La Senza owner AlShaya stands to lose around £65m if no deal is secured to save the lingerie business, which went into administration for the second time in two years this week.
Robert Moran, Mike Jervis and Stuart Maddison from PricewaterhouseCoopers (PwC) were appointed joint administrators of La Senza UK trading company Marnixheath on Tuesday (July 1). The administration does not affect the business in North America or the rest of the world.
The move, which also affects frozen yoghurt franchise Pinkberry, puts more than 750 jobs at risk across the 55 La Senza shops and three Pinkberry stores in the UK. The La Senza stores are in prime locations, including on London’s Oxford Street, Westfield London, Westfield Stratford City and Trinity Leeds.
Middle Eastern retail group AlShaya acquired the La Senza UK franchise through a pre-pack administration purchase in January 2012. It has since sustained losses of around £25m a year, and is thought to have covered this each year by racking up debt estimated by one well-placed source to be around £65m.
The source indicated while the wider economy was to blame in part, restrictions around the type of product La Senza was able to stock from its brand owner and principal supplier Limited Brands were the main factor.
“There is a challenge in being a franchisee when you have a single stock supplier – it makes it difficult to control the type of inventory you have,” the source told Drapers.
Another source agreed, saying Limited Brands had “not allowed [La Senza] to be as commercial as it needed to be in the UK”.
After AlShaya, landlords are expected to be the second biggest losers – although the most recent rent bill for the quarter has been covered. Total debts are still being estimated by PwC, which is hoping to trade the company until the next rental quarter in September.
It is thought the first stores could close as early as next week, although PwC said it was “making every effort to help staff at this difficult time”. It is not yet clear how head office staff will be affected.
PwC is seeking a sale, but sources suggested La Senza could not continue as a going concern unless the stock and brand were overhauled – and as Limited Brands had not adapted its approach to the UK market under AlShaya, this was seen as unlikely.
Limited Brands had not responded to requests for comment as Drapers went to press.
Moran said: “[We] are continuing to trade the businesses as normal while discussions take place with interested parties in respect of a sale. We welcome any approaches to purchase all or part of the portfolio.”
A spokeswoman for Marnixheath said the decision had been made “with regret”, and added: “We will work closely with [PwC] as they explore their options, and if they choose to close all or part of the business every effort will be made to support staff in finding alternative employment.”
The collapse comes a week after women’s clothing retailer Jane Norman entered administration, affecting 24 stores and 157 jobs.