Declining Sales at La Senza

-There's a reason why Victoria's Secret models are the public face for U.S. retailer Limited Brands. The popular intimate apparel brand, with reasonable support from Bath and Body Works, is right now driving Limited's growth.

Limited had its best year in 2010 and its revenues are up 7% on a last-12-months basis, at $10.3 billion, despite consumer spending remaining overall tight during that period in the United States, where the bulk of its 2,600 stores are located.

Declining Sales At La Senza

But the growth and energy associated with Victoria's Secret and Bath and Body Works are absent in a handful of other product ranges that Limited also owns, most notably La Senza, another women's apparel brand; and Henri Bendel, known for its high-end handbags.

And as another economic cycle warms up, Limited may have to seriously ask whether it is really worth holding on to these two brands or sell them and reinvest the proceeds in globally expanding its Victoria's Secret brand.

La Senza is the No. 1 lingerie apparel chain in Canada with 250 self-owned stores, while Henri Bendel sells upscale accessory products through a flagship Fifth Avenue store and 10 other stores.

However, Limited's struggle with La Senza is well known. It paid top dollar, nearly 50 % premium, when it acquired the company for $628 million in 2007.

But La Senza's net sales have decreased largely due to a lack of demand for La Senza merchandise, which has failed to appeal outside of Canada. Limited Brands's acquisition did not include LA Senza UK, which is the United Kingdom and Ireland franchise, and ironically, has recently been acquired by Middle Eastern retail group Alshaya, in a pre-pack administration deal.

Limited Brands has already closed 72 stores in the last couple of years. Not only did La Senza sales decline 6% in 2010, average sales per selling square foot has decreased 13% for La Senza stores to CAD397 in 2010 from CAD458 in 2008. That compares to increases of 7% and 4% at Victoria's Secret and Bath & Body Works, respectively over the same period.

La Senza's net sales in 2010 was $398 million. NYSE listed Hanesbrands Inc. , which sells its undergarment apparel both through distributors and direct retail, trades at 1.0x le sales while Limited Brands trades

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