NEW YORK--Hit by heavy markdowns, Frederick's of Hollywood Inc. reported a loss of $686,000 in the third quarter ended June 1.
In the year-ago quarter, the specialty retailer and catalog operator earned $440,000, or 5 cents a share.
Sales in the latest quarter rose 5.9 percent to $35.3 million from $33.3 million. The Frederick's of Hollywood stores sustained a $2 million operating loss for the period, about twice as large as that of a year ago. Total sales rose 8 percent to $17.4 million. Same-store sales were up 6 percent.
The mail-order business reported operating profits for the quarter slumped about 50 percent to $806,000. Sales rose 4 percent, reflecting increased catalog distribution.
"Significantly greater markdowns, aimed at liquidating slower-moving and promotional merchandise, along with increased promotional expenditures, affected profitability of our stores during the third quarter," George W. Townson, chairman and chief executive officer, said in a statement.He added that the performance was also hurt by higher paper and postage costs and a lower-than-expected response to its swimwear catalogs.
For the nine months, the firm earned $664,000, or 8 cents, against earnings of $3.6 million, or 42 cents. Sales rose 5.1 percent to $116.5 million from $110.8 million.
Last month, Frederick's and the trusts set up by its founders hired Janney Montgomery Scott Inc. as a financial adviser to explore ways to enhance shareholder value, including selling the company.

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