NEW YORK — The weight of acquisition and marketing charges pressured Innovo Group Inc. into the red for the second consecutive quarter.
In the third quarter ended Aug. 30, the Los Angeles-based apparel and accessories marketer reported a net loss of $2.3 million, or 14 cents a diluted share. By comparison, the company reported net earnings of $820,000, or 5 cents, in the same period last year.
However, net sales more than doubled, soaring 115.9 percent, during the quarter to $21.9 million from $10.1 million last year.
Extraordinary charges weighed heavily on Innovo’s bottom line. The producer of Joe’s Jeans incurred $445,000 in amortization expenses from its July acquisition of Blue Concepts, which sells jeans to American Eagle Outfitters. A remaining $67,000 amortization expense will appear in the fourth quarter.
In August, the company showcased its Fetish by Eve and Shago by Bow Wow lines at the MAGIC show in Las Vegas, shelling out approximately $412,000 in the process for its exhibit and two “celebrity-filled events for retailers and industry executives.” All told, expenses related to expansion totaled $967,000 for the quarter.
Jay Furrow, chief executive officer, said in a statement that while the increased expenses were undesirable, they were “necessary to facilitate the company’s organic and acquisition growth” and to support brand development. “We anticipate expenses to be less in the future,” said Furrow during a conference call.
The company expects revenues in excess of $30 million in the fourth quarter.
J.P. Mark, an analyst with Farmhouse Equity Research, said the loss was anticipated, but “a little more than expected.”
The company, as reported, entered a licensing and distribution agreement with Itochu Corp. of Japan during the quarter giving the Japanese firm rights to the Joe’s brand in its home market.
For the nine months, the company reported a net loss of $2.5 million, or 16 cents a diluted share, as opposed to net income of $531,000, or 3 cents, in the corresponding period last year. Total sales were up 126.7 percent to $45.8 million from $20.2 million.
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