La Senza Corporation

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La Senza Corporation

1604 St. Regis Boulevard
Dorval, Quebec H9P 1H6
Canada
Telephone: (514) 684-7700
Toll Free: (877) 644-0551
Fax: (514) 684-0258
Web site: http://www.lasenza.com

Public Company
Incorporated: 1982 as Suzy Shier Inc.
Employees: 6,063
Sales: $189.1 million (2003)
Stock Exchanges: Toronto
Ticker Symbol: LSZ
NAIC: 448120 Women's Clothing Stores

La Senza Corporation is a major Canadian retailer of women's lingerie and apparel, avoiding the sexy niche carved out by Victoria's Secret and Fredericks of Hollywood in favor of focusing on high quality merchandise sold at affordable prices. Based near Montreal, the company owns and operates more than 200 La Senza Lingerie stores in Canada, and another 140 stores located in 18 countries, which includes licensed operations in the United Kingdom, the Middle East, and elsewhere. In addition, the company owns and operates more than 80 La Senza Girl stores, which target girls between 8 and 14 years of age. Through subsidiary Wet Seal, the company has operated in the United States since 1984, but only since 2003 has it attempt to crack the U.S. market with La Senza Lingerie. Although a public company, La Senza is 90 percent owned by chairman and CEO Irving Teitelbaum.

Suzy Shier: Mid-1960s to Mid-1980s

Teitelbaum, La Senza's cofounder, was born to Polish immigrants who came to Canada after World War I. He went to college at McGill University, then transferred to Sir George Williams College, where in June 1960 he graduated with a bachelor of commerce degree. Shortly thereafter he married and began his retail career, going to work for his father-in-law, Irwin Shier, who owned a junior department store in the Quebec area. Over the next several years he gained a practical education in the importance of catering to customers. He told Canadian Business in 2002 that working for a small town department store was an excellent training ground because "You're not making new customers every day, so you have to treat each person who comes into your store like a king or queen." In 1966, Shier was looking to open another department store when he came upon a mall in a desirable location, Sherbrooke, Quebec, but it only had a woman's wear shop available to lease. Aware that junior fashion was becoming very popular, he decided to lease the space and open a store, which would be named Suzy Shier, and offer trendy, yet moderately priced, apparel to the junior market. By this time, he had another son-in-law, Stephen Gross, who teamed with Teitelbaum to open the first Suzy Shier store in 1966. After Shier died in 1968, Teitelbaum and Gross began to aggressively expand the Suzy Shier concept.

Over the course of the next decade Suzy Shier grew into a 22-store chain with units spread across Canada, generating sales of $7 million Canadian in 1975. At this point, the brothers-inlaw needed more capital for expansion and in September 1975 they sold a 50.1 percent interest in Suzy Shier to Dylex Ltd., a Toronto-based holding company with a number of retail chains in its portfolio. Teitelbaum and Gross remained in charge of Suzy Shier, with Teitelbaum assuming the lead management role. Over the next ten years, with Dylex's backing, the chain was able to add another 50 units, with shops located in every major Canadian city as well as other smaller locales, such as Timmins, Sudbury, Sault Saint Marie, and Thunder Bay.

Wet Seal Acquired in 1984

During this period, Teitelbaum and Gross became interested in the U.S. market and took notice of a 16-store, Irvine, California-based chain, The Wet Seal Inc., which sold contemporary fashion apparel and accessories to juniors. Convinced that Wet Seal, despite losing money, was a good complement to Suzy Shier, they acquired an 80 percent interest in 1984 (half of which was owned by Dylex), made it profitable, and steadily expanded the chain in the United States. A key executive credited with the growth of Wet Seal was Kathy Bronstein, who in 1985 joined the subsidiary as the head of the merchandise group. She brought with her a good deal of experience in the junior market place. After earning an advertising degree from the University of Florida, she became an assistant buyer for a Philadelphia, Pennsylvania, chain called Deb Shops, then became the buyer for junior sportswear at Jordan Marsh. She relocated to southern California in 1979 to become a buyer for Fashion Conspiracy, followed by a stint with the Wild West chain before coming to Wet Seal. By 1992, she became the company's chief executive officer. In the meantime, in 1990, Wet Seal was spun off as a public company, raising $41 million. Of that amount, $20 million was used to repay loans from Dylex, which now needed the money because of recent losses as well as a heavy debt load. The remaining $21 million would be used by Wet Seal to fuel further expansion. Over the next dozen years, Wet Seal grew to include some 600 stores divided among three chains. While Wet Seal continued to serve the youth market, Arden B stores catered to women and Zutopia targeted "tweens," girls between the ages of 8 and 14.

