Sex Doesn’t Sell

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Frederick’s of Hollywood, famous for its racy lingerie, has hired a former Wal-Mart executive in a bid to get less-naughty nighties into America’s leading discount chains.

The Los Angeles company plans to launch a line of sleepwear and daywear for young women that could be sold on the racks at Target, Kohl’s, Wal-Mart and other discount retailers.

“It’s a new day for Frederick’s,” Linda LoRe, the company’s president, said regarding the proposed line aimed at women from 16 to 26 years old. “We believe there’s a void in the market.”

The strategy comes amid a dismal retail scene that is causing pain throughout the apparel world, but has hit Frederick’s especially hard. Sales have fallen more than 20 percent from last year, and the company’s chief executive recently said Frederick’s will have to cut back on operations unless it finds financing.

A key player in getting the new line into discounters will be Barbara Bakalic, who spent eight years as corporate brand manager and product development director at Bentonville, Ark.-based Wal-Mart Stores Inc. She became vice president of product development for Frederick’s of Hollywood Group Inc.’s wholesale division in June.

She believes Frederick’s has a prime opportunity to market a new line to young women.

“We believe the mass marketers have played it too safe with this audience,” she said regarding the new brand’s potential buyers. “Where we’re seeing the impulse buy is in that age group; they’re out there looking for newness and fun. They’re not thinking too much about what they can’t have, but what they want anything that has sassiness, sexiness and freshness will sell right away.”

The new line, she said, won’t be sold in the chain’s 130 stores and will have a different name and tamer fashions. Frederick’s is preparing to show the new line to buyers at the retail chains.


Changing times

Frederick’s of Hollywood is no stranger to reinvention.

Founded by Frederick Mellinger on New York’s Fifth Avenue in 1947, the company later moved to Los Angeles to capitalize on the glamorous image of Hollywood for its risqu & #233; line of women’s lingerie.

Over the years, Frederick’s which still operates its flagship store on Hollywood Boulevard has tried to soften that racy tone, attempting to woo the “average” underwear-purchasing customer away from major competitors such as Limited Brands’ Victoria’s Secret chain.

The strategy hasn’t always worked; nine years ago, the company was forced into bankruptcy.

But Frederick’s came back. A series of changes, including the remodeling of some of its stores and redesign of its Web site and catalog, eventually returned the company to profitability. Last year it merged with New York-based Movie Star Inc., a design, marketing and distribution house. Movie Star, a wholesale company, will be involved in the new line.

But now the pendulum has swung back. Decreased mall traffic and reduced spending due to the recession have taken their toll. And increased competition in the intimate apparel market hasn’t helped: For the quarter ending in April, Frederick’s posted a 23 percent drop in sales to about $46.8 million compared with the same quarter of 2008.

The company is facing a cash problem.

“In order to continue to meet our future operating needs, we are currently exploring additional financing,” Chief Executive Thomas Lynch said in a statement issued with the third quarter earnings. “If we cannot raise funds on acceptable terms, we may be required to curtail our operations significantly, which could adversely affect our business.”

That’s a reason why the efforts of Bakalic, whose hiring was announced six days after the earnings report, could prove crucial to the company.

“Barbara was brought in with a vision of really igniting the mass channel of our wholesale business,” LoRe said. “We felt that she provided a perspective needed in the organization to catapult our strategy to the next level.”

Though the new brand has yet to be named, LoRe said, she described it as “something you could wear either as an inner or an outer with a little bit of sexiness, attitude and sparkle.”

The new designs, she said, are ready to be presented to retailers for potential inclusion in next year’s back-to-school or early fall lines. “We’re ready to go to market.”

Some analysts said it’s a logical move considering the bleak landscape of retail apparel.

“Unless you’re lucky enough to be Wal-Mart, the entire world of retail is having a tough time,” said Jack W. Plunkett, chief executive of Plunkett Research Ltd. His firm, based in Houston, follows Frederick’s and other retail companies.

“It’s come a long way in the last eight years,” he said of the company famous for its fancy garters and bras, and the shift into mass marketing looks like the right move.

“It’s a way for them to see if they can boost revenues without opening stores,” he said.

And what of the Wal-Mart connection?

“What the consumer wants right now is very high value for each dollar spent,” Plunkett said. “The ideal retailer is one that’s positioned to have everyday low prices for high-quality merchandise, and there you go that’s Wal-Mart.”

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