Blue Holdings Inc. investors had to be feeling a little blue in the wake of the $400,000 third-quarter loss the company posted last week.
That was sharply down from the $2.4 million profit the Commerce firm showed over the same period last year.
The falloff is a perfect example of what happens when a growing company takes its eye off the ball, according to Eric M. