L Brands to Sell La Sanza Operations, Inks Deal with Regent
L Brands, Inc. LB has entered into a definitive agreement to sell La Sanza business operations to an affiliate of Regent LP — a private equity firm. Well, the company has been reviewing strategic options for this unit, thanks to sluggish performance. Let’s take a closer look at the latest announcement.
What Does the Deal Entail?
Per the terms of the deal, Regent will procure La Sanza’s home office organization, e-commerce, international partnerships and North American stores. L Brands will sell all La Sanza assets in exchange of the consideration that Regent will undertake the stores’ liabilities. L Brands will also be provided suitable compensation in the future, if Regent pursues the sale or monetization of La Senza. The deal is most likely to be completed by January 2019.
The company estimates La Senza’s revenues and operating loss in 2018 at $250 million and $40 million, respectively. For financial reporting purposes, these figures will be included under the company’s Other segment.
Is This a Prudent Move?
We note that L Brands acquired La Sanza in 2007. Unlike other flagship stores of the company, La Sanza did not gain much footing in the United States. Consequently, management stated that it is exploring all possible alternatives for this business. Moreover, stiff competition in the retail realm has been compelling the company to move away from less productive businesses, such as La Sanza, and focus on prospective areas like Bath & Body Works.
Wrapping Up
L Brands is working toward repositioning and revamping its business. In this respect, the company earlier had unveiled intentions to shut Henri Bendel stores. Apart from this, the company is working toward improving store experience, localizing assortments and enhancing direct business. These efforts are particularly targeted toward augmenting the performance of brands like Victoria’s Secret Lingerie, PINK and Victoria’s Secret Beauty. L Brands believes that these measures will generate additional sales and increase store transactions through higher conversion rate. Additionally, the company also focuses on innovation and expanding its brands internationally.
We believe that such well-chalked efforts have aided this Zacks Rank 2 (Buy) company to become a popular name in lingerie, personal care and beauty categories. The stock has gained 11.9% in the past three months, against the industry's decline of 15.4%.
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