Frederick’s of Hollywood Moves to Licensing

Frederick's of Hollywood posts third-quarter profit despite lower sales.

Frederick’s of Hollywood Group Inc. is looking to move the brand beyond intimate apparel.

This story first appeared in the June 15, 2010 issue of WWD.  Subscribe Today.

After licensing Blue by Yoo to produce and market a line of Frederick’s swimwear on an international basis, the firm is looking to expand into other product categories.

Thomas Lynch, chairman and chief executive officer, said, “In addition to swimwear, we have identified domestic and international licensing opportunities that will allow us to expand beyond intimate apparel and into a lifestyle brand, which includes product categories such as fragrance, jewelry, accessories, footwear, headwear, handbags and costumes.”

The company is also exploring partnerships with international distributors in countries including South Korea, Brazil, Japan, China and Canada. Frederick’s of Hollywood recently began a strategic marketing initiative with the Hard Rock Hotel & Casino in Las Vegas and launched a social media and online marketing campaign.

The disclosure of plans to license the Frederick’s name came as the firm reported that it rebounded to profitability in the third quarter ended April 24 despite a decline in sales.

Net income was $218,000, or 1 cent a diluted share, against a loss of $2.1 million, or 8 cents, in the year-ago quarter. Sales fell 7.2 percent to $43.4 million from $46.8 million.

The company said the sales decline was due in part to an 8.5 percent decrease in retail sales, including a 7.7 percent drop in same-store sales, and an 11.7 percent fall in wholesale sales. Wholesale volume declined $860,000, constituting 25.5 percent of the decline, but Lynch said it is gaining traction, with open orders up 20 percent.

Gross margin grew to 40.2 percent from 38.2 percent in the comparable 2009 quarter, with wholesale margin expanding to 32.8 percent from 18.8 percent.

For the nine months, the firm narrowed losses to $9.1 million, or 34 cents a diluted share, from $27.6 million, or $1.05, in the year-ago period. Sales fell 14 percent to $121.9 million from $141.8 million.

In addition to its catalogue, Web site and wholesale business, the firm operates 126 specialty stores under the Frederick’s of Hollywood name.