BANKRUPTCY PROTECTION: Frederick’s files Chapter 11

Despite filing, no layoffs or cutbacks are planned

Although Frederick’s of Hollywood filed for Chapter 11 bankruptcy protection last month, catalog vice president Danielle Savin says she’s still excited about the company’s future.

Newport Beach, CA-based private investment firm Wilshire Partners bought the Hollywood, CA-based women’s apparel and lingerie cataloger/retailer from Knightsbridge Capital Corp. on June 16. On July 11, Frederick’s requested court permission to restructure its debt of more than $50 million. According to the court filing, much of the debt was incurred when Chicago-based Knightbridge bought the then-public company three years ago.

Frederick’s, whose annual sales are estimated at $140 million, also received a commitment of new financing from Ableco Finance, an affiliate of Cerberus Capital Management. The funds and filing status should enable Frederick’s to fund operations and purchase inventory – and to capitalize on what sources estimate to be 10% annual growth.

Wilshire Partners has recruited turnaround management consulting firm Crossroads to help manage its restructuring process, and Crossroads principal James Skelton has been named chief operating officer. Frederick’s president/CEO Linda LoRe, who joined the company in June 1999, will remain in her position and oversee the bankruptcy process.

Circulation changes afoot

Under Chapter 11, Frederick’s plans no layoffs, catalog cutbacks, or store closings. “We won’t have to do anything differently,” insists Savin. The catalog division will be modifying its circulation strategy, however. In the three years since Knightsbridge bought Frederick’s, “the catalog has been mailed too deeply into the house file without prospecting effectively,” Savin says. Prior to 1997, “48%-52% of mailings, on average, went to prospects. But that number dropped to 23% on average last year, which led to disastrous results on the 12-month buyer file. So we’ve brought our prospecting level back to 45%-50% on average.”

Following the past three years of circulation cuts, Savin plans to keep circulation steady in the year ahead. She has also adjusted the mailing dates of the company’s fall and holiday catalogs. Frederick’s used to mail its fall catalog in August and its holiday book in early September. But last year the company changed its mailing windows, sending out its fall books around Labor Day and its holiday books in early October. The strategy bombed, according to Savin.

“Last year, when the company mailed in October and our mailing curve hit around Oct. 21, there was no way to ship a lot of those holiday dresses,” says Savin. “Mailing our holiday catalog on Sept. 5 gives our merchandising people a chance to reorder.”

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