Hollywood Ending? Stand-in Fights to Fix Frederick’s

Interim finance chief tries to rescue famed lingerie retailer.
Tim ReasonSeptember 10, 2001

Want more proof that turnarounds are more challenging in this economy than they were during the last recession? Consider the task facing Craig Boucher, interim CFO at Frederick’s of Hollywood. (Boucher is on loan from Irvine, Calif.-based Crossroads LLC.)

Not only is he fixing a highly leveraged balance sheet, he’s also got to firm up the company’s business plan and operations.

Saddled with $44 million in debt from a 1997 leveraged buyout, the lingerie retailer’s fortunes declined when it experimented with a more upmarket image and committed the cardinal sin of limiting the trademark décolletage on its catalog covers. ”Cleavage is the Holy Grail,” says Boucher of his adopted company, which has been in Chapter 11 since July 2000.

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All interim CFOs want to put an iron grip on cash-flow. But Boucher also worries about fixing IT, upgrading shabby stores, and retooling the Web site. Among the tasks he helped to tackle was a study of Frederick’s retail operation. Because some malls refuse to accept the racy retailer, ”stores were opened haphazardly,” says Boucher. The stores also suffered from a pattern of deferred maintenance, which was blamed for a drop in sales that took Frederick’s from its onetime peak in the catalog business of $70 million in 1997 to $30 million last year. ”The stores were buoying the company, yet they were being neglected,” he asserts. Even worse, there was no coordination between store and catalog, as the same items were assigned separate inventory and SKU numbers. ”They were buying the same stuff from different vendors.”

Boucher even took a strong interest in the company’s Web site, which was, he says, ”big on bells and whistles, but low on functionality.” Like most turnaround specialists, he has a low opinion of the failed dot-coms that litter the current landscape, but he was keen to come to this demoiselle’s distress. ”Frederick’s is a very innovative company,” says Boucher. ”It introduced black lingerie from France in 1945. It sold the first bikini in the U.S. And in 1981, it brought the thong from Brazil.” What dot-com can claim that kind of cultural impact?