La Senza Corporation
TSX : LSZ

La Senza Corporation

May 31, 2006 14:34 ET

La Senza Corporation Posts an Increase of 143% in Net Earnings for the First Quarter of Fiscal 2007 over the First Quarter of Fiscal 2006

MONTREAL, QUEBEC--(CCNMatthews - May 31, 2006) - (TSX:LSZ) La Senza Corporation today reported net earnings of $4.1 million or $0.30 per share for the quarter ended April 29, 2006 compared to $1.7 million or $0.13 per share for the quarter ended April 30, 2005.

Excluding loss from discontinued operations of $879,000 contained in the results for the first quarter ended April 30, 2005, the comparison of net earnings from continuing operations is $4.1 million or $0.30 per share for the quarter ended April 29, 2006 versus $2.6 million or $0.19 per share for the quarter ended April 30, 2005. A write down of $1.0 million for property and equipment was made in the first quarter ended April 29, 2006 due to the conversion of Silk & Satin stores to the new La Senza Express banner.

Sales for the quarter ended April 29, 2006 increased 15.9% to $96.7 million from $83.4 million in the quarter ended April 30, 2005. Comparable store sales (stores open more than a year) increased by 6.0%.

Mr. Irving Teitelbaum, Chairman and Chief Executive Officer of the Corporation, said "I am pleased to note that the momentum generated by strong earnings in fiscal 2006 continued unabated into the first quarter of fiscal 2007. All of our divisions contributed to our enhanced earnings performance sending a clear signal of the widespread popularity of our brand. Our cash position, strengthened by robust sales, is well able to support our current expansion program of new stores for fiscal 2007."

The Board declared a quarterly dividend of $0.20 per share payable on June 28, 2006 to shareholders of record on June 14, 2006.

La Senza Corporation, headquartered in Montreal, is a specialty retailer with 306 corporate owned stores as at April 29, 2006, offering fashionable lingerie and sleepwear sold in its 227 "La Senza", "La Senza Express" and "Silk & Satin" stores, and fashionable apparel for girls sold in its 79 "La Senza Girl" stores. Stores are located in every province in Canada. In addition, 293 independently owned "La Senza" and "La Senza Girl" stores are operating in 29 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 relating to the Corporation and/or the environment in which it operates that are based on the Corporation's expectations, estimates and forecasts. These statements are subject to important risks, uncertainties and assumptions that are difficult to predict and/or are beyond the Corporation's control, as well as on management's reasonable evaluation of future events and are not meant as guarantees of future performance. A number of factors may cause actual outcomes and results to differ materially from those expressed. These factors include those set forth in other public filings of the Corporation. Accordingly, readers should not place undue reliance on these forward-looking statements. In addition, these forward-looking statements speak only as of the date made and the Corporation disavows any intention or obligation to update or revise any such statements as a result of any event, circumstance or otherwise.

Factors which could cause actual results or events to differ materially from current expectations include, among other things: the ability of the Corporation to successfully implement its strategic initiatives and whether such strategic initiatives will yield the expected benefits; competitive conditions in the industries in which the Corporation participates; changes in consumer spending; general economic conditions and normal business uncertainty; customer preferences towards product offerings; seasonal weather patterns; fluctuations in foreign currency exchange rates; changes in the Corporation's relationship with its suppliers and licensees; changes in the Corporation's key personnel; interest rate fluctuations and other changes in borrowing costs; and changes in laws, rules and regulations applicable to the Corporation.

For more information, please contact:
Anna Palestini, CA
Chief Financial Officer
For financial & investor relation information
(514) 421-8713



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

As at As at As at
April 29, April 30, January
2006 2005 28, 2006
Audited
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ASSETS

Current
Cash $16,089 $- $28,899
Short-term investments 26,966 23,836 32,793
Marketable securities 30,818 25,249 24,971
Accounts and sundry receivables 12,224 9,483 10,867
Income taxes recoverable - 1,152 -
Inventory 39,851 49,353 48,990
Prepaid expenses 4,649 4,434 2,428
Assets of discontinued operations - 767 -
Future income taxes 1,036 7,750 1,488
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131,633 122,024 150,436

Property and Equipment 80,564 81,445 79,971
Trademarks 1,255 1,236 1,217
Future Income Taxes 1,120 2,872 1,120
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214,572 207,577 232,744
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LIABILITIES

