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L Brands to Sell La Senza to Private Equity Firm

L Brands has entered into an agreement to sell its La Senza brand and all assets and liabilities to a private equity firm based in California.

The sale comes just months after Victoria’s Secret parent company announced that it would be closing all 23 locations of its handbag and accessory chain, Henri Bendel, by January 2019 to focus on raising shareholder value and growing its core businesses. After a rough first quarter in 2018, L Brands failed to deliver on earnings guidelines in two straight quarters.

One hundred percent of the La Senza assets will be transferred to Regent LP in exchange for the complete assumption of the retailer’s operating liabilities. L Brands estimates that La Senza’s 2018 revenue will be approximately $250 million but carry a $40 million loss.

The sale also includes La Senza’s home office and all of its stores in the United States and Canada, including its global retail partnerships. According to the latest data available from L Brands, La Senza operates 118 stores in Canada and 12 stores in the U.S., seven of which opened this year.

L Brands has been looking for ways to increase profits ever since sales for Victoria’s Secret started slipping last year. Currently, L Brands’ most profitable brand is Bath & Body Works, a title Victoria’s Secret held until recently. Comparable sales for Victoria’s Secret were flat to down slightly in the third quarter at $1.52 billion compared to last year’s Q3 sales of $1.53 billion. Compare that to the 12 percent increase in comparable sales for Bath & Body Works over the same time period, which racked up $956.2 million in Q3—up from $815.8 million in Q3 of FY2017.

Victoria’s Secret stores, not including e-commerce sales, have seen a sales decrease of 5 percent, year-to-date. Physical store sales totaled 1.18 billion in Q3 for the brand, compared to $1.24 billion in the same period during 2017. Victoria’s Secret Direct’s e-commerce business now accounts for around 23 percent of the brand’s total revenue and is still growing, thanks to $351 million in sales so far this year. That number is up from $295.9 million in e-commerce sales in Q3 of 2017.

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But, the final straw for L Brands was likely when the organization posted quarterly results in November that revealed a company-wide net operating loss of $42.8 million caused by an 89 percent drop in operating income during the third quarter. L Brands said decreased merchandise margin at Victoria’s secret was the likely culprit after a period of increased promotional activity. Jan Singer, Victoria’s Secret CEO, resigned shortly after the quarterly results were released.

At the time, the company said it had “made some tough decisions” during the quarter, including deciding to close Henri Bendel and “the pursuit of alternatives for La Senza” which culminated in its deal with Regent LP.

Regent has been involved in a series of acquisitions over the last few years. In 2017 it purchased the Sunset lifestyle magazine from Time Inc. and the organization also owns Supercuts and Regis Salons after purchasing both from Regis Corporation in 2016. In an interview with the L.A. Business Journal, Regent founder Michael Reinstein said the firm is looking to scale its retail business, particularly in the Midwest, where it only runs roughly a dozen stores.