Frederick’s: Closes 16 Stores, Loses $5.1 M

Frederick’s of Hollywood Group Inc. lost $5.1 million in the fiscal second quarter 2014 on sales of $23.5 million, compared to a loss of $10.0 million on sales of $24.3 million in the same period last year.

It also announced that during the past three months it closed 16 stores, of which it termed 15 as “underperforming” and one as at the end of its lease. Two more stores will be closed over the next month or so, leaving the chain with only about 94 by the end of April. On Valentine’s Day, 2008, the company reported it was operating 135 retail stores.

In the six months ended January 25, 2014 the firm lost $12.8 million on sales of $43.3 million compared to a loss of $15.2 million on sales of $46.7 million for the six months ended January 26, 2013.

In more than five years the store has registered a string of losses totaling more than $100 million (including a loss of $22.5 million in fiscal 2013).

Despite its many difficulties, Frederick’s has found a consortium of buyers that announced last year plans to take it private. These buyers already own approximately 88.7% of the company’s common stock (including a sizable chunk owned by Philip Falcone, whose current net worth Forbes estimates at $1 billion).

One advantage to taking the public company private will be to avoid having to report the many troublesome operational details that have made running Frederick’s increasingly difficult.

For example, in its annual report for 2013, Frederick’s found it necessary to report that sales of bras, lingerie and corsets were, in part, “negatively impacted by the late delivery of products from our vendors due to slower payments” and that there was during the year “an increase in accounts payable and other accrued expenses of $3,611,000, which resulted from slower payments to vendors.” The predictable reaction: “due to our liquidity issues, we have had difficulty developing relationships with new vendors to source and manufacture our merchandise.”

During the second quarter, the company summarized: “Net sales decreased 3.1% to $23.5 million from $24.3 million. Direct sales (e-commerce and catalog) increased 9.7% to $8.9 million. Comparable store sales decreased 4.1%. Total store sales decreased 8.0% to $14.2 million.”