Current
Bank indebtedness - 3,372 -
Accounts payable
and accrued liabilities 24,494 25,436 41,656
Income taxes payable 544 - 1,284
Current maturity of
obligations under capital leases 11,029 11,158 11,380
Current maturity of long-term debt 129 113 127
Liabilities of
discontinued operations - 3,418 -
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36,196 43,497 54,447

Obligations Under Capital Leases 21,075 23,037 23,552
Long-Term Debt 2,549 2,679 2,582
Deferred Lease Obligations 9,233 8,579 8,871
Future Income Taxes 110 70 110
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69,163 77,862 89,562
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SHAREHOLDERS' EQUITY

Capital Stock 37,292 31,921 36,328
Contributed Surplus 9,121 9,603 9,182
Retained Earnings 98,996 88,191 97,672
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145,409 129,715 143,182
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$214,572 $207,577 $232,744
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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
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April 29, April 30,
2006 2005


Balance - Beginning of Period $97,672 $87,044
Net earnings 4,090 1,686
Dividends on subordinate voting shares (1,777) (339)
Dividends on multiple voting shares (989) (200)
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Balance - End of Period $98,996 $88,191
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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
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April 29, April 30,
2006 2005


Sales $96,663 $83,400
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Cost, Expenses and Other
Cost of sales and store, warehouse, general,
administrative and sales support expenses 83,847 73,607
Amortization 6,129 5,539
Interest on obligations under capital leases 485 517
Interest on long-term debt 35 57
Other interest (158) (8)
Foreign exchange loss (gain) 308 (73)
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90,646 79,639
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Operating Income 6,017 3,761

Interest income on short-term investments 353 265
Other (loss) income (18) 67
Foreign exchange loss on investment activities (122) (117)
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Earnings from Continuing
Operations Before Income Taxes 6,230 3,976
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Income Taxes 2,140 1,411
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Earnings from Continuing Operations 4,090 2,565

Discontinued operations, net of income taxes - (879)
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Net Earnings $4,090 $1,686
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Basic Earnings Per Share
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Continuing Operations $0.30 $0.19
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Net Earnings $0.30 $0.13
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Weighted Average Number
of Shares Outstanding-Basic 13,799,203 13,459,723
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Diluted Earnings Per Share
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Continuing Operations $0.29 $0.19
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Net Earnings $0.29 $0.13
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Weighted Average Number of
Shares Outstanding-Diluted 13,915,905 13,461,769
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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 29, April 30,
2006 2005

Funds Provided (Used)
Operating Activities
Earnings from continuing operations $4,090 $2,565
Amortization 6,129 5,539
Amortization of deferred lease obligations (380) (420)
Stock-based compensation 237 180
Future income taxes 452 637
Deferred lease obligations 741 806
Foreign exchange loss on investment activities 122 117
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11,391 9,424
Changes in non-cash operating
elements of working capital (12,341) (23,721)
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(950) (14,297)
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Financing Activities
Issue of subordinate voting shares 666 140
Repayments of obligations under capital leases (2,827) (2,861)
Repayment of long-term debt (31) (23)
Dividends (2,766) (539)
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(4,958) (3,283)
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Investing Activities
Short-term investments
and marketable securities (5,367) (204)
Additions to property and equipment (6,672) (3,953)
Additions to trademarks (88) (82)
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(12,127) (4,239)
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Cash used in continuing operations (18,035) (21,819)
Cash used in discontinued operations - 100
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Net Decrease in Cash and Cash Equivalents (18,035) (21,719)

Cash and Cash Equivalents

Beginning of Period 40,505 18,347
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End of Period $22,470 $(3,372)
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Cash and cash equivalents comprise the following:

Cash (bank indebtedness) $16,089 $(3,372)
Short-term investments 26,966 23,836
Short-term investments
with maturity over 3 months (20,585) (23,836)
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$22,470 $(3,372)
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See accompanying notes



La Senza Corporation - Corporation La Senza
Notes to Consolidated Financial Statements
April 29, 2006
Unaudited
(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
28, 2006. 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 28, 2006.



2 - Seasonal Variations

Results of operations are subject to significant seasonal variations
and, accordingly, the operating income for any given interim period
is not necessarily indicative of the results of operations for a full
year.



3 - 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 prior periods have been presented as
discontinued operations. The net assets of these operations are
presented as assets/liabilities of discontinued operations in the
periods in which they qualify as held for sale. In the second
quarter of fiscal 2006, all of the U.S. stores were closed.

