Lebanese PM: new budget start of “a long road” to economic safety

Saad Al-Hariri said the 2020 budget would not take as much time to create as the 2019 budget. (AFP/File)
Updated 26 May 2019

Lebanese PM: new budget start of “a long road” to economic safety

  • Lebanese PM said the new budget is only the start of the changes for the country
  • Lebanon has one of the biggest debts in the world

BEIRUT: The Lebanese draft state budget for 2019 is the start of a “long road” and shows Lebanon is determined to tackle public sector waste, Prime Minister Saad Al-Hariri said, after his unity cabinet wrapped up marathon talks on the plan.
The budget finalized by the government on Friday cuts the deficit to 7.5% of GDP from 11.5% in 2018. It is seen as a critical test of Lebanon’s will to launch reforms that have been put off for years by a state riddled with corruption and waste.
“The 2019 budget is not the end. This budget is the beginning of a long road that we decided to take in order to lead the Lebanese economy to safety,” Hariri said in a speech at a Ramadan iftar meal on Saturday.
Lebanon’s bloated public sector is its biggest expense, followed by the cost of servicing a public debt equal to some 150% of GDP, one of the world’s heaviest debt burdens.
The government, which groups nearly all of Lebanon’s main political parties, met 19 times to agree on the budget. Hariri said the budget for 2020 would not take that much time “because now we know what we want to do.”
“The 2019 budget is the beginning of the process of what we want to do in 2020, 2021, 2022 and 2023,” he said, according to a transcript of his remarks sent by his office.
The cabinet is due to meet on Monday at the presidential palace to formally seal the process before the budget is referred to parliament.
The budget could help unlock some $11 billion in financing pledged at a Paris donors’ conference last year for infrastructure investment, if it wins the approval of donor countries and institutions.
Hariri said the budget was a message to the Lebanese, financial markets and friendly foreign states that Lebanon was determined to “address the weakness, imbalance and squander in the public sector.”
Measures to rein in the public sector wage bill include a three-year freeze in all types of state hiring and a cap on extra-salary bonuses. State pensions will also be taxed.
A big chunk of the deficit cut stems from tax increases including a 2% import tax and a hike in tax on interest payments.
The government also plans to cut some $660 million from the debt servicing bill by issuing treasury bonds at a 1% interest rate to the Lebanese banking sector.
Fears the budget would lead to cuts to state salaries, pensions or benefits triggered weeks of strikes and protests by public sector workers and military veterans.


Struggling Victoria’s Secret sold as women demand comfort

Updated 22 February 2020

Struggling Victoria’s Secret sold as women demand comfort

  • Chairman calls time following difficult year of Epstein links and controversy over chief marketing officer comments

NEW YORK: Victoria’s Secret has a new owner. Now, the big question is whether the once sought after but now struggling brand can be reinvented for a new generation of women demanding more comfortable styles.

The company’s owner, L Brands, said that the private-equity firm Sycamore Partners would buy 55 percent of Victoria’s Secret for about $525 million. The company, based in Columbus, Ohio, will keep the remaining 45 percent stake. After the sale, L Brands will be left with its Bath & Body Works chain and Victoria’s Secret will become a private company.

Les Wexner, 82, who founded the parent company in 1963, will step down as chairman and CEO after the transaction is completed, and become chairman emeritus. Wexner has faced seperate troubles, including questions over his ties to late financier Jeffrey Epstein, who was indicted on sex-trafficking charges.

The selling price for Victoria’s Secret signifies a marked decline for a brand with hundreds of stores that booked about $7 billion in revenue last year.

In a statement, Wexner said the deal would provide the best path to restoring Victoria’s Secret’s businesses to their “historical levels of profitability and growth.” The deal will also allow the company to reduce debt and Sycamore will bring a “fresh perspective and greater focus to the business,” he said.

