Face Lift at Frederick’s : A shift to less kinky and more mainstream merchandise is paying off.
Ooh-la-la. Things are really shaping up at Frederick’s of Hollywood.
Four years ago, the bottom line of the legendary purveyor of naughty lingerie was sagging like an old fan dancer’s fanny.
The company--famous for its passionately purple Art Deco flagship store on Hollywood Boulevard--reported the first annual loss ($148,000) since its 1946 founding. Without adequate computers, merchants were failing to follow changing tastes. Sales stagnated as the company’s reputation for the raunchy kept mainstream business away; customers flocked instead to competitor Victoria’s Secret and other stores deemed “more acceptable.”
Now, after several nips and tucks in its tattered strategy, Frederick’s has bounced back--with surging profits, remodeled stores, sophisticated merchandising and distribution, and a cleaned-up approach that is downright demure compared to the “missiles and snow cones” look of yore.
“We’re now soft and sensual compared to harsh and sexual,” said George Townson, a former Carter Hawley Hale Stores executive who was brought in four years ago to fix the problems. He succeeded founder Frederick Mellinger as chairman and chief executive and gets much of the credit for the turnaround.
“We don’t want to be associated with the old words--sleazy, tawdry, tacky. They really offend us.”
All he has to do, he acknowledged in a recent interview in his basement office at the 54-year-old Hollywood Boulevard building, is convince everybody that Frederick’s has changed.
For shareholders, there has already been ample evidence that the new-found Frederick’s beauty isn’t only skin deep. In July, the company declared its second 3-for-2 stock split in six months. Frederick’s stock, traded on the American Stock Exchange, has more than doubled in price this year, climbing steadily to a Friday close of $16.125.
“Our shareholders are a bunch of happy campers,” Townson quipped. (Founder Mellinger’s family still owns about 60% of the stock.)
Also last month, the company reported that profit for the third quarter tripled to $607,000 and that sales rose 29% to $20 million. For the nine months, sales increased 23% to $60.8 million, and earnings reached a record $2.3 million, topping the $1.7 million for all of fiscal 1988.
By one projection, Frederick’s could surpass $3 million in earnings and $78 million in sales for the year that ends Saturday.
Townson “has really taken the company to new heights,” said David S. Leibowitz, an analyst with American Securities Corp. in New York who has followed the company for almost a decade. “Most observers would not have thought it possible looking at the company he inherited.”
Signs of the face lift by Townson and his hand-picked management team--90% of whom came from outside--permeate the company. Among the more obvious changes are better-quality merchandise, more tasteful store designs and fixtures, high-powered IBM computers to track sales and an updated logo with a stylized star.
Frederick’s catalogues, which as recently as 1985 featured the theme “Dress for Sex-cess,” no longer offer the whips, vibrators, X-rated videos, bondage get-ups, his-and-her Halloween devil costumes and nudity that had been mainstays. In place of line drawings and risque photos of models are glossy color pictures of wholesome looking women posing daintily, covering up any parts that might offend.
Once a staple of the back pages of Hustler and Penthouse, Frederick’s ads have shifted to Cosmopolitan, Harper’s Bazaar and Vogue.
The idea may still be to get men’s pulses racing, but the approach is less blatantly suggestive.
In the stores, burgundy, brass and gold have given way to mauve, chrome and soft lighting. Backdrops inside the display windows that once hid shoppers from view have been taken down, replaced by inviting glass fronts.
Harsh mannequins are gone, as are the sportswear, wigs and swimwear that once took up much of the selling floor. (Sportswear, dresses and swimwear are still sold through the catalogues.) Instead, Frederick’s stores now sell a broader array of intimate apparel under the Frederick’s label that is, in Townson’s view, “a lot closer to middle of the road than four years ago.”
Lately, Townson, 48, has spent much time on tour, touting the new image to investment analysts and trying to dispel the notion among mall developers that Frederick’s stores should be relegated to out-of-the-way wings in shopping centers.
Rapid Expansion Schedule
Developers are noticing. Steve Rausch, vice president of leasing for Macerich Co. in Los Angeles, said Frederick’s remodeling and remerchandising of a store at Lakewood Center Mall have boosted sales by nearly 50% in the past two years.
“It used to be a place where women shopped for novelties--the stylish, kinky, extraordinary,” he said. “Now women are going there for everyday lingerie needs, too.”
Since taking charge, Townson has shut down about 30 older-generation stores (in some cases because developers refused to renew leases) while undergoing an aggressive expansion of stores with the new look. The company now operates 151 Frederick’s stores and eight upscale Private Moments stores in 35 states. It plans to open new Frederick’s locations at the rate of 24 a year.
While new stores are contributing to growth, sales gains at stores open at least a year have been running at a healthy 15%. Townson is particularly proud that the expansion and remodeling are being funded without borrowing.
Meanwhile, mail-order sales have tripled since 1985 and account for 37% of sales. Within five years, Townson expects mail order to represent 45% of the business.
The mail-order subsidiary alone posted a 41% sales increase during the third quarter, primarily because of an increase in mailings. Once shunned by other direct marketers with customer lists to sell, Frederick’s now buys from Avon and Spiegel and even managed recently to crack Bloomingdale’s, after a pitch by Townson impressed executives of the high-profile chain.
In January, Frederick’s will consolidate its mail-order activities--now “bursting at the seams” in three scattered locations--in a new 72,000-square-foot warehouse in Compton that Townson said “will allow rapid growth.”
Younger Clientele
Within the next two months, a $300,000 remodeling will begin on the store in the lurid purple landmark building on Hollywood Boulevard. Although Townson declined to provide many details, a prominent feature, he said, will be a Lingerie Hall of Fame, a successor to the “bra museum” that Frederick’s occasionally sets up.
Before moving to Frederick’s, Townson, a Boston native, was chief executive of Tinder Box, a chain of gift stores. Previously, he spent more than eight years with Sunset House, a mail-order division that Carter Hawley Hale sold.
Townson acknowledges that he and other Frederick’s executives have constantly reassessed their strategy in the past four years. Plans to expand the small Private Moments chain have been put on hold. Store designs have gone through several refinements. A prototype store in Westminster Mall with mirrored columns, for example, was immediately branded as “too glitzy” and had to be toned down, Townson said.
The company has counted on research by Walter K. Levy, a New York retail consultant, and on Townson’s instincts. The executive said he spent hours standing outside the company’s store at Del Amo Fashion Center, observing customers. One thing he learned was that customers were younger than Frederick’s had believed.
Townson said he realizes that many developers and customers still regard the company as “the old Frederick’s.”
“There is still a lot of missionary work to be done,” he said.
One shift that Frederick’s isn’t likely to make is a name change, an idea that Townson had considered to help unload the old baggage.
“The Frederick’s name is better known around the country than other retailers’ names,” Townson said, adding that the name has a 92% recognition factor in the Los Angeles area and probably is known to 80% of customers nationwide.
“The name is really gold to us.”
