bring from home. We also ask that, in many cases, they wear gloves. We provided individual aprons. We have moved away from shared shopping mesh bags to individual shopping bags, and we have practiced a significant amount of social distancing in the stores, which has meant that we have removed fixtures. We have marked stickers on the floor where customers should stand when they're in the store. We have significantly limited the number of customers that are allowed into any of our stores at 10% to 20% of the capacity of those stores depending on jurisdiction. We have reduced our hours of operation. And we are doing significant cleaning throughout the day as well as before and after openings, and we're doing that cleaning in a very visible way. Last but certainly not least, we've reduced the number of registers in stores and installed plexiglass barriers in between registers and in between the associate and the customer. And we are cleaning all of the surfaces that the customer would be in contact with after every interaction and transaction. So with all of that said, I would say we have been very encouraged by what we have seen qualitatively and quantitatively so far in those openings. Again, we have been, first and foremost, focused on safety, so we survey our associates every day to understand how comfortable are they with the work environment that we've provided. And we are also regularly surveying the customers through e-mails that have shopped in our stores, and we continue to get very high marks from both of those groups. On actual results standpoint, I should point out that we've been operating 2 different store model tests at this point. One, which is an open model, where we put in place all the safety measures that I just described. But we -- and the store is essentially open for business, but with a limited number of customers that are able to shop at any point in time. The other model that we've put in place is a call ahead or go online and buy ahead model, where we're not allowing open shopping in the store, but where transactions are placed by the customer ahead of time and they come and pick up the order once they get an email confirming that it's been fulfilled. That said, we have seen better success out of the first model, the social distancing model as we're calling it. And in terms of total results, again, I would caveat that this is a very small sample size. At the end of Q1, we had 23 stores reopened in the models that I've just described. But with those caveats, the performance that we've seen out of those open stores has been very similar to the type of trend we were seeing before we closed all the stores back on March 17. So encouraged by that performance. Your other question was around the performance of online and specifically online in the markets where we have reopened stores. So again, as you saw in our prepared remarks, our online business for the total quarter was very strong, with net sales up 85%. I think it's important to understand that within the time frame, the online channel started to perform significantly better than that total quarter of up 85% once the stores closed. So for the fiscal month of February, the online channel was up 33%, which is very similar to the trend we had seen in 2019 and 2018. For the month of March, net sales were up 60%. And for the month of April, net sales were up over 150%. Again, so as stores closed, the online business saw a significant increase. And that increase, while driven by soaps and sanitizers at up over a 300% comp and more than doubling the rate of penetration to last year, we saw all of our other key categories also performing at levels significantly higher than what they had been performing at historically as well. So good business across all categories. I believe your last question was around the stock-outs that we've been experiencing. I would say the good news is our supply chain has continued to perform very well through the crisis, with the notable exception, obviously, that the tremendous surge in demand in the sanitizer business has exceeded our supply chain in the early part of the first quarter. I would say we have now successfully caught up with that demand. And so you should be now seeing online more consistent availability of our sanitizer product, versus a month, 1.5 months ago, it might have been only available for a couple of days a week. And in our stores, as they reopened, we've been able to maintain our in-stocks across all categories at this point.

Great. Thanks, Andrew. Thanks, Lorraine.

Our next question comes from Alexandra Walvis with Goldman Sachs.

My question is on inventory management. Can you talk a little bit about the process that you went through to reduce inventory receipts quite significantly for the first half, why those were reduced so much more at Victoria's Secret and Bath & Body Works and whether that was just a function of the greater expectations for demand in Bath & Body Works. And any thoughts on how you're planning purchases for the second half?

Thanks, Alexandra.

