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Struggling Bluenotes Heading Back to Roots

MONTREAL — After seeing its same-store sales drop 15 percent in the first quarter of the year, the Bluenotes unisex retailer of jeans, fashion tops and accessories for teenagers is going back to basics.<br><br>The money-losing chain owned by...

MONTREAL — After seeing its same-store sales drop 15 percent in the first quarter of the year, the Bluenotes unisex retailer of jeans, fashion tops and accessories for teenagers is going back to basics.

The money-losing chain owned by American Eagle Outfitters is slashing jeans prices and adding some recognizable brands this fall to complement its private label jeans lineup, according to the Toronto-based retailer, which did not name the new brands, as talks were ongoing with jeansmakers.

Bluenotes’ sales last year were $90.3 million, according to chief financial officer Graham Canning. Dollar figures have been converted from Canadian dollars at current exchange rates.

The 111-store chain, whose name is being converted from the Thriftys banner purchased from Dylex in 2000, will return to its roots of value-priced jeans and away from the trendier, more upscale styles introduced a year ago.

The more fashionable offerings were not well received, co-chief executive James O’Donnell said during a recent conference call to analysts. The company also was forced to slash prices because it was carrying too much inventory.

“They bought a successful formula and changed it,” according to retail analyst George Hartman of Dundee Securities in Toronto. “And once you lose customers, it’s difficult to win them back. If [Bluenotes] goes back to basics, it might work.”

Another Toronto analyst who requested anonymity suggested Bluenotes changed its product mix after discovering that its target audience overlapped that of American Eagle, which took over the Braemar chain from Dylex.

“It’s not an easy change to make because you’re targeting a very fashion-sensitive part of the market,” the analyst said. “They’re actually trying to regain an older market after going after young teens.”

The analyst said the parent company underestimated the power of its banners and worked harder developing American Eagle in Canada, where it was already well known, and put less into Bluenotes, a relative unknown.

Bluenotes also is being impacted by specialty retailers and mass merchandisers like Zellers and Wal-Mart, which have increased their trendier jeans selections, he added.

“Their problem is that their target group shifts allegiances very quickly and they didn’t keep a close watch on high school corridors,” said Len Kubas of Kubas Consultants, Toronto.

Bluenotes is banking on American Eagle veteran Fred Grover, who replaced Bluenotes’ Canadian president Lora Tisi in February, to turn things around.