La Senza Corporation
TSX : LSZ.SV

La Senza Corporation

May 30, 2005 14:24 ET

La Senza Corporation Increases Dividend Following Strong Improvement in First Quarter Results

MONTREAL, QUEBEC--(CCNMatthews - May 30, 2005) - La Senza Corporation (TSX:LSZ.SV) today reported net earnings of $1.7 million or $0.13 per share for the quarter ended April 30, 2005 compared to a net loss of $4.2 million or $0.32 per share for the quarter ended May 1, 2004. The quarterly financial results include a loss from discontinued operations relating to the planned closure of the Company's U.S. operation. The results of the U.S. operations for the corresponding period of the previous year have been reclassified as discontinued operations. Excluding losses from discontinued operations, earnings from continuing operations amounted to $2.6 million or $0.20 per share for the first quarter of fiscal 2006 compared to a loss of $3.0 million or $0.22 per share for the first quarter of the prior year. Earnings from continuing operations before interest, foreign exchange, income taxes, depreciation and amortization and loss in a significantly influenced company (EBITDA) amounted to $9.9 million for the current first quarter versus $3.8 million for the first quarter of the prior year. Sales for the quarter ended April 30, 2005 amounted to $83.4 million compared to $71.0 million for the quarter ended May 1, 2004, an increase of 17.4%. Comparable store sales (stores open more than a year) increased by 10.3% in the current first quarter over the prior year first quarter. Mr. Irving Teitelbaum, Chairman and Chief Executive Officer of the Corporation, said "The excellent financial performance in the first quarter of the current fiscal year illustrates the strength of La Senza Corporation's strategy of transforming itself into a pure play, primarily as Canada's leading lingerie retailer and as an international licensor of its brand. Our cash flow statement and balance sheet show strength and, as a result, the Company has increased its quarterly dividend to $0.16 per share (both Class "A" and "B" shares) from $0.04 per share." The quarterly dividend of $0.16 per share is payable on June 27, 2005 to shareholders of record as of June 13, 2005. La Senza Corporation, headquartered in Montreal, is a specialty retailer with 297 corporate owned stores as at May 30, 2005, offering fashionable lingerie and sleepwear sold in its 217 "La Senza" and "Silk & Satin" stores, and fashionable apparel for girls sold in its 75 "La Senza Girl" stores. Stores are located in every province in Canada and five La Senza stores are located in the United States. In addition, 244 independently owned "La Senza" and "La Senza Girl" stores are operating in 21 other countries under license. Forward-looking statement Except for historical information provided herein, this press release may contain information and statements of a forward-looking nature concerning the future performance of the Company. These statements are based on suppositions and uncertainties, as well as on management's best possible evaluation of future events. Such factors may include, without excluding other considerations, fluctuations in quarterly results, evolution in customer demand for the Company's products and services, the impact of price pressures exerted by competitors, and general market trends or economic changes. As a result, readers are advised that actual results may differ from expected results.


                       La Senza Corporation - Corporation La Senza
                              Consolidated Balance Sheets
                               (thousands of dollars)


                                  As at         As at           As at
                               April 30,        May 1,    January 29,
                                   2005          2004            2005
                              Unaudited     Unaudited         Audited
                                           (restated)
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ASSETS

 Current
 Cash                     $         - $             - $        18,347
 Short-term investments        23,836           5,577          23,216
 Marketable securities         25,249          20,098          25,782
 Accounts and sundry            9,483           8,554           7,063
  receivables
 Income taxes recoverable       1,152           4,150           1,428
 Inventory                     49,353          45,763          39,753
 Prepaid expenses               4,434           9,503           2,190
 Assets of discontinued
  operations                      767               -           2,286
 Future income taxes            7,750           8,162           8,387
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                              122,024         101,807         128,452


Fixed Assets                   81,445          87,585          82,844
Trademarks                      1,236           1,174           1,199
Assets of Discontinued
 Operations                         -               -             359
Future Income Taxes             2,872             813           2,872
Investment in Significantly
 Influenced Company                 -          24,361               -
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                              207,577         215,740         215,726
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LIABILITIES