Thank you, Alex. So yes, you saw in our prepared remarks that at Bath & Body Works, we did reduce inventory receipts relatively meaningfully. But as I just described, the performance that we've seen in our direct channel is up dramatically. And so in some categories, soaps and sanitizers specifically, we've actually had to significantly increase the amount of receipts that we would have expected versus last year because that category for the total first quarter, even with stores closed for half of the time, the soap and sanitizer business was actually up for the total quarter meaningfully. So we've increased receipts there. We have decreased receipts, as you would expect, in our other categories based on our current assumptions around store reopening cadence in the second quarter. But at the total level, we are very comfortable, not only with our total amount of inventory, but with the mix of inventory as we move into Q2 and then into Q3. I think it is important to remind everyone that, again, when the stores closed in the middle of March, the seasonal product that was available for sale at that point was early spring, in some cases, things like Easter product in our stores. And so as we do start to reopen the majority of our stores in the month of June and July, we will be opening in a semiannual sale type format, which, again, is similar to what we would be running normally in that time frame anyway. But in terms of your question, inventory levels and inventory mix at this point at Bath & Body Works, we feel very comfortable with.

Great. Thanks, Andrew.

Our next question comes from Kimberly Greenberger with Morgan Stanley.

Great. I wanted to ask about the range of options being considered for Victoria's Secret, given that you are on track to pursue a separation of the 2 divisions. And then secondarily, if you could talk about Bath & Body Works and some of the more permanent changes you expect in a post-COVID world, I would be interested to hear about your observations. And has this presented, in fact, an opportunity for you to accumulate new customers for that business?

Thanks, Kimberly. We'll start with Stuart.

Kimberly. With respect to Victoria's Secret, and we're referring to the business internally as VS newco. Kimberly, what we are intensely focused on right now is strengthening the foundation of that business, and even addressing the foundation of that business to manage through this crisis and to create a foundation for separation and for growth. And the elements to that work, I think you appreciate from our commentary that was provided, but I think it's important to review them because it provides very important context to the essence of your question, which is what options will we look at and generally in what time frames for the separation of Victoria's Secret. So as you've read, as we announced last night, first and foremost, we're closing approximately 250 stores in North America over the next several months. That's a very significant decision, an appropriate decision and one that we think will strengthen the business. But the details of that, the implementation of that, the effect of that is significant. So rationalizing real estate, more to come after that. But 250 stores closing is a big deal, and we're initiating conversations with landlords with respect to that. So that's kind of a key piece of work. Secondly, we are engaged in a complete, comprehensive detailed review of our entire home office organization, really with the exception of Bath & Body, there's a little work happening there. But as you know, it's a well-running business and it doesn't need much change. But with respect to Victoria's Secret newco and all the shared functions -- sourcing, production, technology, HR functions, finance functions, store design functions, real estate functions, the wide range of shared organizations today, we are embarking on a process to decentralize those functions to create 2 stand-alone companies. The amount of work involved in that -- and we're energized about the work, but the amount of work involved in that and doing that in a way that strengthens the business, clarifies accountability, retains key talent, that's a very involved piece of work. And with that is a substantial target for overhead dollar reduction, okay? And you will naturally ask, well, when will that be done? And we would expect that, that work will be largely concluded or concluded by the end of the second quarter, okay? So we're closing a bunch of stores, big deal. We're reorganizing, rationalizing, decentralizing, reducing overhead for a large home office workforce, that's in process. Thirdly, we've got work to do, and it's underway to address the losses and -- both on an OI and EBITDA basis in the U.K. and China. And you'll ask about those in detail, and we won't be prepared to comment in detail about them other than we're looking at all options with respect to those geographies in those markets. And then lastly, there are 2 more things that we're working on, is we've got to reopen all of our stores. So if you thought about selling a business literally in the moment where essentially all of your stores are closed and gave that serious thought for a minute, I know you're a serious person, you'd say, it's an interesting time to be actively marketing a business, right? So we would expect to have all the Victoria's stores certainly opened by the end of July. Our pace, we've got some range of pace in terms of the activity in June and July, but would expect to have the stores we aren't closing to be opened by the end of July. But as you again appreciate, there's a lot of work involved in that to do that in the ways that Andrew just described for Bath & Body, starting with safety of associates and customers. And then lastly, the management of inventory. So adjusting inventories, in Alex's earlier question, adjusting inventories for Victoria's. There's been a ton of work done there internally. And with our sourcing partners, and we believe we've managed it well, but there's more to do there. And so all those things are in-flight to strengthen the foundation of Victoria's, to allow the business to navigate appropriately through this unprecedented situation for retail and to then have a business that one could reasonably market for sale. So that's our thought process. The Board is heavily involved, as you would expect, led by now Sarah Nash, and they're getting regular updates as they should. And we'll consider a wide range of options for the business. But the ultimate goal here -- the goal, I won't say, ultimate, the goal is clear, 2 separate independent stand-alone companies. And having Bath & Body be a pure-play public company such that it gets appropriately valued in the market. It's a long answer, but it's a big question, and I hope responsive to what was on your mind.