The results of discontinued operations were as follows:

Three Months Ended
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April 29, April 30,
2006 2005
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$ $
Sales - 2,468
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Operating losses - (1,323)
Income taxes - (444)
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Loss from discontinued
operations, net of income taxes - (879)
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Basic and diluted loss per share
from discontinued operations - (0.07)

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The net assets of discontinued operations are summarized as follows:

As at As at As at
April 29, April 30, January 28,
2006 2005 2006
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$ $ $
Current assets - 767 -
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- 767 -
Current liabilities - 3,418 -
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Net assets from
discontinued operations - (2,651) -
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The cash flows from discontinued
operations are summarized as follows:

Three Months Ended
--------------------------------------------------------------------
April 29, April 30,
2006 2005
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$ $
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Cash flows provided by operating activities - 100
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4 - Earnings Per Share

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

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Three Months Ended
--------------------------------------------------------------------
April 29, April 30,
2006 2005
Weighted average number of
shares outstanding - basic 13,799,203 13,459,723
Assumed exercise of share options 116,702 2,046
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Weighted average number of
shares outstanding - diluted 13,915,905 13,461,769
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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 65,000 for the three months
ended April 29, 2006 and 60,000 for the three months ended April 30,
2005.



5 - 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"). On September 12, 2005, the Court granted a motion to
dismiss, which was filed by the Company and its officers. An amended
complaint was filed with the Court on November 23, 2005. Defendants
have filed motions to dismiss plaintiffs' amended consolidated
complaint, which are scheduled to be heard by the court on June
12, 2006. 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 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 of its officers
and their holding companies during 2005. On April 22, 2005, the
Company and 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 requested 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. The Company and its officers have provided documents
to the SEC in response to the subpoenas. No provision has been made
with respect to this matter.

Legal Proceeding

A legal proceeding was filed on February 28, 2006 against the
Company's subsidiary, La Senza Inc. by Victoria's Secret Stores Brand
Management, Inc., Victoria's Secret Direct, LLC and Victoria's Secret
Stores, LLC (the "Plaintiffs") in the Superior Court of Justice of
Ontario. The Plaintiffs allege that La Senza Inc. has passed off its
"La Senza ITEC" bra and related products as and for those of the
Plaintiffs sold under the Plaintiffs trademark IPEX and has directed
public attention to its products or business in a way that causes or
is likely to cause confusion with the Plaintiffs business. The
Plaintiffs requested both an interim and an interlocutory injunction,
both of which were denied by the court. The Plaintiffs are claiming
damages, including exemplary or punitive damages in the amount of
$1,000,000; interest and costs of this proceeding. Neither the
outcome nor the extent of the potential damages, if any, which may be
awarded is known. La Senza is disputing the claim and is vigorously
defending against it. No provision has been made with respect to this
matter.


6 - Contributed Surplus

Three Months Ended
--------------------------------------------------------------------
April 29, April 30,
2006 2005
--------------------------------------------------------------------
$ $
Balance - beginning of period 9,182 9,423
Stock-based compensation expense 237 180
Exercise of share options (298) -
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Balance - end of period 9,121 9,603
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7 - Capital Stock

Quantity $
--------------------------------------------------------------------
Subordinate voting shares
Balance - January 28, 2006 8,792,566 34,934
Issuance of subordinate voting
shares upon exercise of options 57,800 666
Reclassification from contributed
surplus due to exercise of share options - 298
Conversion of multiple voting shares 50,000 14
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Balance - April 29, 2006 8,900,366 35,912

Multiple voting shares
Balance - January 28, 2006 4,992,569 1,394
Conversion to subordinate voting shares (50,000) (14)
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Balance - April 29, 2006 4,942,569 1,380

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13,842,935 37,292
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Share Option Plan

On June 16, 2005, the Company amended the share option plan so that
the number of subordinate voting shares that may be issued pursuant
to the share option plan is limited to 11% of the subordinate voting
shares and multiple voting shares outstanding.

Share option transactions during the three month period ending April
29, 2006 were as follows:

Weighted
Average
Options Exercise Price
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$
Outstanding as at January 28, 2006 571,200 13.04
Granted 10,000 20.35
Exercised (57,800) 12.13
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Outstanding as at April 29, 2006 523,400 14.29
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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
    For financial & investor relation information
    (514) 421-8713