In its second-largest acquisition, Amazon buys the company for $970 million.
In fiscal 2008 about 70% of all direct orders were placed online, which is prompting Frederick’s of Hollywood to cut back its catalog program. The company this past fiscal year reduced the number of catalogs it publishes and mails by 8.3%.
Retail sales at Frederick’s of Hollywood Inc. remained flat in fiscal 2008, but the company will continue to grow its direct business by concentrating on e-commerce and cutting back on catalogs.
In fiscal 2008, Frederick’s, No. 167 in the Internet Retailer Top 500 Guide, posted retail sales of $153.7 million, a decrease of about 1% from retail sales of $155.2 million in fiscal 2007. In comparison, total sales, driven by an increase in wholesale revenue of $28.5 million, grew by 17.4%. For the 2008 fiscal year, Frederick’s posted a net loss of $15.6 million on sales of $182.2 million vs. net income of $441,000 on revenue of $155.2 million in fiscal 2007. For the fourth quarter ended July 26, Frederick’s recorded a net loss of $7.2 million on sales of $42 million, compared with a net loss of $2.6 million on sales of $32.8 million in Q4 of the prior year. The company didn’t break out Q4 retail sales.
Overall in fiscal 2008 about 70% of all direct orders were placed online, though Frederick’s didn’t break out specific web sales in its recently filed annual report with the Securities and Exchange Commission. In fiscal 2008 the company reduced the number of catalogs it publishes and mails by 8.3% to 18.7 million copies from 20.4 million in the prior year. “Since we have reduced catalog circulation, we are endeavoring to expand our Internet customer base through various methods, including partnering with Internet search engines and participating in affiliate programs,” Frederick’s says in its annual filing.
In fiscal 2009, Frederick’s will make the transition to a different third-party platform from Demandware. “Following an unsuccessful transition to a new web platform during fiscal 2008, we also have focused our efforts on replacing our web site with a state-of-the-art e-commerce system,” says Frederick’s executive chairman Peter Cole. In May, Frederick’s filed a lawsuit against e-commerce platform provider MarketLive Inc. in the Superior Court of California, County of Los Angeles, for breach of contract. A mediation hearing is scheduled for Nov. 12, according to Frederick’s 10K filling. Frederick’s and MarketLive decline to comment on the suit.