La Senza debut attracts market:The Investment Column

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The Independent Online
It may have been the pictures of scantily clad models draped across the financial pages of the national press that swung it. Or perhaps - just perhaps - it was the compelling investment story. Either way, shares in loss-making lingerie and nightwear specialist La Senza enjoyed a decent debut on the junior Alternative Investment Market yesterday, going to a 6p premium above their 150p offer price.

The placing of 13.3 million shares valued La Senza at over pounds 50m and raised pounds 19.4m to fund expansion in the UK of a further 152 outlets over the next five years compared with the 22 it has now. Quoted Canadian group Suzy Shier will retain a majority, 60.2 per cent, holding in the enlarged La Senza group, and provide most of the top brass with their proven track record.

Leaving aside the publicity material, La Senza has its attractions on fundamentals. With Marks & Spencer dominating the estimated pounds 1.2bn British market, there ought to be plenty to go for, though competition is hotting up. Market research group Verdict estimates that consumer spending on women's underwear and sleepwear (including hosiery, which La Senza is also targeting) is set to grow by 28 per cent.

From a standing start two years ago, La Senza's sales are set to reach pounds 22m in the year to 1 February 1997, with maiden profits of pounds 2.3m pencilled in for the following year. The forward p/e would then fall from 35 to 15 in 1999, though the economic assumptions on which these projections are based are little more than educated guesswork.

Investors have always had a soft spot for concept retailers sporting aggressive roll-out programmes and bold profit projections. Some, like pub retailer JD Wetherspoon, surpassed the most optimistic forecasts; others, like computer games specialist Rhino, flopped after a warm reception. Shares in La Senza should go higher, but be prepared for a bumpy ride.

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