NEW YORK -- Is Kathie Lee Gifford about to become to Wal-Mart what Jaclyn Smith is to Kmart?

Sources claim that Gifford's three-year-old dress line with Halmode Apparel, called Kathie Lee for Plaza South, will be dropped at the end of the year, and a new deal has been signed with an unknown manufacturer to produce a new line of dresses and sportswear aimed at the mass market, notably Wal-Mart. The Jaclyn Smith line, a private label collection sold at Kmart, racks up an estimated volume of $150 million, according to industry analysts.

Robert Adler, chairman and chief executive officer of Halmode, which last week signed a definitive agreement to be bought by Kellwood Co., denies the reports.

"We are in negotiations to renew the license," Adler said. "I have every reason to believe that it will be renewed. We have a renewal option on the contract, and I feel we have lived up to the conditions for renewal."

Adler said his company is currently shipping Kathie Lee fall merchandise to the moderate-price department stores that carry the line and is showing early spring in the showroom, also to department stores. He expects the Kathie Lee line, which features career and social occasion dresses, to have a volume of about $50 million this year.

A spokeswoman for Gifford said Thursday that any questions concerning the dress collection should be referred to Adler. She said Gifford "had nothing to announce right now" about the dress line.

A Wal-Mart spokesman said he "was unaware of any deal" between the store and Gifford.

Meanwhile, Gifford was on "The Late Show With David Letterman" Wednesday night hawking her new exercise video, called "Kathie Lee's Feel Fit and Fabulous Workout." Produced and marketed by Video Treasures, Troy, Mich., the video is being sold through mass market chains and music video stores, according to Sandy Weisenauer, vice president of marketing for Video Treasures.

Among the stores carrying the video are Kmart, Wal-Mart, Target, Musicland and Sam Goody.

As for whether the dress line would shift its distribution to the mass market, as sources have indicated, Adler said, "We have had discussions with many people about future distribution, but nothing has been decided yet beyond spring."However, the move to mass wouldn't be a new road to travel for Halmode, which Adler projects will have sales of about $160 million this year.

In addition to the licensed Kathie Lee line and the companion proprietary Plaza South line, Halmode operates three dress divisions. The M.H.M. unit sells popular-priced dresses under the division's name, as well as the Sunshine/Starshine and private label programs to mass merchants.

Vintage Blue/Vintage Dress, based in Los Angeles, markets branded and private label junior dresses and sportswear to chains and department stores.

In addition, there is a Plus Sizes and Petite Sizes division, which produces dresses under Halmode and Kathie Lee and private labels. Other divisions include uniforms, sold under the Snowbird, Sunshine Alley and licensed Nurse Mates names, and maternity, under the Great Times label.

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