(Reuters) - L Brands (LB.N) said on Thursday it was pursuing options for its money-losing luxury lingerie brand La Senza as it focuses on core businesses such as Victoria’s Secret and Bath & Body Works, sending its shares up 12 percent.
L Brands has been trying to reset the Victoria’s Secret brand and its Pink lingerie business to stem declining sales due to intense competition from American Eagle Outfitter’s (AEO.N) Aerie and upstarts such as Adore Me and Third Love.
The company’s brash marketing and dark store environments have also proved to be out of step with what modern customers want, analysts have said.
“La Senza news is good, but LB is still overstored with rising competition, which yields continued margin erosion,” Jefferies analyst Randal Konik wrote in a note. “This company has bigger problems that need addressing.”
L Brands, which bought Canadian chain La Senza for about $700 million in early 2007, said it estimates that the brand will post an operating loss of $40 million and sales of about $250 million for the year.
Bernstein’s Jamie Merriman also welcomed the La Senza decision, saying that she does not see the brand becoming a positive contributor to operating profit.
The announcement comes as L Brands said last month it would shut down operations at another non-core business - luxury fashion accessories retailer Henri Bendel.
“(The La Senza move) along with the decision to close Henri Bendel, is a signal that management is focused on improving profit and taking the steps necessary to transform the business,” Merriman said.
Comparable store sales at Victoria’s Secret rose 1 percent in September, the first rise in four months, while sales at Pink continued to decline.
L Brands also reported a 5 percent increase in same-store sales for the five weeks ended Oct. 6.
Shares of the company were up 11 percent to $31.57 in morning trading on Thursday.
La Senza has 126 company-owned and operated stores in North America and 188 non-company owned international stores.
Reporting by Aishwarya Venugopal in Bengaluru; Editing by Saumyadeb Chakrabarty