Thanks, Stuart. Now we'll go to Andrew for the second part of the question.

Kimberly, thanks for the question. So as we think about the crisis and what the impact will be to the Bath & Body Works business both short-term and long term, I think, as we always do, we first ask ourselves the question of are we in the right businesses. And I think the very clear answer to that, that we're seeing, is a strong yes. So again, in our hand soap and sanitizer business, which last year was about 14% of the business, with the crisis that's occurred and the focus on safety, that business is clearly an essential part of our customers' daily routine. And so we were already a market leader in that category before the crisis. As I mentioned earlier, we've been able to grow our sales in soaps and sanitizers materially, even with the stores closed for half of the quarter, and so that is encouraging. And we're assuming, I think, appropriately that, that should continue to be a growth category for us as we look out into the foreseeable future. Also important to understand though that our other major categories of body care and home fragrance, we also believe are vital to her, not only here in the short-term but in the long term. Home fragrance, as everyone is spending more time out of necessity in their homes, the ability to turn your home into a sanctuary and to have it be reflective of your emotional state is something that we've heard qualitatively from our customers and we have seen in terms of our results, both in stores prior to and after -- prior to closure and after reopening as well as in our online channel. And then our body care business, with its emphasis on fragrances, lotions, bath and shower products, we believe continues to offer her a relatively inexpensive opportunity to pamper herself while she is isolated. And as we think long term, there's no reason why those categories and our emotional positioning around fragrance, our affordability that makes our products affordable enough for everyday use, while our quality and efficacy make them special enough to give as a gift, we absolutely believe will continue to be a strong positioning opportunity for us to go forward.

Thank you, Andrew.

I was going to ask because you had mentioned customer as well. And so I was going to add a little bit around what we are seeing from a customer standpoint. So obviously, with stores closed for half the quarter, store customers, we saw fewer of them than we did last year. But our direct business, as I mentioned, especially since stores closed, has seen market growth. And I think in addition to just the number of customers that we've now seen online, one of the metrics we obviously look at is the combination of new-to-channel and new-to-brand because, as you can imagine, using direct is both an absolute customer acquisition vehicle as well as the ability to turn a customer from a single channel customer into a dual-channel customer drives overall value. And we have seen very exciting results on that front in the time frame that the stores have been closed.

Great. Thanks, Andrew and Stuart and Kimberly.

Our next question comes from Dana Telsey with Telsey Advisory Group.

As you think about separating the businesses apart, which areas of operation -- how do you think about segmenting the businesses and the synergies that you used to have from being a joint organization being decentralized? What goes where? And how do you see the time frame of that evolving? And does it impact one's operating margin potential more than another?

