Lingerie and swimwear retailer Frederick’s of Hollywood Group has seen its second-quarter losses widen due to a drop in sales of intimate apparel, coupled with poor results from its expansion into new product categories.
Net losses reached US$9.9m for the three months to 26 January, compared to a loss of $3.5m the same period last year.
Sales declined 25.3% to $24.3m from $32.5m the prior year, while comparable store sales fell 15.7%. Store sales dropped 19% to $15.5m and direct sales plummeted 32.5% to $8.1m.
Chairman and CEO Thomas Lynch said: “Revenue for the second quarter of fiscal 2013 was lower due to several events, most notably the poor results from our expansion into non-core product categories (dresses, sportswear and shoes). Our merchandising strategy to provide a fuller array of products across a broader assortment of merchandise and price points did not meet our expectations due to the limited funding to successfully market these new product categories.
“In addition, we had lower sales of core intimate apparel products (bras, lingerie and corsets), which is primarily attributable to a reduction in inventory levels in these categories. The sales for these categories were also negatively impacted by the late delivery of products from our vendors due to slower payments.”
Lynch said the group has started “reconnecting” with its customers and increasing inventory levels of its core intimate apparel products. “We are looking forward to improving the financial performance of our company,” he added.
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By GlobalDataOver the first half, the company’s net loss widened to $15m against a $5.9m loss the year before, while sales slumped 23.2% to $46.7m from $60.9m last year.
“We are disappointed by the operational and financial issues that have held us back from reconnecting with our customers, which led to sales results that were counter to much of the retail sector,” Lynch said.
“We are disappointed by the operational and financial issues that have held us back from reconnecting with our customers, which led to sales results that were counter to much of the retail sector. Therefore, we have implemented a plan to refocus on our lingerie products. This plan included the $10m capital infusion from Five Island Asset Management LLC, a subsidiary of Harbinger Group Inc, which was announced just last week. This capital infusion will play an important role in stabilizing our business and will allow us to improve sales by maintaining appropriate inventory levels in the categories our customers are looking for.”
The company has also terminated its employment agreement with president and chief operating officer Don Jones. Lynch will assume Jones’ responsibilities.