 Current
 Bank indebtedness              3,372          20,846               -
 Accounts payable and
  accrued liabilities          25,375          22,811          35,169
 Current maturity of
  obligations under
  capital leases               11,158           9,529          11,588
 Current maturity of
  long-term debt                  113           1,047             104
 Liabilities of discontinued
  operations                    3,418               -           4,317
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                               43,436          54,233          51,178


 Obligations Under Capital
  Leases                       23,037          21,958          25,326
 Long-Term Debt                 2,679           6,396           2,711
 Deferred Lease Inducements     8,579           6,874           8,193
 Future Income Taxes               70           1,179              70
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                               77,801          90,640          87,478
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 Commitments and Contingencies

SHAREHOLDERS' EQUITY

 Capital Stock                 31,921          31,616          31,781
 Contributed Surplus            9,603           8,618           9,423
 Retained Earnings             88,252          84,866          87,044
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                              129,776         125,100         128,248
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                          $   207,577 $       215,740 $       215,726
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See accompanying notes


                  La Senza Corporation - Corporation La Senza
                  Consolidated Statements of Retained Earnings
                        Unaudited (thousands of dollars)


                                            Three Months Ended
---------------------------------------------------------------------
                                    April 30,                  May 1,
                                         2005                    2004
                                                            (restated)

Balance - Beginning of
 Period                               $87,044                $89,779
 Retroactive effect of
  adopting fair value-based
  method for share options                  -                   (667)
 Net earnings (loss)                    1,747                 (4,246)
 Dividends on subordinate
  voting shares                         (339)                       -
 Dividends on multiple
  voting shares                         (200)                       -
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Balance - End of Period              $88,252                  $84,866
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See accompanying notes


                 La Senza Corporation - Corporation La Senza
                    Consolidated Statements of Earnings
        Unaudited (thousands of dollars, except earnings per share)


                                            Three Months Ended
---------------------------------------------------------------------
                                     April 30,                  May 1,
                                         2005                    2004
                                                            (restated)

Sales                                 $83,400                $71,019
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Cost, Expenses and Other
Cost of sales and store,
 warehouse, general,
 administrative and sales
 support expenses                      73,607                  67,372
Amortization                            5,539                   4,262
Interest on obligations under
 capital leases                           517                     509
Interest on long-term debt                 57                      59
Other interest                            (8)                      91
Foreign exchange gain                   (134)                    (166)
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                                       79,578                  72,127
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Operating Income (Loss)                 3,822                  (1,108)

Interest income on short-term
 investments                              265                     100
Other income                               67                     130
Foreign exchange gain (loss)
 on investment activities                (117)                    245
Equity in net loss of a
 significantly influenced company           -                  (2,565)
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Earnings (Loss) from Continuing
 Operations Before Income Taxes         4,037                  (3,198)
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Income Taxes                            1,411                   (205)
---------------------------------------------------------------------
Earnings (Loss) from Continuing
 Operations                             2,626                  (2,993)

Discontinued operations,
 net of income taxes                     (879)                 (1,253)
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Net Earnings (Loss)                    $1,747                 $(4,246)
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---------------------------------------------------------------------

Basic and Diluted Earnings (Loss) Per Share
Continuing Operations                  $0.20                  $(0.22)
Net Earnings (Loss)                    $0.13                  $(0.32)
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---------------------------------------------------------------------
Weighted Average Number
 of Shares Outstanding-Basic      13,459,723              13,416,715
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Weighted Average Number
 of Shares Outstanding-Diluted    13,461,769              13,416,715
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See accompanying notes


              La Senza Corporation - Corporation La Senza
                Consolidated Statements of Cash Flows
                  Unaudited (in thousands of dollars)


                                            Three Months Ended
---------------------------------------------------------------------
                                     April 30,                  May 1,
                                         2005                    2004
                                                            (restated)

