L Brands selling La Senza

Dive Brief:

L Brands on Thursday announced a definitive agreement to transfer ownership and operating control of its Canadian La Senza lingerie brand — 100% of its assets including the home office organization, North American stores and e-commerce and international partnerships — to an affiliate of private equity firm Regent LP.
The deal, expected to be completed next month, will have Regent assuming La Senza's liabilities and provides L Brands future consideration if it sells or otherwise monetizes La Senza, according to a company press release.
The brand is included in L Brand's "other" segment, which in the most recent quarter reached $155.9 million in revenue, up from $148.2 million in the year-ago quarter. The company estimates that La Senza's 2018 revenues will reach about $250 million and its operating loss will be about $40 million, according to its release Thursday.

Dive Insight:

With its flagship unit, Victoria's Secret, faltering in a lingerie segment challenged by changing consumer preferences and buying behavior, L Brands CEO and Chairman Les Wexner said the company is turning its focus on its largest brands.

As part of that effort, in September the company shuttered its upscale Henri Bendel women's apparel banner, which had been open for 123 years, including the closure of all 23 stores and its e-commerce site. Wexner knows the value of exiting a declining business, having sold off his first endeavor, The Limited, in 2007 after 44 years.

The sale of Henri Bendel and La Senza could provide at least some comfort to investors watching the company confront sales declines at Victoria's Secret, which remains the market leader with billions in sales but faces steep competition from direct-to-consumer startups and a thriving Aerie brand from American Eagle, among other rivals. Aerie store comps soared 32% in the most recent quarter and AEO announced it will accelerate Aerie store openings, while Victoria's Secret store comps fell 2% following a 4% decline a year ago. Taking out e-commerce, Victoria's Secret's third quarter physical store-only comps fell even further at a 6% decline.

Plus, La Senza was a "drag on the company," according to retail analyst Jane Hali, CEO of Jane Hali & Associates. "I have seen it many times in London. It never looked good, more like a sexy Victoria's Secret with less taste at cheaper prices."

But it's also a sign that the fundamental strategy at L Brands of "'own[ing] the customer from cradle to grave' doesn't work," according to Lee Peterson, executive vice president of brand, strategy and design at retail design firm WD Partners. "It didn't work for L Brands in apparel (Justice, Express, Limited, Lerner, Lane Bryant) and it's not working in lingerie," he told Retail Dive in an email. "It's a move that shouldn't have happened in the first place as the cannibalism factor was obvious from the get-go."