In the early 1980s, Teitelbaum and Gross launched another chain of apparel shops to cater to the junior market called L.A. Express, but by the end of the decade they sensed that both Suzy Shier and L.A. Express had peaked in Canada, and they looked for a new growth vehicle. At the time, lingerie retailer Victoria's Secret was making a splash in the United States, and the partners decided to try something similar in Canada, while avoiding the overtly sexual nature of Victoria's Secret. Suzy Shier was already carrying a modest line of undergarments and sleepwear, but because shelf space was limited and fearing that the traditional Suzy Shier customer might be confused by the sudden influx of lingerie, Teitelbaum and Gross elected to form a separate chain of lingerie shops under a new subsidiary. After toying with the Suzy's Secret as a name for the business, Teiltelbaum drew on the Italian word for "without," Senza. He added the article "la" to feminize the name, creating "La Senza," which he felt "had a nice, luxurious ring to it." The basic business plan was to sell private-label lingerie—designed by the company with manufacturing outsourced—in a boutique format. The first La Senza shop opened in 1990 in Ottawa's Place D'Orleans Shopping Centre.

Placed in charge of the brand as president was British-born Laurence Lewin, who did not start out in the apparel industry. Rather he was an accountant by training who was working for Honeywell Information systems when he was sent to Montreal in the early 1970s to work on a project for Air Canada. In the mid-1970s, he accepted a chance to run a clothing chain, found that he loved the industry, and elected to make a career in apparel. Teitelbaum recruited him in 1987, initially hiring Lewin to serve as vice-president in charge of merchandising at Suzy Shier, but with the intention of eventually offering greater responsibility. With Lewin as president, La Senza grew quickly, so that by the end of 1992 the chain had grown to about 35 units.

As had been the case with Wet Seal, Suszy Shier's La Senza division needed more financial backing to support its growth than its corporate parent could provide. Because it was still strapped for cash, Dylex once again opted to make a public offering, spinning off Suzy Shier, which was one of its few consistent successes. In 1993, Dylex sold its entire 50.1 percent stake to underwriters, realizing approximately CAD $60 million, while Suzy Shier also made shares available, raising about CAD $18 million, which was used to double the size of the La Senza chain by the end of the year.

Over the next few years, Suzy Shier attempted to grow on a number of fronts. Looking to becoming international, the company targeted England, a large and fragmented market. It formed a company, La Senza plc, and in the final weeks of 1994 opened six La Senza stores in the United Kingdom. By early 1996, another 16 shops had opened and La Senza plc floated an offering on the Alternative Investment Market, garnering a great deal of attention by bringing pictures of lingerie-clad models to London's financial newspapers. In the United States, Wet Seal posted back-to-back unprofitable years, but because of aggressive cost-cutting measures, the unit was much better positioned than rivals who were not as quick to react to a downturn in the economy and lapsed into bankruptcy. In April 1995, Wet Seal was able to acquire the 237-store Contempo Casuals chain from Neiman Marcus, nearly tripling the size of Wet Seal, which operated 130 stores. A few weeks later, Suzy Shier, which had remained profitable despite difficult economic conditions, paid $12 million to acquire a controlling interest in Wet Seal from Dylex, which had just emerged from bankruptcy. A year later, in October 1996, Suzy Shier paid nearly CAD $5.2 million to acquire the 42-store Silk & Satin lingerie chain from Woolworth Canada Inc. By this stage, Suzy Shier was operating 257 stores under the Suzy Shier and L.A. Express names and 145 La Senza stores.