Funds Provided (Used)
 Operating Activities
 Earnings (loss) from
  continuing operations                $2,626                 $(2,993)
 Amortization                           5,539                   4,262
 Amortization of deferred
  lease inducements                      (420)                   (370)
 Stock-based compensation expense         180                      99
 Equity in net loss of a
  significantly influenced company          -                   2,565
 Future income taxes                      637                     503
 Deferred lease inducements               806                     223
 Foreign exchange (gain) loss
  on investment activities                117                    (245)
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                                        9,485                   4,044
 Changes in non-cash operating
  elements of working capital         (23,782)                (20,175)
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                                      (14,297)                (16,131)
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 Financing Activities
 Issue of subordinate voting shares       140                      10
 Repayments of obligations under
  capital leases                       (2,861)                 (2,328)
 Repayment of long-term debt              (23)                    (21)
 Dividends                               (539)                      -
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                                       (3,283)                 (2,339)
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 Investing Activities
 Short-term investments and
  marketable securities                  (204)                   (119)
 Additions to fixed assets             (3,953)                 (6,164)
 Additions to trademarks                  (82)                   (100)
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                                       (4,239)                 (6,383)
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 Cash used in continuing operations   (21,819)                (24,853)
 Cash provided by (used in)
  discontinued operations                 100                  (5,953)
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Net Decrease in Cash                  (21,719)                (30,806)

Cash (Bank Indebtedness)

 Beginning of Period                   18,347                   9,960
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End of Period                         $(3,372)               $(20,846)
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---------------------------------------------------------------------

See accompanying notes


Notes to the Consolidated Financial Statements
(tabular amounts are expressed in thousands of dollars, except per
share amounts)

1 - Financial Statement Presentation

The interim consolidated statements have been prepared in accordance
with Canadian generally accepted accounting principles ("GAAP"),
using the same accounting policies and methods of computation as were
used for the consolidated financial statements for the year ended
January 29, 2005. They do not include all the disclosures required by
GAAP in annual financial statements and, accordingly, should be read
in conjunction with the consolidated financial statements for the
year ended January 29, 2005.

2 - Seasonal Variations

Results of operations are subject to significant seasonal variations
and, accordingly, the operating income for the three months ended
April 30, 2005 is not necessarily indicative of the results of
operations for a full year.

3 - Change in Accounting Policies

Vendor Discounts

In January 2004, the Emerging Issues Committee of the CICA released
Abstract 144 (EIC - 144) "Accounting By a Customer (Including a
Reseller) for Certain Consideration Received From a Vendor". EIC -
144 specifies the accounting method to be applied to considerations
received from a vendor. EIC - 144 requires the Company to record cash
considerations received from a vendor as a reduction in the price of
the vendor's products and reflect them as a reduction of cost of
sales and related inventory when they are recognized in the income
statement and balance sheet.

The Company applied this new recommendation in the fourth quarter of
fiscal 2005. As a result of the retroactive application of this new
standard, the financial statements for the three months ended May 1,
2004 have been restated. The impact on previously reported balances
is as follows:


                                                         Three Months
                                                                Ended
---------------------------------------------------------------------
                                                                May 1,
                                                                 2004
---------------------------------------------------------------------
                                                                    $
Cost of sales and store, warehouse,
 general, administration and sales support expenses               (63)
Earnings from continuing operations before income taxes            63
Income tax expense                                                 23
Earnings from continuing operations                                40
Net earnings                                                       40
Retained earnings - end of period                                  40
Inventory                                                          63
Income taxes recoverable                                          480
Future income tax asset                                          (503)
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Reporting Segment

The Company assessed the long-term economic characteristics for the
La Senza and La Senza Girl segments and has determined that it meets
the criteria for aggregating the operating segments and, accordingly,
considers that it currently has a single reporting segment.

As a result, segmented results for La Senza and La Senza Girl will no
longer be presented.

4 - Discontinued Operations

In January 2005, the Company approved a plan to discontinue the U.S.
operations of La Senza and, accordingly, the results and cash flows
of the U.S. operations for the current and prior periods have been
presented as discontinued operations. The net assets of these
operations are presented as assets/liabilities of discontinued
operations since the date the plan was approved.

