By and  on May 10, 2007

NEW YORK — Caché Inc. has agreed to acquire Adrienne Victoria Designs, its largest supplier, the company said Wednesday. The deal is to close around June 30.

The acquisition came as the company announced that first-quarter earnings plummeted 91 percent, hurt by soft sportswear sales. The sportswear fashion misses led to higher markdowns and marketing expenses, the company said.

But the purchase of Adrienne Victoria Designs "represents an important strategic fit for us, as it significantly advances our direct sourcing and manufacturing efforts and expands our talent in design, production and merchandising," Brian Wolfe, chairman and chief executive officer, said in a statement.

"This acquisition creates a vertical platform for Caché. Adrienne and Robert Kantor, [AVD] founders, are extremely talented people who will join the Caché team and continue to run the company," said Gilbert Harrison, chairman of investment banking firm Financo Inc., which represented Caché.

The deal will help Caché, owner and operator of specialty stores selling sportswear, eveningwear and accessories, with its next growth phase, which includes its Caché Luxe concept, Harrison said. Marketing Management Group represented Adrienne Victoria Designs.

Caché said that income for the quarter ended March 31 plunged to $145,000, or 1 cent a share, from $1.7 million, or 11 cents, in the year-ago period. Sales inched up by 0.8 percent, to $64.4 million from $63.8 million, and total same-store sales gained 3 percent.

Because of a $1.8 million jump in marketing costs, operating expenses increased to $29.5 million from $26.9 million last year.

The company said it expected second-quarter diluted earnings per share in the range of 20 cents to 24 cents, on estimated sales of $73 million to $75 million. Full-year 2007 diluted EPS are expected in the range of 75 cents to 80 cents, on sales of between $284 million and $294 million.

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