(Filed Under Financial and General Interest News). Frederick’s of Hollywood sales for its fiscal first quarter 2013, plummeted while its losses doubled. Sales at the intimate apparel retailer fell to $22.5 million for the three months ended October 27th, 2012, down from $28.4 million for the three months ended October 29th 2011. Meanwhile losses for the period were $5.2 million, up from $2.3 million a year earlier.
“We have been concerned that, since the recession began, customers have been conditioned for major price reductions. We experienced firsthand the difficulty of trying to move away from such promotional activity this quarter when we tested customer tolerance for significantly lower promotional activity. While we anticipated a drop in sales, we experienced a larger than anticipated decline in customer traffic at our stores and on our eCommerce site. As a result, we revised this strategy and have returned to higher levels of promotional activity,” complained Thomas Lynch, chairman and CEO in a release that accompanied the results. “As previously disclosed, we are now sharing some of the costs of our promotional activities with our vendors, which will help offset some of the costs of the increased promotions.”
Lynch continued, “Over the past few months, we have launched several new product categories at our stores and on our eCommerce site, which are gaining customer awareness. Our goal for these new product lines is to expand the reach of the ‘Frederick’s of Hollywood’ brand. We believe the strength of our brand with consumers will continue to help the company through this difficult economic period.”
Discussing the declines, Frederick’s reported “Comparable store sales decreased 17.0%,” “Total store sales decreased 20.8% to $15.2 million” and “Direct sales decreased 19.1% to $6.5 million.” In addition, “Gross margin, as a percentage of net sales, decreased to 27.0% from 33.7%. This decrease is attributable to an increase in product and shipping promotional offers during the second half of the fiscal 2013 first quarter.” The firm also “recorded a $521,000 loss on abandonment related to vacating a portion of its Hollywood corporate office and a portion of its Phoenix distribution facility.”
At the time of the reporting in December, Frederick’s said it was operating 119 specialty retail stores.
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