Frederick’s of Hollywood has officially conceded that its racy lingerie stores are a bust, disclosing in a bankruptcy petition that it will continue operating only as an online retailer.
According to a Chapter 11 petition filed Sunday, Authentic Brands Group has agreed to acquire Frederick’s e-commerce business for $22.5 million. The bankruptcy filing listed $36.5 million in assets and about $106 million in liabilities.
Founded as a mail order catalog selling lingerie in 1946, the company has struggled for years amid increased competition from Victoria’s Secret and other retailers, failing to record a profitable fiscal year since 2007. It previously filed for bankruptcy protection in 2000.
“As a company, I think they became old and stale,” Ron Friedman, a retail expert at consulting and accounting firm Marcum, told the Los Angeles Times. “Victoria’s Secret has been a home run compared to them.”
Sunday’s filing had been expected after Frederick’s announced last week that it had closed all of its few remaining stores. Last year, the company operated 94 stores, down from more than 200 during its heyday.
In a bankruptcy court declaration, Chief Operating Officer William Soncini, who joined Frederick’s in July as part of a turnaround team, said the company had suffered a “significant overall decline” in financial performance due to poor sales, increasing expenses, and the burden of servicing debt.
Despite recent cost-cutting efforts, the board concluded in December that the “store portfolio was unlikely to produce positive cash flow in the foreseeable future” and absent a “significant infusion of capital,” sale options would need to be explored, Soncini said.
In the event, the only offer the board accepted was for the e-commerce business. Authentic Brands, a buyer of brands’ licensing agreements, has also bought the intellectual property of menswear retailer HMX Group and acquired tennis racket maker Prince Sports through bankruptcy sales.
“An online business is nothing more than another retail store without fixed rent,” Friedman said. “They have to really focus and hire people that really understand the online business.”
Frederick’s was taken private in 2013 by a consortium including Harbinger Group. Salus Capital Partners, an affiliate of Harbinger, has agreed to provide Frederick’s with $11 million in bankruptcy financing.