Leslie Wexner isn’t done with fashion Darwinism just yet.
And Wall Street is applauding the L Brands Inc. chief executive officer’s willingness to keep cutting.
The company said it was “pursuing all alternatives” for La Senza, which it estimates is on track for operating losses of $40 million this year on sales of $250 million.
That effectively puts the lingerie brand on the block just as the firm’s much larger Victoria’s Secret business struggles to find its footing. L Brands spent $600 million to buy La Senza in 2007.
Together with last month’s decision to shutter Henri Bendel, the company is checking out of businesses that are on pace to drive $85 million in operating losses this year.
Investors, who have been waiting much longer than promised for a turnaround at Victoria’s Secret, approved and sent shares of L Brands up 5.9 percent to $30.20 in what was overall a bad day for the markets.
“As part of an ongoing effort to drive shareholder value and in order to focus on its larger core businesses, the company announced that it is pursuing all alternatives for its La Senza business,” L Brands said. “La Senza currently has 126 company-owned and operated stores in North America and 188 non-company-owned international stores.”
Wexner has been working to reinvigorate the massive Victoria’s Secret business, which has a commanding position in lingerie, but lost its way as young shoppers turned to newer brands and styles and sought a vision of sexiness that isn’t as overt.
Part of the prescription at Victoria’s Secret has been to cut — eliminating apparel and swim as well as the brand’s famed catalogue.
But Wexner, who founded the business in the Sixties and is a legend of specialty retailing, is practiced at building up businesses and has proven more than ready to change course and focus operations.
L Brands today consists of Victoria’s Secret, Pink and Bath & Body Works. But over the years, Wexner built or acquired several other prominent businesses only to later part ways with them one way or the other. The list includes manufacturing firm Mast Industries, Express, Lane Bryant, Lerner, Limited Too, Abercrombie & Fitch and Galyan’s Trading Co.
Victoria’s Secret’s did show some signs of traction last month, when comparable sales rose 1 percent after a 5 percent decline a year earlier. Growth in lingerie and beauty was offset by a decline at Pink.
But to get those sales, the company has had to cut prices.
“The merchandise margin rate was down significantly [compared] to last year, driven by increased promotional activity,” a spokeswoman said on a call recorded for investors. “In October, we will focus on new fashion through our Very Sexy collection in the lingerie business and everyday loungewear in the Pink business.”
Simeon Siegel, an equity analyst at Instinet, noted that Pink has not posted a monthly gain since January after years of growth.
He said Pink posted sales just shy of $3 billion last year and that, “the brand’s health and understanding downside are critical” issues for investors.