Frederick’s of Hollywood Group Inc., the unprofitable maker of the namesake women’s lingerie, hired an adviser to pursue a possible sale.
Allen & Co., a New York-based investment bank, has been retained to explore a broad range of strategic alternatives, which may include selling the company, Hollywood, California-based Frederick’s said in a statement today. The company said it has no timeline for the strategic review.
Frederick’s of Hollywood, which was founded as a mail-order lingerie business more than 60 years ago and pioneered the push-up bra, has posted four consecutive years of losses on shrinking sales as competition has increased in the U.S. Limited Brands Inc.’s Victoria’s Secret chain in contrast has been thriving, and posted an 11 percent sales gain last year.
“Victoria’s Secret and others have probably made them irrelevant,” Walter Loeb, president of Loeb Associates Inc., a New York-based retail consulting firm, said in a telephone interview. “They will have to develop a new image for the company, and innovative merchandise, to attract new customers, to be younger and to be more up-to-date.”
The shares rose 12 percent to 28 cents in New York. They slid 21 percent this year.
Frederick’s board “has received several inquiries regarding various transactions” during the past few months, Chief Executive Officer Thomas Lynch said in the statement.
The retailer had a net loss of $3.54 million, or 9 cents a share, in the quarter ended Jan. 28. Second-quarter sales dropped 0.2 percent to $32.5 million after Frederick’s reduced prices and sold clearance items.
The business was created by Frederick Mellinger, who was the first to sell the bikini in the U.S. The company filed for Chapter 11 bankruptcy protection in 2000 and emerged 2 1/2 years later. It became a publicly held company in a deal announced in 2006 to merge with New York-based Movie Star Inc. Frederick’s, whose main store location is on Hollywood Boulevard, now sells what it calls sexy women’s intimate apparel and swimwear through 117 stores, a catalog and website.