Innovo Raises Denim Prices in Search of Profits

Innovo Group Inc., the denim company that makes Joe’s Jeans, recently raised wholesale price points by 10 percent on the five-pocket version of that label to help the company secure a profitable third quarter for the first time in more than one year.

“We are getting a big pickup with the higher price points,” said Marc Crossman, president and chief financial officer of the Commerce, Calif.–based company.

The wholesale prices for Joe’s Jeans now range from $60 to $100, Crossman said, noting the company might entertain licensing agreements for Joe’s Jeans in the next six months.

Innovo is also aiming for better price points with its new Indie line for women, which the company introduced last August at the MAGIC Marketplace in Las Vegas and showed in September at the Fashion Coterie in New York. The company initially thought it would design the product as a lower-priced contemporary jean but now is thinking of positioning the label as a high-end juniors line. “Stores are seeing a migration to the higher price points in juniors,” said Crossman, who noted the jeans will retail for approximately $98, below the $150 to $200 price tag that many premium denim lines are fetching.

“It is being put out there as a fast revenue grower,” Crossman said. “It is part of our brand strategy. We are able to launch these brands economically with our in-house staff.”

Joe Dahan, creative director of Joe’s Jeans, is overseeing the creation of the Indie line.

Indie will be produced in Mexico by Azteca Production International Inc., which shares its headquarters with Innovo. Azteca’s owners, brothers Hubert and Paul Guez, are principal shareholders in Innovo.

Crossman and Innovo Chief Executive Jay Furrow held a conference call on Oct. 13 to discuss the company’s earnings for the third quarter, ended Aug. 28, 2004. The company had a net income of $2 million on net sales of $41.1 million, its first profit in five quarters.

Innovo’s recent move out of urbanwear to concentrate on denim contributed to the profit. The company relinquished its licenses to make Fetish by Eve and Shago by Bow Wow apparel, which had been a major financial drain. Innovo is also getting out of the accessories business and is selling its former headquarters in Springfield, Tenn.

The company’s private-label business, produced in Mexico and sold primarily to American Eagle Outfitters Inc., began selling jeans this quarter to Kmart Corp.

The third quarter, when Back-to- School business is bustling, is traditionally Innovo’s strongest quarter. Last year, during the third quarter, the company showed a net loss of $2.5 million on net sales of $45 million.

Deborah Belgum