A Tale of Two Lingerie Retailers

Frederick’s of Hollywood and Victoria’s Secret started on the same track decades ago as catalog lingerie retailers. But while Victoria’s Secret zoomed to the top of the sexy intimates business, Frederick’s lagged behind, becoming virtually a nonentity in the industry.

Success at L Brands Inc.-owned Victoria’s Secret is evident in its bottom line. Annual sales at the company rose about 5% in 2014 from the year prior to $7.2 billion, Chief Executive Sharen Turney said on a Thursday earnings call. Analysts gushed at the success of chain, which has more than 1,100 stores, with one analyst later writing that Victoria’s Secret is the “undisputed champion of the domestic specialty lingerie market.”

Frederick’s, meanwhile, is working with liquidators to close at least a third of its 93 stores as it fights to stay alive and revive its damaged brand.

The U.S. lingerie industry raked in more than $13 billion last year, with Victoria’s Secret’s market share accounting for 41.3% of that, according to research firm IBIS World. Frederick’s, meanwhile, made up less than 1%.

“Frederick’s is appealing to a very small segment of younger women,” said Britanny Carter, an industry analyst with IBIS World. “They’re essentially selling sex, whereas Victoria’s Secret is selling more of a lifestyle.”

The companies had similar origins, both founded by men with a new vision of women’s lingerie. World War II veteran Frederick Mellinger launched Frederick’s in 1946, introducing the U.S. to fashions he saw in Europe such as black lingerie and pioneering what are now intimate staples including the push-up bra and thong underwear. The first retail store opened in 1952, and the company went public 20 years later.

Victoria’s Secret got its start in 1977 by founder Roy Raymond, who initially catered the brand toward men looking to buy lingerie for their wives and girlfriends. Limited Brands Inc., now called L Brands, bought the company in 1982 when Victoria’s Secret had just a handful of stores and a catalog. It had expanded to 100 locations by 1986, and the retailer went public with its parent in 1995.

Today, Victoria’s Secret is considered a store that moms and daughters—or husbands and wives—feel comfortable shopping in together, while Frederick’s lures in customers with risqué, skin-baring looks.

Victoria’s Secret’s consistency has been the key to its stability and popularity with consumers, industry watchers say. Frederick’s, meanwhile, has had trouble maintaining its image.

“Frederick’s has seen changes in leadership, ownership and direction that are not only tough on the brand, but tough on the consumer,” said Richard Jaffe, an analyst at Stifel Nicolaus & Co.

Frederick’s chief operating officer, Bill Soncini, did not return requests for comment. Last week, he told The Wall Street Journal the company is “in the process of re-engineering the whole business.”

In recent years, Frederick’s has embarked on ill-fated attempts to fix the brand, including licensing its name to products ranging from beach towels to Halloween costumes, opening franchise stores in the United Arab Emirates, and launching a high-end lingerie line. None of the ventures perked up revenues enough to stick around.

Victoria’s Secret, in contrast, keeps expanding. The company said Thursday it plans to increase its store square footage by 5% this year, including through 26 new store openings. The retailer has had some misses: Ms. Turney said Thursday that the company is cutting an unsuccessful apparel and makeup lines.

A spokeswoman for Victoria’s Secret did not return a request for comment Thursday.

Frederick’s has worked with restructuring advisers on and off since 1996, bouncing from a public to privately held company multiple times. Harbinger Group took the company private in 2013 in a deal that valued Frederick’s at $11 million, and the private-equity firm has since written off $60.2 million on the acquisition. At the time of its takeover, Frederick’s debts included a $24 million loan borrowed in 2012 from Harbinger affiliate Salus Capital Partners.

Victoria’s Secret’s brand has remained uplifted by its marketing, brand position and quality products, analysts say.

“No matter who you are, Victoria’s Secret is just the king of the hill,” said Paul Lejuez, an analyst at Wells Fargo.

-Stephanie Gleason contributed to this article.

Write to Lillian Rizzo at [email protected] and Sara Randazzo at [email protected]. Follow them on Twitter at @Lilliannnn and @sara_randazzo