Jessica Simpson's marriage to Nick Lachey isn't the only thing of hers that's shaky.
The bubbly pop star's denim line, JS by Jessica Simpson, suffered a setback recently when Bensalem, Pa.-based Charming Shoppes Inc., the retailer behind Lane Bryant and Fashion Bug stores, decided not to pick it up. That was a hit to Los Angeles-based Tarrant Apparel Group, which manufactures and distributes JS and another Simpson line.
"Denim in and of itself fell into a weakened mode after back-to-school," said Barry Aved, Tarrant's president, during the company's third-quarter conference call.
JS wasn't the only Tarrant line victimized by a denim downturn. Troy, Mich.-based Kmart Corp., a subsidiary of Sears Holdings Corp., discontinued Tarrant's Gear 7 jeans brand. Gear 7 had been in all 1,500 Kmart stores.
Vera Van Ert, an analyst with Wedbush Morgan Securities Inc., described Gear 7 and JS as "two question marks" hanging over Tarrant. "Over the longer term, it is important for the company to reposition Gear 7 in some other channel," she said.
Aved said Tarrant is pursuing new outlets for the Gear 7 and JS lines. However, the company acknowledged in a Securities and Exchange Commission filing that it anticipates sales for the brands to "decline significantly in the fourth quarter of 2005."
That will hurt Tarrant in its fast growing private brands segment, which includes American Rag Cie and Alain Weiz. Private brand sales hit $22.6 million in the third quarter, nearly eight times higher than the $2.8 million for the like period a year earlier. Overall, sales totaled $69.6 million in the third quarter, up from $38.1 million last year.
Now, though, Tarrant expects private brand sales for the year to be in the $50 million to $53 million range, with total sales of $210 million to $215 million. The full-year net income forecast is down to $2 million to $2.5 million, from previous guidance of $9 million to $12 million.
Investors have punished Tarrant accordingly, with its shares settling at $1.54 last Tuesday. The stock had traded as high as above $4 a share in August after nose-diving in September, October and early November.
Meanwhile, the company is starting to ship a new line called House of Dereon by Tina Knowles, the mother of Destiny's Child singer Beyonce Knowles. The line just gained wide exposure by being featured on "The Oprah Winfrey Show."
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