La Senza poised for restructuring as retail woes worsen

Lion Capital portfolio company, La Senza, is poised to undergo a KPMG-led financial restructuring as the UK retail sector faces disappointing winter sales.

In a sign of the worsening environment on the high streets of Europe, Lion Capital has been forced to appoint KPMG to conduct a financial restructuring of lingerie retailer La Senza, according to a source close to the buyout firm.

The source stressed that KPMG is acting as a consultant for the business, and not an administrator. It will weigh up “a whole range of options” before any decisions are made about La Senza’s future. These options include rebranding or closing some shops. The source could not completely rule out administration at this point however.

Lion Capital and KPMG both declined to comment.

Lion Capital acquired La Senza in July 2006 for just over £100 million (at the time €148 million; $197 million) from entrepreneur Theo Paphitis. In 2007, the business had 103 stores and concessions. Today, La Senza has 200 retail outlets and in its most recent financial year generated revenues of £140 million, according to the company’s website. 

La Senza’s troubles come as a growing number of retailers feel the pinch of a slow Christmas shopping season amidst economic turmoil in Europe. According to media reports, shoe retailer Barratts Priceless last week hired advisory firm Deloitte as an administrator and another discount fashion retailer Peacocks was revealed as planning to close up to 100 stores. 

An industry consultant told PEI that private equity firms were being badly affected by the slowdown in consumer spending in the UK, having invested a lot of money in the retail sector during the last financial crisis.

However, he said the current climate does offer great opportunities for private equity in the distressed retail sector, especially for those who have the capabilities of taking on a company's international arms. Earlier this year, the UK stores of furniture retailer, Habitat, went into administration, whereas its other European stores continued to perform strongly. 

Lion Capital has various other portfolio companies in the retail sector such as fashion retailers All Saints and American Apparel. The firm is currently fundraising for a $2 billion fund, whose target it had been expected to beat by the end of the year, according to PEI in July. A final close has not yet been announced by the firm.