Victoria's Secret slaps La Senza with $1M lawsuit over push-up bra
By Rita Trichur
TORONTO (CP) - Lingerie retailer La Senza Corp. (TSX:LSZ.SV) has been slapped with a $1-million lawsuit by U.S. rival Victoria's Secret in a dispute over its new wireless push-up bra.
Montreal-based La Senza, which boosted its dividend after posting a higher annual profit of $17.7 million, moved to assure investors Thursday the case was being sensationalized.
"It's a fairly non-material item," said CEO Irving Teitelbaum. "I can't comment on it because it is before the courts. But suffice it to say that on both sides of the fence, meaning lawsuits that we engage in to protect our mark, there are always a raft of them that are going forward at any one time all over the world, frankly."
Teitelbaum said he wasn't sure how long it would take to resolve the quarrel, adding: "I think the media blows it out of proportion because it is a lot more exciting than softwood lumber."
The fracas centres on La Senza's ITEC brassiere, which the retailer claims is "the world's most technologically advanced bra" because its one-piece design eliminates all tags and seams.
Victoria's Secret, a subsidiary of Ohio-based Limited Brands (NYSE:LTD), alleges that ITEC is essentially a knock-off of its trademarked IPEX wireless bra, and that La Senza is confusing consumers with a similar marketing hook.
The allegations have not been proven in court and La Senza has yet to file a statement of defence.
The lawsuit, filed with the Ontario Superior Court of Justice last month, is seeking $1 million in punitive damages plus other unspecified damages. "The filing speaks for itself," said a Limited Brands spokesman.
Neil Linsdell, an analyst with Versant Partners Inc., said amount of damages being sought is "rather insignificant and a little bit silly."
He added: "It seems to be more of a publicity stunt than an actual serious lawsuit."
La Senza CFO Anna Palestini confirmed the retailer holds a trademark on ITEC, which it began selling in February.
"It is very different from your typical wired bra," Palestini said but declined to disclose the product's sales thus far.
La Senza also told investors Thursday that it is eager to expand its global presence now that international sales account for more than 12 per cent of its consolidated revenues, up from 8.5 per cent last year.
"International expansion is going to continue at the current pace, without question," Teitelbaum said.
"Our cap-ex (capital expenditures) budget will be the strongest cap-ex budget over the last three years and the most aggressive - and yet still allows the company to fund its strong dividend payments out of cash flow."
He declined to specify how much capital is earmarked for growth, but noted the firm plans to open 28 new stores.
The retailer, which has about 275 international locations, has previously announced a goal of reaching 500 by early 2009. It also operates 305 Canadian stores.
La Senza's stock hit a 52-week high Wednesday after the lingerie retailer pushed up its quarterly dividend 25 per cent and said sales and profits rose substantially in the latest fiscal year.
The chain earned $17.7 million, or $1.30 per share, in its 2006 financial year, ended Jan. 28. That compared to a profit of $81,000, or one penny per share, in the previous year.
Full-year sales increased 15.8 per cent, to $410.9 million. In response, its board increased its dividend from 16 cents per share to 20 cents per share, for shareholders of record on April 12.
During Thursday afternoon trading on the Toronto Stock Exchange, its shares were flat at $21.
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