The results of discontinued operations were as follows:

                                               Three Months Ended
---------------------------------------------------------------------
                                       April 30,                May 1,
                                           2005                  2004
---------------------------------------------------------------------
                                              $                     $
Sales                                     2,468                 2,785
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Operating losses                         (1,323)               (1,232)
Income taxes                               (444)                   21
---------------------------------------------------------------------
Loss from Discontinued Operations,
 Net of Income Taxes                       (879)               (1,253)
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic and Diluted Loss Per Share from
 Discontinued Operations                  (0.07)                (0.10)
---------------------------------------------------------------------
---------------------------------------------------------------------


The net assets of discontinued operations are summarized as follows:

                                As at          As at            As at
                             April 30,         May 1,      January 29,
                                 2005           2004             2005
---------------------------------------------------------------------
                                    $              $                $
Current assets                    767              -            2,286
Fixed assets                        -              -              359
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                                  767              -            2,645
Current liabilities             3,418              -            4,317
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Net assets from discontinued
 operations                    (2,651)             -           (1,672)
---------------------------------------------------------------------
---------------------------------------------------------------------

The cash flows from discontinued operations are summarized as
follows:


                                              Three  Months Ended
---------------------------------------------------------------------
                                       April 30,                May 1,
                                           2005                  2004
---------------------------------------------------------------------
                                              $                     $
Cash flows provided by (used in)
 operating activities                       100                (7,653)
Cash flows from investing activities          -                 1,700
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                                            100                (5,953)
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5 - Earnings (Loss) Per Share

Basic and diluted per share amounts are based on the following
weighted average number of shares outstanding:

---------------------------------------------------------------------
                                               Three Months Ended
---------------------------------------------------------------------
                                       April 30,                May 1,
                                           2005                  2004
---------------------------------------------------------------------
Weighted Average Number of Shares
 Outstanding - Basic                 13,459,723            13,416,715
Assumed exercise of share options         2,046                     -
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Weighted Average Number of Shares
 Outstanding - Diluted               13,461,769            13,416,715
---------------------------------------------------------------------
---------------------------------------------------------------------

Earnings from continuing operations have been used as a control
number in determining if the inclusion of share options in the
diluted per share calculation is dilutive. In addition, in periods
where the inclusion of share options is dilutive, only those having
an exercise price below the average market price of subordinate
voting shares during the period are included in the computation. The
number of excluded share options was 60,000 for the three months
ended April 30, 2005.  As a result of the loss from continuing
operations for the three months ended May 1, 2004, diluted loss per
share was calculated using the basic weighted average shares
outstanding because to do so otherwise would have been anti-dilutive.

6 - Contingent Liabilities

Class Action Suit

On August 19, 2004, a class action suit was filed against the Company
and certain of its officers in the United States District Court,
Central District of California, alleging that the Company and two of
its officers violated section 20A of the US Securities Exchange Act
of 1934 relating to contemporaneous insider trading in relation to
the sale by the Company of its investment in The Wet Seal, Inc. ("Wet
Seal").  The Company and its officers deny all allegations of
wrongdoing made in this suit, consider the allegations groundless and
without merit, and intend to vigorously defend against this action.
No provision has been made with respect to this matter.

United States Securities and Exchange Commission Informal Inquiry

On February 4, 2005, the United States Securities and Exchange
Commission ("SEC") announced an informal inquiry relating to Wet Seal
and requesting Wet Seal to voluntarily provide the SEC with a
detailed chronology of events and certain documents pertaining to Wet
Seal's public announcements on August 5, 9 and 19, 2004. The SEC
inquiry also requested all information relating to the sale of Wet
Seal shares by the Corporation during 2004 and by two if its officers
and their holding companies during 2005. On April 22, 2005, the two
officers of the Company each received a subpoena for documents only
from the SEC pursuant to a formal order of investigation dated April
19, 2005. The subpoenas seek documents relating to the sale of Wet
Seal shares by the Corporation in 2004 and by the two officers and
their holding companies during 2005, and related topics. At this
early stage, it is not possible to give any opinion as to the likely
outcome of the SEC investigation. No provision has been made with
respect to this matter.

7 - Contributed Surplus

                                               Three Months Ended
---------------------------------------------------------------------
                                       April 30,                May 1,
                                           2005                  2004
---------------------------------------------------------------------
                                              $                     $
Balance - beginning of period             9,423                 7,852
Stock-based compensation
 expense - prior periods                      -                   667
Stock-based compensation
 expense - current period                   180                    99
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Balance - end of period                   9,603                 8,618
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8 - Comparative figures

Certain comparative figures have been reclassified to conform to the
current period's presentation.

Contact Information

  • La Senza Corporation
    Anna Palestini, CA
    Chief Financial Officer
    (514) 421-8713