Even while La Senza was making plans to open stores in additional countries, such as Saudi Arabia, the U.K. venture was beset with mounting losses, primarily because it attempted to grow too quickly and property rentals spiraled out of control. In September 1997, the company announced that the projections used in its listing prospectus "should be disregarded." By early 1998, however, the subsidiary was on the ropes and with no help forthcoming from the parent company, bankers were reluctant to step in to help out. As a result, the U.K. operation was sold for a token pound to a company owned by businessman Theo Paphitis, who owned Contessa Ladieswear among other assets. Going forward, Suzy Shier's La Senza shops in the U.K. would be run on a licensing basis.

Company Perspectives:

La Senza offers women and men a unique shopping experience with outstanding lingerie presentation in a beautiful and intimate environment, featuring everything from bras & panties, to sleepwear, loungewear, bodycare, accessories, and men's underwear.

Suzy Shier Adopts La Senza Name in 2001

Another venture that did not succeed for Suzy Shier was an attempt to open stores to serve women five-feet, four-inches and under in height. In general, it was the La Senza brand that was generating growth for the company. A new concept, La Senza Girl, aimed at 7-to 14-year-old girls, was quick to succeed and establish itself. The parent company, as a result, began to convert a significant number of L.A. Express and Suzy Shier stores to La Senza Girl outlets. In July 2001, Suzy Shier Limited became La Senza Corporation, a name which management believed was more in keeping with the direction the company was taking.

Not only was the Suzy Shier chain not doing as well as it had in the past, Wet Seal also endured a difficult stretch in 2002, which led to the dismissal of Bronstein as CEO. Teitelbaum replaced her on an interim basis. Effective June 30, 2003, a permanent CEO was hired, Peter D. Whitford, the former worldwide president of Disney Stores. In the meantime, the 178-unit Suzy Shier chain was put on the block. A buyer was found in YM Inc., which operated similar junior clothing stores, such as Stitches, Sirens, and Urban Planet. Hindering the transaction, however, was a probe launched by Canada's federal competition bureau, which charged that Suzy Shier had used misleading "regular" prices in order to convince consumers they were getting a better bargain. La Senza's management agreed to a CAD $1 million fine but did not admit guilt. Teitelbaum told the Toronto Star that the company felt the matter was holding up the sale of the chain, adding, "It was obvious there was no way YM or anyone else was going to buy a Canadian retailer that had an ongoing investigation with the bureau hanging over its head." Just hours after the settlement was announced, the sale to YM was finalized. The terms of the agreement were not made public, but press accounts estimate the purchase price at CAD $8 million.

In the same month that Suzy Shier was sold, La Senza opened its first outlet in the United States in a Rockaway, New Jersey, shopping center. Establishing a presence was imperative in achieving the goal of building La Senza into a true international brand. Within the year, a store opened in Garden City, New York, as well as three more units in Massachusetts. Management was confident that it would achieve success in the United States. It had some 20 years of operational experience in the country through Wet Seal, an advantage not enjoyed by many Canadian retailers who failed to crack the market. La Senza was also debt free and held cash investments. With 2,400 regional malls in the United States, half of which management considered suitable for housing a La Senza outlets, the lingerie chain appeared well positioned to realize a goal of one day operating 500 stores in the U.S. market.

Principal Competitors

Frederick's of Hollywood, Inc.; Movie Star, Inc.; Victoria's Secret Stores, Inc.

Key Dates:

1968:: Suzy Shier Inc. is launched.
1975:: Dylex Ltd. acquires a controlling share of Suzy Shier.
1984:: Wet Seal is acquired.
1990:: La Senza lingerie division is formed, and the company's first stores opens.
1993:: Suzy Shier is spun off as a public company.
2001:: Suzy Shier changes its name to La Senza Corporation.
2003:: La Senza opens its first U.S. store.