Innovo to Regroup After Losing Fetish Brand
The recent loss of the Fetish by Eve label may help more than hurt the Los Angeles– based Innovo Group Inc., which acquired the label last year.
Financial analyst J.P. Mark, who follows the publicly traded Innovo, said the company had to invest a lot of capital to promote the label, which hit retail stores last fall and raked in about $50 million in sales.
Innovo has laid off about 50 to 60 employees since losing the label to Marc Ecko Enterprises, an urban lifestyle fashion company that will debut the Fetish label for Fall 2005.
“Part of the problem is that Innovo didn’t understand at the beginning how much investment it would take to make this a national brand,” said J.P. Mark, an analyst with Farmhouse Equity Research in Portsmouth, R.I. “They invested all the resources that they could but you are talking about competing with other urban brands that have $100 million to $200 million in sales. I think Fetish by Eve had initial shipments of about $10 million to $12 million in the fourth quarter [of 2003].”
Because of production and distribution problems that resulted in late deliveries, about 25 percent of that $12 million in inventory was returned to Innovo, Mark said.
“Eve was unhappy with the direction the label was going and was talking to other people, and Innovo was unhappy making this huge investment and not seeing a profit,” Mark said, noting Innovo’s stock went up 10 to 15 cents after the company announced it was losing the label. “Fetish was a moneylosing proposition. Innovo is not good at fashion but [is] good at jeans, tops and accessories.”
Innovo Chief Executive Jay Furrow said in a press statement that the company and rapper/ actress Eve worked hard to create and develop the Fetish brand. “While there were some differences of opinion during the course of the relationship, we believe that the amicable settlement resolves the issues,” Furrow stated. He could not be reached for further comment by press time.
Innovo invested quite a bit of money at last year’s MAGIC International show in Las Vegas to promote its two entertainment labels, Fetish by Eve and Shago by Bow Wow. Both entertainers were on hand to sign autographs and promote their lines.
Shago, a high-priced label geared toward boys and young men, did not do well and was temporarily discontinued while Innovo regrouped to sell the label to mid-tier department stores. The label has not reemerged and will probably be mothballed, Mark said.
In his press release, Furrow said the company, which had an $8.3 million net loss on $83.1 million in revenues in 2003, will not turn a profit until at least the third quarter of this year after writing off losses from the Fetish label. “During the second quarter, we anticipate incurring and taking reserves against the remaining Fetish inventory, writing off prepaid advertising expenses, and writing down the carrying value of the Fetish trade show booth, which the company owns,” Furrow explained.
Innovo will concentrate on its Joe’s Jeans brand, designed by Joe Dahan, and on its denim production for American Eagle Outfitters Inc. —Deborah Belgum
