Despite sweeping changes begun last year by a new chief executive at Blue Holdings Inc., shares of the Commerce apparel firm have been pounded down to the delisting level.

It's been a savage ride south for the high-end denim company from its glory days of 2005, when net income was $7.5 million. Since then, the company's been doused in red ink, with $8 million in losses over the past two years.

The company's stock hit an all-time low last week of 40 cents per share, down from more than $25 three years ago, and faces delisting from Nasdaq. Blue Holdings also reported last week that it will have to restate earnings from 2007 due to accounting errors. The chief financial officer resigned the previous week.

Turnaround specialist Glenn Palmer was hired July 2007. He abandoned Blue Holding's retail strategy, shuttering its only two stores to bring its focus back to manufacturing and distributing. He also cut a quarter of its workforce; the company now employs 109 full-time workers. Palmer plans to cut another $1.5 million to $2 million in expenses this year.

"The new CEO is trying to undo the very weak management structure that has been pervasive at the company," said Eric Beder, the only equity analyst who covers the stock. "If anyone can turn around this company, Glenn can."

In a phone interview from Mexico where he was on vacation last week, Palmer said he is confident.

"The company had a strong foundation and solid brands, it just needed to be re-focused," he said.

Palmer added T-shirts and hoodies to the company's fashion line, and he pulled the plug on underperforming labels to make Blue Holdings leaner.

"Like a lot of retailers, the company has hit a rough patch," said Beder, an analyst with New York-based Brean Murray Carret & Co., who maintains a "buy" rating on the stock. "How they weather this storm will show what they're made of."

The company's losses came from spending too much as it grew, and Palmer is trying to address those problems.

"We grew a lot, really fast, but we were still run like a mom-and-pop organization," said Sophie Wizmann, the company's vice president of marketing, who has worked there for 10 years. "Since Glenn has come in, he's added a lot of structure."

Palmer is a former executive at private investment firm Cerberus Capital Management, where he specialized in turning around troubled textile and apparel companies. He served as chief executive at New York-based Rafaella Apparel Group to prepare the company for sale to Cerberus.

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