Amid Wear and Tear, Firm Seeks to Rework Image

TIMES STAFF WRITER

Before there was Victoria's Secret, which gave women the feminine and affordable lingerie they wanted to wear, there was Frederick's of Hollywood, which gave men the racy and mostly inexpensive undergarments they wanted women to wear.

Ten years after Frederick's was eclipsed as the country's largest lingerie chain store, what the company is revealing now are the broad outlines of its plans for Frederick's 200-plus stores and catalog, which are thought by many people to be more about kitsch than quality.

But in the middle of a renewed effort to rework its image and expand its customer base, the company in March abruptly fired its chief executive. Former CEO Teresa Patterson responded last week with a lawsuit against parent company FOH Holdings Inc. and several of its principals for wrongful termination.

All this while Victoria's Secret's 844 stores are booming, Gap is expanding its own underwear lines and designers such as Calvin Klein continue to offer trendy department store alternatives.

With plans for an updated Web site, a new catalog and new efforts to refine and deepen their customer base, Frederick's now needs to show it has not missed out on the great American lingerie frenzy.

"They were there but they did not seize the moment," said Todd Slater, a retail analyst with Lazard Freres & Co. in New York. "Now it's not clear to me that the intimate-apparel market is big enough for too many specialty-store players going after the same customers."

Patterson, who arrived at Frederick's 14 months ago saying she would "keep the sexy and get rid of the sleazy," said she was abruptly terminated after she mistakenly received a fax from an executive search firm hired to find her replacement.

The company claims Patterson was fired for cause, although representatives would not comment further on pending litigation.

Frederick's executives say what is important is that they have the same management team, which is committed to continuing what the company calls its "evolution."

"We've always been a provider of wonderful, sexy, quality intimate apparel, but perhaps when you looked at the pages of our catalog, you didn't see the fact that we have an amazing array of everyday, beautiful lingerie," said Pat Flanigan, the company's vice president of marketing. "If that's not clear, it will definitely be clear in the very near future."

As it stands, Victoria's Secret markets supermodels wearing sets of bras and panties with names such as Ashley Collection, Emma and Angels.

Frederick's offers its models' measurements and interests on its Web site, a la Playboy magazine. The lines show a mix of more mainstream products, with names such as Coquette and Charmer, as well as highlight a group called Naughty.

The latter offerings include the type of feather-and-sheer-fabric fare that made Frederick's name, with titles such as Bodacious Basque, Bare All Teddy and Bad-Girl Sleepshirt.

And revamp or no revamp, items like those aren't going anywhere.

"The line will continue to be sexy, it will be fun," said Frederick's product designer Amanda Diaz. "It is certainly naughty, and I don't think 'naughty' is a negative word. It's playful."

The first time the company worked to get out the message that the store wasn't your father's Frederick's was in the mid-1980s, when then-CEO George Townson embarked on a program he called "desleazification."

Gone were the sex toys, nudie shots and a significant number of people who thought the company should become more hard-core, not less. Townson added new stores, remodeled old ones and eliminated extraneous product lines.

Then, 50 years after Frederick Mellinger opened his first store, the family announced in 1996 they would sell off their controlling interest at a time when the stock had fallen to the single digits.

The company was acquired by Knightsbridge Capital in 1997 for $69.7 million, or $7.75 a share. Wall Street analysts speculate that the big question is when, not if, it plans to take the company public again.

Although Frederick's says it is not in competition with Victoria's Secret or any of the others crowding the intimate-apparel field, it might be hard not to be.

While Frederick's worked on refining its business in the 1980s, Victoria's Secret--with its faux-British veneer, romantic styling and soft classical music--was taking over.

Leslie Wexner of Limited Inc. bought Victoria's Secret in 1982, when it was a chain of six mostly failing stores and a catalog. The company's original concept was to make men more comfortable buying lingerie. Wexner quickly changed the focus to women.

Wexner spun off Victoria's Secret and Bath & Body Works under the new name Intimate Brands Inc. in 1995. Limited retains ownership of 83% of Intimate Brands.

By 1998, Victoria's Secret controlled 14% of the market and posted annual sales of $2.6 billion. Parent company Intimate Brands posted 1998 earnings of $400.2 million, up 38.5% over the previous year. Victoria's Secret plans a marketing campaign this year worth more than $100 million.

"It would be very hard for any specialty store to compete with them meaningfully," said Harry A. Ikenson, senior retail analyst with Hambrecht & Quist. "You have the stores, the catalog, the models--this has been very well-executed."

Frederick's will also have to contend with the super-successful specialty store stable of Gap Inc., as its Gap and Banana Republic stores expand their undergarment offerings, in some cases in a store-within-a-store format.

Big-name designers are also courting customers, with Tommy Hilfiger and Donna Karan joining Klein on the department store and boutique racks.

But the Hollywood-based retailer contends that sales are brisk and its plans are thorough.

"Frederick's is a very old brand, it's a very solid brand, it has as much global recognition as any brand in the marketplace," said Flanigan. "The customer is telling us there is room" for Frederick's.

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