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LOS ANGELES — “It’s a whole new beginning for the company,” said Linda LoRe, chief executive officer and president of Frederick’s of Hollywood, on Friday, commenting on Wednesday’s U.S. Bankruptcy Court decision to accept its reorganization plan to emerge from Chapter 11. The official confirmation hearing will be Jan. 7.
“The entire organization is pleased to be able to move forward now,” she continued. “It’s wonderful that it happened in less than two years.”
As reported, key points of the plan call for the conversion of “significant” debt to equity from the company’s creditors, led by Credit Agricole, a French investment bank. The plan also calls for unspecified investment for growth of the company, including capital for an unspecified number of new stores as well as funds to spiff up Frederick’s merchandise and image. It also calls for the assumption of all 167 store leases and the continuation of the senior management team led by LoRe.
Frederick’s, which filed its Chapter 11 petition in July 2000, will officially emerge in January to a changed $10 billion lingerie market, crowded with existing competitors like Victoria’s Secret, Target and Wal-Mart, and brimming with startups eager to get part of the market.
Industry observers say that if Frederick’s is to be successful, it’s going to have to set itself apart from its peers.
“It sounds to me like they want to develop a somewhat different niche,” said Wells Fargo Securities analyst Jennifer Black. “They sort of went from naughty to nice and now they’re going back to being naughty and racier. They don’t have anywhere near as large of a target audience as Victoria’s Secret does, but they could be going after a niche that could be underserved. So it could work.”
As part of its strategy, Frederick’s has slimmed down by shuttering 44 stores, while opening another seven under bankruptcy, and has introduced a new store concept, the first of which bowed at Glendale Galleria in Glendale, Calif., last March 26.
The store resembles a jewel box with a boudoir-style interior decorated in cherry-wood paneling, red velvet drapes and leopard carpeting. Ideally, LoRe would like to open about 200 stores in the new style in the next four years, based on the availability of funds. For now, all stores will get “touched one way or another,” including the flagship store on Hollywood Boulevard, the site of the company’s headquarters.
As for product, Frederick’s said it will get back to its racy roots — but it’s not about to abandon its nice side. A Frederick’s fashion show at the trendy Falcon restaurant here during fall fashion week in October introduced a denim collection. Frederick’s will also continue its plus-size category expansion with a greater assortment of styles.
Packaging also has a new look. Gone are the white plastic bags with a pink star. In their place are red cardboard totes with a stencil-cut “f” and animal-print tissue paper.
Once under a debt load of $70 million, the company is in much better shape these days with assets of $56 million, including $29 million in trademark assets, $12 million in inventory and $700,000 in cash, according to bankruptcy documents filed on Aug. 11. Liabilities are approximately $28.8 million.
Same-store sales rose 7 percent in November compared with the same month a year ago.