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Frederick’s of Hollywood Inks Middle East Licensing Deal

An Abu Dhabi flagship will open in April.

Frederick’s of Hollywood Group Inc. is taking its provocative innerwear message to the Middle East as it seeks to make up revenues lost from the sale of its wholesale division.

The New York-based lingerie chain said Tuesday that it inked a multiyear deal with the Abu Dhabi-based Emirates Associated Business Group to open at least 10 retail stores in six Middle Eastern countries. Frederick’s of Hollywood, which currently operates 126 retail stores exclusively in North America, expects to open an Abu Dhabi flagship next month.

“By utilizing licensing agreements to enter new geographic markets, we can cost-effectively and quickly grow our business, while also benefiting from our partners’ knowledge, presence and experience in these new retail environments,” said chairman and chief executive officer Thomas Lynch, who earlier in the week underscored the need for the brand to increase revenues after sluggish quarterly results, due partially to the sale in October of its wholesale division, formerly known as Movie Star, to Dolce Vita Intimates LLC.

In the second quarter ended Jan. 29, Frederick’s recorded a net loss of $3.3 million, or 8 cents a diluted share, compared with a loss of $4.9 million, or 18 cents a share, in the year-ago quarter.

Adjusted earnings before interest, taxes, depreciation and amortization from continuing operations was a loss of $1.3 million versus a loss of $400,000.

Net sales slid 11.3 percent to $32.6 million from $36.7 million a year earlier. Quarterly same-store sales fell 16.5 percent, and gross margin slid to 35 percent of sales versus year-ago margin of 36.7 percent.

“Although we are disappointed with our lower retail store sales, we continue to make significant progress in improving our overall retail business,” Lynch said. “We primarily attribute these lower sales to late deliveries of merchandise, which resulted from credit limits imposed by certain of our vendors prior to the sale of our wholesale division.”

The ceo added that the lateness of deliveries, coupled with conservative expectations for holiday, resulted in “lower than optimal inventory levels,” but the firm’s “improved financial condition” following the sale of its wholesale division had led to an elevation of its vendors’ credit limits, which “will result in timely product deliveries going forward.”

For the six months, the company’s net loss shrank to $4.5 million, or 12 cents a diluted share, compared with a loss of $9.3 million, or 35 cents, a year earlier. Sales declined 9.8 percent to $61.2 million from $67.9 million.