LOS ANGELES — J.C. Penney’s love affair with contemporary Los Angeles designers just got hotter.

Seven months after signing an exclusive distribution pact with Bisou Bisou, the retailer is expected to announce today that it has inked a similar deal with BCBG Max Azria Group’s Parallel division.

In the same vein, J.C. Penney will be the sole retailer carrying Parallel, which begins shipping Aug. 15 to about 400 doors, or about 40 percent of Penney’s stores, as well as to the company’s Web site and upcoming catalogs.

What’s different is that Azria, BCBG’s founder and chief executive, will not only oversee the design and merchandising of the collection, but also its sourcing and manufacturing. He has already beefed up his staff by 12 employees to around 30 in the last month.

“This is all about bringing the customer affordable fashion with more styling, and Parallel represents the perfect alignment with our contemporary offering,” said Vanessa Castagna, chairman and chief executive officer of J.C. Penney stores, catalog and Internet.

Azria, whose relationship began with Penney about four years ago when he started offering private label services for the retailer’s Mixit line, said the deal helps him better manage his firm’s portfolio of brands, which include BCBG, To the Max, and Hervé Leger.

“This is a simplification of our jobs —it’s a consolidation of the brand in a precise direction that doesn’t cannibalize other brands,” said Azria.

For Penney, the move is in direct step with its turnaround strategy begun five years ago to reposition the 101–year-oldchain of 1,049 stores into a hub of easy-on-the-eyes-and-wallet fashions focused on rapid turnover. Its Mixit private label line, begun seven years ago, has recently been updated, and in February it added Clio, a Los-Angeles-based line that used to sell at May Department Stores Inc. in its 1,200 to 2,400-square-foot contemporary departments. Penney continues to have ongoing conversations with others in the market, Castagna said. Chatter in the industry has pointed to Oscar de la Renta as another potential partnership.

“We’re very serious about getting attention from the customer and we’re only here to offer brands that customers will respond to — we don’t have time to offer brands that don’t work,” Castagna said.To date, Bisou Bisou has “definitely met expectations” since it bowed in February, she said. A mix of customers have responded to it, from age 18 to 80, and the company has taken notes on how the sizing, fit and styles are resonating with shoppers. Promotions also have stoked sales. Shoppers visiting the Penney’s Web site, which now lists a contemporary category, can pick up Bisou Bisou rip-stop cargo pants or wide-waistband jeans for $29.99 each, down from $44, and a lined lace cami for $19.99, down from $30.

The chain’s transformation has been a work in progress. Comparable department store sales returned to positive territory for the months of May and June after a bumpy start to 2003, with increases of 3.2 percent and 0.1 percent, respectively. Penney’s expects July comparable department store sales and catalog- Internet sales to register flat sales or asmall increase, while comps at its Eckerd drugstore chain should be down slightly.

But the retailer trimmed its second-quarter guidance, saying operating profits for Eckerd are trending below year-ago levels. It now expects to report a second-quarter operating loss per share about equal to last year’s loss of $6 million, or 5 cents a share. In May, the company estimated second-quarter earnings of “about zero” cents a share.

With this new venture, Penney will initially focus distribution at its top-producing stores, mostly found on the West and East Coasts and in Florida, displaying the line in 300-to-500-square-foot shops with matching fixtures (compared with Bisou Bisou’s 450-to-700-square-foot shops). Also drawing attention to the launch is a marketing campaign hitting newspaper inserts in August along with full-page ads in the October issues of Marie Claire, In Style, Lucky and Jane. Depending on consumer response, Parallel can expand to more units, and possibly more categories, such as accessories, Castagna said. Already, the Bisou Bisou line has grown with the addition of shoes and handbags.

Designed to suit the wardrobe from work to happy hour, the 25-piece Parallel collection will feature softly structured suits with pants and tailored jackets, brushed twill trousers, knee-length print and pencil skirts, poplin blouses with shirring or tuxedo detailing, knit jersey tie-waist blouses with flared sleeves, and stretch denim cargo pants (minus the low-rise). Motorcycle jackets in brushed twill, corduroy peacoats and tailored sweaters round out the mix. Azria said the line went through subtle morphing in fabrics to fit in with the new retail price points that range from $25 for a T-shirt to about $80 for a jacket. Another shift is in sizing, which ranges from a more forgiving XS to XL in tops and sizes 2 through 16 in bottoms.“The looks are still quite similar,” Azria said, noting he will replenish stores with monthly shipments.

Both parties declined to comment on first-year sales projections, but analysts say the move could potentially bring in at least $50 million, averaging about $250 a square foot in annual sales.

“The Penney’s strategy has been a smart one,” said Walter Levy, managing director of retail trends at Kurt Salmon Associates. “By getting exclusives from persons with fashion credibility, they’re telling the shopper that she doesn’t have to go to a specialty retailer to find good fashion.”

It’s not the fist time that Vernon, Calif.-based BCBG has teamed up with a retailer.

In 2000, the contemporary sportswear firm created an exclusive collection of lower-priced contemporary casual wear for Nordstrom to reach a broader customer base.

That venture lasted about one year. It stopped due to management changes at Nordstrom, according to Azria.

BCBG Max Azria picked up streetwear label Parallel with the Francine Browner Inc. portfolio in 1996 and business turned rocky when designer Katayone Adeli and president Sean Barron left to launch Adeli’s own line that November. (Adeli closed her line last April.) Parallel went through a series of management changes, leaving its design focus blurred.

At its peak about two years ago, Parallel had 600 wholesale accounts and four stores, with locations in Las Vegas, Santa Monica, Newport Beach, Calif., and here on trendy Robertson Boulevard. The line generated $23 million in sales. Merchandise included cotton poplin tops with three-quarter sleeves, matte jersey drawstring cargo pants and men’s wear-inspired knee-length jackets, priced from $86 to $350. The company stopped shipping in March, closed the Robertson location last year, and is transforming its remaining stores into BCBG units.

Azria still retains the right to license the line outside of the U.S. He even foresees up to a dozen Parallel stores in the future, with Penney’s “blessing.”

For now, BCBG Max Azria has streamlined operations to cope with a cash crunch it hit two years ago. Future projects include opening up about 10 BCBG stores and focusing on the September re-launch of Hervé Leger.Azria, who once told WWD he wanted to be a “global branding corporation,” continues to speak pretty confidently about his $360 million operation.

“Business is great…and as you know,” he said, “lots of department stores are looking for new avenues to distinguish themselves.”

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