To successfully turn around Victoria’s Secret, Sycamore will need to change up the corporate culture, reinvent fashions and redesign the stores to make them more contemporary, experts say. Sycamore manages a $10 billion portfolio including retailers as Belk, Hot Topic and Talbots.

The management team at Victoria’s Secret essentially was designing what men wanted, and not catering to women’s tastes, said Neil Saunders, managing director of GlobalData Retail.

“The brand is very embedded in the past,” said Saunders. “It was always about men feeling good. It should be about making women feel good about themselves.”

Victoria’s Secret has an unparalleled history of success. The brand was founded by the late Roy Larson Raymond in the 1970s after he felt embarrassed about purchasing lingerie for his wife. Wexner, the founder of the then Limited Stores Inc., purchased Victoria’s Secret in 1982 and turned it into a powerful retail force. By the mid-1990s, Victoria’s Secret lit up runways and later filled the internet with its supermodels and an annual television special that mixed fashion, beauty and music.

That glamor has faded and so have sales in the last few years. The show was canceled last year, and shares of Victoria Secret’s parent have gone from triple digits less than five years ago to a quarter of that today.

Victoria’s Secret struggled to keep up with competition and failed to respond to changing tastes among women who want more comfortable styles. Rivals like Adore Me and ThirdLove, which have sprouted up online and marketed themselves heavily on social media platforms like Instagram, have focused on fit and comfort while offering more options for different body types. Meanwhile, American Eagle’s Aerie lingerie chain, which partners with women activists like Manuela Baron, has also lured customers away from Victoria’s Secret.

And in the era of the “Me Too” movement, women are looking for brands that focus on positive reinforcement of their bodies.

“Victoria’s Secret will need to empower women, not make them spectacles,” said Jon Reily, senior vice president and global head of commerce strategy at digital consultancy Isobar.

Stacey Widlitz, president of SW Retail Advisers, a retail consultancy, said that Victoria’s Secret designs in the last few years had gone in the opposite direction to what women wanted, ever sexier and poorer in quality.

And while last year Victoria’s Secret started featuring more diverse models, including its first openly transgender model, the moves fell short.

Victoria’s Secret suffered a 12 percent drop in same-store sales during the most recent holiday season. L Brands said on Thursday that same-store sales declined 10 percent at Victoria’s Secret during the fourth quarter. Bath & Body Works, which has been a bright spot, enjoyed a 10 percent increase. The skincare chain represents more than 80 percent of L Brands’ operating profit.

“The (Victoria’s Secret) brand has lost its way, while the lingerie market is not large or high growth, and has become commoditized,” Randal Konik, an analyst at Jefferies, wrote Thursday. “Furthermore, with athleisure taking over, the need for regular bras continues to wane.”

The company has also been beset by allegations of a toxic work environment and its founder recently apologized for his ties to Epstein, who was found hanged in his cell after federal indictment for sex trafficking of minors. L Brands’ Chief Marketing Officer Ed Razek resigned last August after making controversial comments about why transgender models shouldn’t partake in its annual fashion event.

Epstein started managing Wexner’s money in the late 1980s and helped straighten out the finances for a real estate development backed by Wexner in a wealthy suburb of Columbus. Wexner has said he completely severed ties with Epstein nearly 12 years ago and accused him of misappropriating “vast sums” of his fortune.

Wexner offered an apology at the opening address of L Brands’ annual investor day last fall, saying he was “embarrassed” by his former ties with Epstein.

Wexner is the longest-serving CEO of an S&P 500 company. He founded what would eventually become L Brands in 1963 with The Limited retail chain, according to the company’s website. Wexner owns approximately 16.71 percent of L Brands, according to FactSet.

Mike Robbins, a San Francisco-based corporate culture expert who has advised chains including Gap and Sephora, said the team at Victoria’s Secret would have to retrain workers and hire more people with diverse voices.

“They have a lot of work to do — within the company and also outside with the customers,” Robbins said. “The companies that are able to have (a) great culture attract the best employees.”