So Dana, it's Stuart. I'll take it. In terms of how we think about it, as you appreciate in your question, first of all, it's complex and needs to be addressed thoughtfully. With that said, we're very comfortable that the amount of dissynergy -- with a couple of exceptions that I'll comment on, the amount of dissynergy between the 2 businesses is very manageable and shouldn't have a meaningful impact on either business' operating results. The 2 areas that will require the most thought are -- is technology, which by its nature is a significant function. And if one doesn't approach it thoughtfully in terms of a logical separation of the technology over a couple of year, maybe a 3-year period, one could incur cash and other costs in a way that's not necessary. So obviously, we expect to pursue a separation of the technology on the businesses on a thoughtful basis, and we would expect that we will have some sharing of technology for a 2- or 3-year period. Our systems aren't as integrated as some other retailers, it's important to know. Bath & Body's direct business, for example, is not riding on the same platforms that Victoria's business is riding on. And in fact, those activities today are outsourced. But technology would be one that deserves and will get appropriate thought as we separate these businesses. Maybe 2 others I'd comment on, the sourcing and production of beauty products. You know, Dana, that Victoria's Secret has a beauty business within it. It's a good business. It's a sizable business and running with good numbers, and shares organizationally resources and works with some of the same vendors -- many of the same vendors, I should say, as Bath & Body, but we believe that we can manage that well. And it's important to understand that scale economies aren't linear and straight. In fact, they're step functions. And one needs to very carefully understand how scale really works and where the steps really are in scale economies. And again, we think we can manage that area well. And then the last area that comes up a lot, which we believe is very addressable, would relate to the movement of goods, the inbound movement of goods from base of supply is largely separate today. As you understand, the sourcing base for Victoria's Secret is largely one that's international outside the United States, largely with the exception of Beauty, which I already commented on. And the sourcing base for Bath & Body is largely domestic, as you understand, in personal care and beauty. So the inbound transportation as a general matter, there are a few exceptions. But as a general matter, is generally not shared. The distribution and logistics aspects of the business, there is a sharing there in some regards, but the distribution centers themselves are largely brand-specific. The outbound transportation from central points in -- largely in the Midwest and specifically in Columbus, that outbound transportation is shared, and we have some scale there and we can retain that pretty easily. So with respect to movement of merchandise, again, relatively easy and being addressed. The overall point, Dana, I'd want to make is one of the perspectives coming out of the situation with Sycamore and part of the work in front of us over the next month to 45 days, is we're going to more aggressively and actively separate these businesses. We're going to use this time to do that, such that the ongoing support from LB or BBW remainco to VS newco, the nature and the extent of that is substantially less than what was contemplated in the arrangements with Sycamore. And we think that will serve the business well and more quickly and more appropriately separate the businesses. So part of that org work that I've mentioned is very much focused on a more accelerated decentralization of many of these functions. But again, technology, a little bit in the supply chain for Personal Care and Beauty, a little bit in distribution logistics, but we think we can manage through all that.

Thanks for the question, Dana.

Our next question comes from Ike Boruchow with Wells Fargo Securities.

Hope everyone is staying safe. Stuart, I guess 2 high-level questions for you. Talking about the alternatives internationally with VS and its store rationalization opportunity. Can you talk about what you think the ultimate size of the revenue base might need to come down as you start to manage the profitability for that brand? And then just on BBW, great digital business. The margins are obviously pressured given what's going on. But is there anything that's going on in the business now, whether it's the mix or just anything in general, that changes your view of what the operating margin profile of that business should be once the macro basically normalizes?

So Ike, I'll start on the Victoria's newco-related question. There's -- in the spirit of strengthening the foundation of that business, you appreciate the effect of closing roundly 250 stores in North America. We think there will be more store rationalization over the next several years as well. And you'd reasonably ask the number of stores. Obviously, as you move out in time, you're less certain of that. But there is an additional need to further rationalize the real estate in the business. In answer to your question, we see a pathway for a business that's, say, in the neighborhood of a $6 billion-ish business or a $5.5 billion business, one that mixes much more significantly to digital and one, obviously, that's substantially more profitable than the current or recent state of the business. So a big opportunity to have substantial growth in the digital channel. We're experiencing nice results here recently, but more strategically, big opportunity for growth with a good platform to start with. A rationalization of the store business, a big first step in this current year, but as you understand in your question, there is more to come. And what we see is a somewhat smaller but substantially more profitable business with a much better foundation, and then obviously a return to growth, which is what all of us are looking for, for our associates, for our customers, for shareholders. So that's the overall thought.

Thanks. And Andrew, for the second part of the question.

Ike, thanks for the question. So again, the nature of your question was around are we seeing anything specifically right now that makes us think differently, either because of mix or other factors about what our longer-term profitability, operating margin structure should look like, and my short answer on that would be no. Again, as a reminder, we have had a large direct business already. That direct business, as we've shared, historically, has performed at an operating margin very similar to our stores business. And while we are certainly seeing a significant shift to online here through the crisis time frame and would expect that some of that will be an ongoing shift for the long term. There's nothing inherent about that shift in mix that we believe would materially change the opportunity associated with our long-term operating margin structure as we move to 2021 and beyond.

Great. Thank you. Thanks, Ike.

Next question comes from Simeon Siegel with BMO Capital Markets.

Great. I hope everyone is doing well through this. Stuart, I think you gave a distinction between merch margin and product margin for BBW. Anything you could provide similarly for Victoria's? And then following up on that conversation just with the pullback of inventory, how you'd expect comp versus margin or just discounting to look. And then just for Andrew, just quickly, recognizing the updated square footage expectation for BBW this year, does anything change in terms of the long-term view on square footage that we've been seeing, White Barns, et cetera?

Simeon, it's Stuart. So I'm sorry. The question you're asking about the differences between product and merch margin for Victoria's newco is what, what's the question?

Just your thought on discounts versus -- or what we should expect for promotional cadence for Victoria's Secret, how that looks on this -- the product margin side.

Yes. Okay. I just want to make sure I wasn't missing something beyond that. So Simeon, as you would expect and addressed earlier in the questions and through our commentary, we have taken very significant action on inventory. Very substantial, hopefully thoughtful, I think it is, but very substantial action on inventory. One of the challenges in the business over the last 2 or 3 years is that we have had a view of revenue or sales that didn't materialize and have been challenged with promotion to clear goods with a softer revenue line. Said another way, we weren't buying as conservatively, certainly with the benefit of hindsight as we should have. As Rahm Emanuel said, I think he said it, others I'm sure have said it, never waste a crisis. So as serious a matter as this has been for our country and for retail and for our company, I don't, in any way, mean to make light of it. But the clarity of the need to take action on inventory and overhead and real estate, we're really quite seriously approaching all those subjects. And with a very substantial reduction in receipts, I would expect that any phenomena that we might have experienced over the last 2 or 3 years, where we have found ourselves to be somewhat overbought and in needing to drive promotion as a result of that, we're not going to be in that place this fall. Just to be clear, we will not be. The receipt reductions are very, very substantial. So that, along with, honestly, John and Amy being in seat longer, they've got -- they've learned a lot. They're talented people. They're forming their teams. They've been in role longer. The combination of those 2 things and some early indications online -- granted, got to be careful about interpreting online business right now, but I have lots of reasons to believe that the margin rate context should be substantially better for Victoria's as we move into the fall season and particularly in the fourth quarter for the business. With that said, as we open stores in Q2, we're going to be in semiannual sale mode. And so there will be, in the second quarter, margin rate pressure, as you would understand, given where we are in the calendar and the need to clear goods in Q2. It's a long answer, but a lot of reasons to believe that we should be in a better place with respect to margin rates at Victoria's.

Thanks, Stuart. Andrew?

Simeon, thank you for your question. So again, in terms of our real estate strategy for 2020, hopefully, it's understandable that our decision to slow down dramatically the pace of activity this year was driven by the overall company's desire to be much more conservative in terms of capital spending during these unprecedented times, not driven by any change in our either performance of the stores that we've remodeled and opened or our belief in the long-term opportunity that those remodels do provide to the business. As a reminder, we finished last year with just under 50% of our total North American fleet having gone through a remodel. Even with the ramp down number of projects that we will go through this year, we'll finish the year with about 52% of the fleet remodeled. And we remain -- even in the period prior to store closure, we remain very pleased with the results that we're seeing from those stores. And so as I look out to next year and beyond, again, depending on the overall financial health of the business, our intent would be to get back to a significantly larger number of projects in the years ahead. Hopefully, that helps.

Excellent. Perfectly. Best of luck to everyone. Stay safe.

Thanks, Simeon. [Operator Instructions]

Our next question comes from Mark Altschwager with Baird.

Maybe for Stuart, just understanding that it's difficult to give guidance in a time like this. Could you outline maybe some of the various cash flow scenarios that you're contemplating for the next couple of quarters? Would you expect to need to tap the revolver? And then along these lines, what are the cash flow implications of VS remaining part of LB for the near to medium term?

Sure. So as you would expect, our focus on managing cash flow and liquidity has been, if not the most, among the 2 or 3 most important things we've been doing since the crisis emerged. So our focus on it and actions taken to improve it, which have been outlined, have been very significant for all of the understandable reasons. And I would say generally consistent with actions taken by the industry, by the way. And so as you know, we converted the revolver to an ABL facility, and that's been disclosed and communicated. We have very conservative revenue projections for purposes of forecasting cash for the balance of the year. We will continue to consider raising additional financing as appropriate. We've done about 10 bond deals over the last 10 years. I checked with Tim Faber, who's our Treasurer and a terrific treasurer, by the way. We know how to do debt financings, and I don't mean that in an arrogant way. It's -- but we're familiar with it. And the markets are open to people situated like we are, we're aware of that. And so we'll be looking at the merits of additional financings as we move on. And we recognize that today, though, those markets are available to us. And so will we make some use of the ABL as we move through the year? We expect to, based on the forecast that we have. And will we also give serious consideration to raising additional financing? We will, with obviously the right conversations with the Board and approvals from the Board. And again, the markets are open to us. And earnings calls are important things to use to update the markets. And so we'll see what our specific plans are here shortly. But there are plenty of bankers calling us, and we're familiar with doing financings and the markets are open. So hopefully, that's a good sense of an answer there without being more specific.

Thanks, Mark.

Our next question comes from Tiffany Kanaga with Deutsche Bank.

Would you discuss in a little more detail your expected cadence from here for store reopenings across your brands, such as how many stores you might have open at the end of May and at the end of June? And I just want to confirm from your earlier comments today, would it be fair to characterize Bath & Body Works sales in open stores as in the range of the 20% comp you saw before the closing, even as we move further into May?

Thanks, Tiffany. We'll go to Andrew for that question.

Thank you, Tiffany. So again, as I stated earlier, the #1 priority with how we're running the business overall, but especially as we progress with reopening stores, is the safety of our associates and our customers, and that will obviously drive the pace at which we're able to reopen stores. That said, to your -- the first part of your question around what our current view of that cadence looks like, I can provide a little bit of color. So again, at the end of the first quarter, we had 23 stores reopened as part of the pilot. All of those stores were here in Ohio, and all of those were off-mall locations. As a reminder, about 45% of the Bath & Body Works overall North American fleet does exist in off-mall centers. As of this morning, we have progressed from that 23 stores that we had reopened at the end of April to now 66 stores reopened, and we now have stores operating across 8 different states. And we have, over the last week, actually reopened our first 2 mall locations. And again, important to say that our #1 priority as we do that, is looking at how are they operating from a safety standpoint for both our associates and our customers. At this point, we believe that, barring any issues that would arise associated with that guiding principle, we should be able to ramp up the pace of our store reopenings here through the rest of May and into June. So that at this point, we believe we will have the majority of our stores reopened by the end of the quarter. That said, in the first quarter, roughly half of -- the stores were open for roughly half of the quarter. Depending on the pace at which we're able to reopen here through the second quarter in June and July specifically, some of which still depends on markets, large markets that are still close to us, for example, California, where we have over 150 stores at this point, the pace of that will determine how many stores we're able to have open for what amount of time. But our current models would assume more like 1/3 to 40% of total stores opened for the equivalent of the full quarter, if you will. Hopefully, that's helpful. In terms of performance, yes, you did hear me correctly. That, again, with all the caveats that need to go along with it, a very small sample size. Again, only 23 stores that were open at the end of the quarter. Stores only open in off-mall locations, which means oftentimes there are other mall locations in that same trade area that are not open. But yes, the stores that have reopened have been performing in line with the comp trend that we saw before we ended up having to close all stores on March 17. Hopefully, that's helpful.

Great. Thanks, Andrew. Thanks, Tiffany.

Our next question comes from Oliver Chen with Cowen.

We were curious about some of the frameworks around thinking about the VS closures and also the topic of rent expense and what's equitable with different alternatives or scenarios, just given the reality of sales productivity. Would also love your thoughts on co-tenancy and anchors, and what may happen as this unfolds.

Thanks, Oliver. We'll go to Stuart.

Well, Oliver, it's obviously a very dynamic situation in terms of what's happening in mall-based retailing. And your -- this is your work, you understand the industry well. And we have important relationships with our landlords and developer partners. But with that said, we've got some serious discussions to have. We -- our real estate function is led by an individual, Jamie Bersani, who is among the best in the business literally. And our business context is clear, which is we need to get relief in the form of rent reductions, rent abatements, other economic concessions. And Jamie will be appropriately working with our landlords and developers to achieve those results. And obviously, to the extent we can't make the unit economics work, then we have to close stores. And we're closing -- announcing a closure of 250 stores. So it's a complex, dynamic situation. But ultimately, it's got to make sense economically for us. And there's a lot of work to do, a lot of conversations to be had, and we'll take the appropriate actions. And this part of our business is led by Jamie and a team that are deeply experienced. They know what they're doing. And we're clear-minded and aligned as a team about the situation that we're in at VS newco.

Yes. Thanks, Oliver. Thanks, Stuart. I would concur with everything that Stuart just said. I think, again, the 2 businesses are in a little bit of a different situation as it applies to the store strategy. And so while the guidance for Bath & Body Works does show a projection of closures, I believe, for the year of about 50 locations, that is more of a sense that, again, even though we are able to operate very effectively in off-mall locations, I think it's fair to assume that there will be some of the at-risk mall properties that may not come back to their pre-crisis levels of productivity. And so even though while Bath & Body Works has traditionally been very successful at performing in all venues, whether those are A malls, off-malls, outlet malls or even struggling malls, we are recognizing that, again, the solvents or viability of some of those locations may be less post-crisis. And so that's what you see in our forecast. But we still remain committed, as I mentioned earlier, to -- that our real estate remodel strategy, which has been very successful for the past 5 years, is something that we intend to go forward with as we move through the rest of this year and into the years ahead.

Best regards.

Thanks, Andrew. Thanks, Oliver.

Our next question comes from Janet Kloppenburg with JJK Research Associates.

Thank you, and good morning. Stuart, I wanted to just ask a quick question on Victoria's Secret real estate with 250 stores being closed. Is your assessment that, that is the full and complete downsizing necessary? Or are you considering another round as we go forward or in the scenario of business not rebounding at the levels that you might expect? And for Andrew, I congratulate you on your business trends. And as you think about the antibac business, I am just wondering about the opportunity you see to grow that business and that category, which now represents maybe 14%, 15% of sales. Could it become a substantially larger part of the business? And maybe you could talk a little bit about how you can further expand that opportunity.

Thanks, Janet.

So Janet, as I think I mentioned before, and it's okay because we want to make sure we're being clear, we would expect to have a meaningful number of additional store closures beyond the 250 that we're pursuing this year, meaning there will be more in 2021 and probably a bit more in 2022. Obviously, our ability to forecast that, we've got a point of view today, but that's dynamic. But in answer to your question, is it 250 and that's it? No, I would expect that there will be more. And again, this is all about strengthening the foundation, having the right-sized store business, responding to the changing consumer behavior around digital and having a more balanced mix, might end up being about 50-50 balanced mix, between the digital channel and our business and the store-related channel. And it will be a healthier business, a better business. So that's our game plan.

Thanks, Stuart. Andrew?

Janet, thanks for the question. So clearly, as we've talked about and as you shine light on, there is a big opportunity with the sanitizer business. I think one point of clarity would be that the sanitizer business, as a portion of the total soaps and sanitizer business that I referenced earlier which was -- that total was 14% of our business last year and is essentially doubling the sanitizer business, is the much smaller portion of that at about 20% of that total. It has obviously grown dramatically since then to the point where what was roughly $100 million business last year, probably could be, as we look out to this year and beyond, 2 to 3x of that size going forward. So a meaningful business, but certainly not anything approaching the majority of our business. One of the ways we're looking to expand it is not only selling more of the business that we're in, which, for the most part, has been the small 1 ounce individual PocketBacs, as we call them. But we're also here, as we move through the second quarter, ramping up the availability of additional sanitizer forms and sizes. And we do believe that, that portion of the business especially will continue to grow rapidly. As again, sanitizer is now something that will likely be part of all of our daily routines for the months and years ahead. So a meaningful opportunity.

Thanks, Janet. So I think we have time for 2 more questions.

Our last question comes from Carla Casella with JPMorgan.

My question relates to the split up of the 2 businesses. You mentioned that you expect you want Bath & Body Works to be the pure-play public company. Does that mean you'll need to relist it? Or would that remain the existing listing and then you just spin-off Victoria's Secret from that? And then where would the debt sit in that scenario?

Carla, it's Stuart. So in terms of the specific structure and form, those are things to be determined. Obviously, you know what our definitive agreement was with Sycamore as one way to accomplish a separation of the 2 businesses. And there was logic to that approach. And that particular approach will probably get heavy consideration as we move forward in terms of one way to structurally achieve what we've talked about. But Carla, I'd be premature to get into the details of -- in the regard that you're asking about with respect to how we'll best affect a separation of the businesses. But I would take notice of the approach that we pursued. Because based on facts and circumstances then, obviously, we felt that, that was an appropriate approach. Obviously, that will all get reconsidered in a new context. The commitment is clear. But all that will get reconsidered with the right advice and obviously, under the direction and approval of the Board. So I think it'd be premature, Carla, to get into those details. We'll work to be thoughtful about all of it, as you would expect.

Okay. And can you just say how long that you expect that to take? Is it like a 6 to 12 months to get through all of those considerations? Or is that 3 to 6? Any kind of a ballpark?

Well, what I would focus on, Carla, is the 4 or 5 things that I mentioned operationally, okay? The closures of stores, the reorganization and downsizing of our home office overhead, the work that we have in the U.K. and China, the reopening of stores, all that work. So that work will be intense in the second quarter and as we begin the fall season. But as we come out of that work and move through the fall season, that's when we'll be increasing our focus on the subject of how to best separate these businesses. So a specific time frame I want to be careful about, but I want to be crystal clear, the Board's been crystal clear itself and with management, which is the intention is very clear, we've got to get through these steps that I've mentioned and the work about how to best separate the businesses will intensify as we move through the fall season.

Thanks, Carla.

Our last question comes from Marni Shapiro with Retail Tracker.

Hey, everybody. It's good to hear everyone's voice is healthy, and welcome, Andrew. Not exactly what you were expecting for your first earnings call, I suppose. I have 2 kind of logistical questions, one for Stuart and one for Andrew. Andrew, in the stores prior to the closure, I noticed a lot of people coming in to just wash their hands. So -- and there's a line for your sinks at times. So if you could just update us on what that will look like in your stores go forward? And Stuart, at VS, could you talk a little bit about returns coming back from the online business, especially with the spike in April and how you plan to handle that? And also what the fitting room experience should look like because Victoria is a much more intimate experience, there's a lot of one-on-one conversation and contact, that's part of the whole experience, would you say, at Victoria's Secret?

Great. Well, let's start with Andrew.

Marni, thanks. And yes, you're right. This is a little different than I expected. In terms of your question around sinks, I might broaden it a little bit. There are many aspects of our store experience, sinks being one of them, open product testing being another piece that, clearly, we are having to operate very differently now in the store reopening pilot that we've done. And we're frankly trying to learn as we open more stores how to approach that going forward. I don't have all the answers right now. Again, as I've mentioned, our first and really primary and only priority is safety. And so in many cases, like on the use of sinks and like on the use of open product testing, we have paused their use here during the store reopening pilots. But I am hopeful that as we move through the balance of the year and into next year that we do figure out appropriate ways to take advantage of those things because we do believe those are and should continue to be competitive advantages for us.

Thanks. Stuart?

Yes. With respect to merchandise returns in stores and the fitting room experience, the very just candid, straightforward answer is we're testing and learning. Our priorities are the same, as Andrew articulated, and would be the case, I think, for any retailer, which is, first and foremost, is how do we keep associates and customers safe. And with respect to the return of merchandise and the use of fitting rooms, we've got a lot to learn about that. And as we have that learning, we'll adjust. But I'm not going to sit here and tell you that we've got that all figured out because the honest answer is we don't. We understand the importance of those things in the running of our business. And we'll be looking at a range of options as will others similarly situated in the industry, and we'll learn as we go. So we -- those are important subjects, we agree. And I would say that at this point, we're learning about how to best address those parts of the experience.

Thanks, Marni. That concludes our call this morning. Thank you for your continuing interest in L Brands, and we hope you all stay safe and well. Thanks.

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