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Initiatives Throw Innovo Into Red

NEW YORK — Higher costs, many related to start-up activities, more than offset surging sales to throw Innovo Group Inc. into the red in the second quarter.<br><br>For the three months ended May 31, the Los Angeles-based apparel and accessories...

NEW YORK — Higher costs, many related to start-up activities, more than offset surging sales to throw Innovo Group Inc. into the red in the second quarter.

For the three months ended May 31, the Los Angeles-based apparel and accessories marketer reported a net loss of $493,000, or 3 cents a diluted share. By comparison, last year the producer of Joe’s Jeans had net earnings of $207,000, or 1 cent.

Sales for the period shot up 76.6 percent to $12 million from $6.8 million a year ago, but a 570 basis-point plunge in gross margin, coupled with a 200 basis-point increase in selling, general and administrative costs, combined to produce a loss.

In a separate matter, Innovo’s wholly owned subsidiary, Innovo Azteca Apparel Inc., has completed the acquisition of the Blue Concepts division of Azteca Productions International Inc., which primarily sells jeans to American Eagle Outfitters Inc.

Innovo said it purchased certain assets of Blue Concepts, which had full-year revenues of about $75 million, for $21.8 million. While Innovo will keep Blue Concepts’ employees, it will not assume the firm’s existing liabilities.

Innovo said the acquisition has been funded through the issuance of a seven-year promissory note bearing 6 percent interest.

Overall, for the first half of the fiscal year, Innovo managed to pare its net loss to $211,000, or 1 cent a diluted share, from $289,000, or 2 cents, in the year-ago period. Sales soared 137.6 percent to $23.9 million from $10.1 million last year.