Innovo Sells Private-Label Division
Innovo Group Inc., a Commerce, Calif.–based apparel manufacturer, has sold its private-label division, which makes jeans for Target’s Mossimo line and American Eagle Outfitters.
The deal, which was approved by Innovo stockholders, closed on May 16.
The private-label business was sold for approximately $10.4 million to New York–based private-label manufacturer Cygne Designs Inc.
No cash was exchanged in the transaction. Instead, Cygne will assume debt Innovo owes to denim producer Azteca Production International in exchange for the division’s customer list, existing purchase orders and inventory.
In recent years, Innovo’s private-label division has comprised the bulk of its business. In 2004, the company’s net sales of privatelabel goods were more than double the sales of its branded apparel, which includes the Joe’s Jeans brand. But sales had been dropping steadily and Innovo executives projected mounting operation costs and cash-flow problems.
“Rather than continue to invest in our private-label apparel business, we believed that our best course of action was to pursue other opportunities, which would offer greater growth potential such as focusing on our Joe’s Jeans branded apparel line,” Samuel J. Furrow, chairman of Innovo’s board of directors, wrote in a letter to stockholders.
Brothers Paul and Hubert Guez are Innovo’s majority stockholders and owners of Commerce-based Azteca Production—which produces goods for both Innovo and Cygne.
Hubert Guez is Cygne’s largest stockholder. Innovo documents value his ownership of Cygne, which makes apparel for New York & Co., JC Penney and Kohl’s, at 49 percent, but other industry sources say his ownership is closer to 70 percent.
On the day of the transaction, news of the acquisition drove Cygne’s stock up 3 percent to close at $3.69. Innovo’s stock rose nearly 2 percent to close at $1.04. —Erin Barajas
