Victorias Secret parent L Brands shares jump on search for alternatives for La Senza

Victoria\s Secret parent L Brands\ shares jump on search for \alternatives\ for La Senza
L Brands Explores Options for La Senza Chain
Victorias Secret parent L Brands Inc. could be shedding another business: La Senza, which L Brands describes as the worlds sexiest lingerie at seriously hot deals.

In an earnings release Thursday, L Brands said it will pursue all alternatives for its La Senza business as part of its effort to focus on the larger core business.

In addition to its decision on La Senza, L Brands announced net sales of $1.06 billion for the five weeks ended Oct. 6, 2018, an 8% increase compared with the prior year. Comparable sales jumped 5% over the five-week period ended Oct. 7, 2017. That helped boost its net sales for the 35 weeks ended Oct. 6, 2018, by 7% to $7.52 billion, with comps jumping 3% over the same period.

La Senza has 126 company-owned stores in North America and 188 international stores that arent owned by the company, according to the earnings release for the period ended Oct. 6. L Brands LB, +5.93%   estimates that La Senza will have 2018 revenue of $250 million and an operating loss of $40 million.

L Brands La Senza could be sold or closed

On a day when the Dow Jones Industrial Average DJIA, -2.13%   fell 545 points, L Brands stock rose nearly 6%.

The markets liked the move to shop around its La Senza brand, but even if that proves successful, it doesnt fix some of the companys core problems of increased competition and margin declines. But at the very least, this signals to investors that management is taking steps to improve profitability and knows it needs to drastically alter its business.

L Brands said sales for five weeks ending Oct. 6 were $1.058 billion, up from $981.6 million last year. Same-store sales were up 5% for the period.

Shares of L Brands Inc. (NYSE:LB) — a leader in womens intimate and other apparel, and personal-care, home-fragrance, and beauty products — were up roughly 10% as of 10 a.m. EDT on Thursday after the company announced monthly sales and, separately, that it was exploring options for its money-losing La Senza luxury lingerie brand.

The FactSet consensus for the fiscal third quarter through October is for sales of $2.69 billion and same-store sales growth of 1.2%.

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Victorias Secret same-store sales were up 1%, with growth in lingerie and beauty offset by declines in Pink, the brand focused on college-aged shoppers.

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L Brands announced in September that it will shutter Henri Bendel department stores and the accompanying website in January.

Notable callouts from this month include ongoing strength and weakness at Bath & Body Works and Pink, respectively, promo-driven growth at VS Lingerie, and most interesting, introduction of the fact that L Brands has a second ~$40 million money-losing business that could be removed next year, suggesting an ~$85 million year-over-year EBIT [earnings before interest and taxes] lift simply by closing the doors on the two businesses, wrote Instinet analysts led by Simeon Siegel.

The Victorias Secret brand has struggled to regain its footing as trends shift toward bralettes and away from the padded, structured bras the brand is known for. The business exited the swim category, and its major marketing vehicle, the televised Victorias Secret Runway Show, has seen ratings decline.

Pink has not posted a monthly gain since January, and at just shy of $3 billion last year, the brands health and understanding downside are critical, Instinet said.

L Brands shares are down nearly 50% for the year, while the S&P 500 index SPX, -2.06%   is up 2.1% for the period.

Tonya Garcia is a MarketWatch reporter covering retail and consumer-oriented companies. You can follow her on Twitter @tgarcianyc. She is based in New York.

L Brands Inc. on Thursday said it would pursue all alternatives for its La Senza lingerie and intimate-apparel chain as it focuses on its larger core businesses.

The Columbus, Ohio, parent of Victorias Secret and Bath & Body Works said La Senza has 126 company-owned stores in North America and 188 noncompany-owned international stores.