Betsey Johnson's boutique is credited with helping revive Melrose in the 1980s, and the designer continues to sell her dresses and tops throughout the world. But her premium jeans have turned out to be a dud for Innovo Group Inc.
The City of Commerce-based clothing manufacturer inked a four-year deal in 2004 with Betsey Johnson licensor B.J. Vines Inc. to manufacture a Johnson line of jeans and related tops for high-end department and specialty stores.
According to the licensing agreement, Innovo expected sales of Johnson's apparel to total between $2.5 million and $5.5 million, which would have earned Johnson royalties of at least about $1.3 million. Instead, Innovo reported that six month sales of Johnson apparel totaled just $283,000 less than 1 percent of Innovo's revenues for the period.
Those results prompted Innovo, whose main business is in manufacturing private-label apparel products for American Eagle Outfitters Inc., Target Corp. and Kmart Corp., to pay B.J. Vines $350,000 to dissolve the licensing arrangement.
"(Betsey Johnson) is definitely a name recognized in this industry, which was why we got into it, but that doesn't necessarily translate into a denim brand that was going to gain traction," said Shane Whalen, Innovo's vice president of corporate development. "We experimented with it. It didn't work."
A spokeswoman for New York-based Betsey Johnson, which sells clothes at 41 branded stores, department stores and specialty locations, blamed the failure on Innovo and said that that the designer is looking for other denim manufacturers.
"Innovo didn't prove to have the ability to capitalize on our ever-expanding brand," said Allegra Baldwin, licensing brand manager for Betsey Johnson. "We are currently experiencing huge retail success with our other licensed products and seeing sales that are triple and even quadruple what we originally projected."
Betsey Johnson has licensed intimate apparel with Carole Hochman Designs, footwear with Titan Industries Ltd., watches with the Geneva Watch Co., and accessories and small leather goods with Daniel M. Friedman & Associates.
Paul Guez, a controlling stockholder of Innovo, and chief executive of Antik denim company Blue Holdings Inc., is a big Betsey Johnson fan. He helped orchestrate the failed agreement.
"I was excited to make the deal," recalled Guez. "I'm sorry it didn't work out between them."
A same-store sales decline doesn't seem like a reason to be upbeat, but executives at parent company Wendy's International Inc. were almost cheery when Baja Fresh reported a 1.7 dip in same-store sales for the second quarter.
Wendy's was relieved that the Thousand Oaks-based chain of casual Mexican restaurants didn't match the 6.2 percent same-store sales slip of a year ago. The nation's No. 3 fast-food company chalked up the relative good news to a turnaround effort that includes revamping Baja Fresh's menu and installing new management.
"The results at Baja Fresh are beginning to show the improvement we expected to see this year, which is encouraging," Jack Schuessler, Wendy's chief executive, said in a statement.
Wendy's had set out on a growth strategy when it bought the chain for $275 million three years ago.
But after Baja Fresh struggled to produce sales outside of its California base, Wendy's pulled back the expansion and added just five units in the second quarter, bringing Baja Fresh's total to 303.
Brion Grube, Baja Fresh's new chief executive and a 15-year Wendy's veteran, has been spearheading Baja Fresh's menu changes. The chain added smoky chipotle chicken quesadillas and flautas to its menu during the quarter.
The changes have given revenues a boost. Wendy's reported that second-quarter revenues at its developing brands, which include Baja Fresh and a 19-unit Wendy's concept called Caf & #233; Express, increased 1.6 percent in the second quarter, to $54.3 million.
Tomdan Enterprises Inc. is paying all-time high prices for hamburger beef and that's quite a dilemma for Glendale-based company, because hamburgers are the signature product at its Original Tommy's restaurants.
Wholesale beef prices for Tommy's have gone up 12 percent from last year and 33 percent from two years ago.
"We don't have salads or chicken sandwiches to offset the price," said Brent Maire, general manager of the Original Tommy's chain. "It's a big thing."
So far, Tommy's hasn't pushed up the price of its hamburgers. Instead, the company has tried to increase efficiency in its 27 restaurants and negotiate for lower rates on other products, such as potatoes and paper supplies. The burger remains $1.65.
Maire is optimistic that beef prices won't get higher. Renewed importation of Canadian beef, which was halted in 2003 after mad cow disease was found in a Canadian herd, is expected to increase the supply of beef and temper prices.
*Staff reporter Rachel Brown can be reached by phone at (323) 549-5225, ext. 224, or by e-mail at firstname.lastname@example.org .
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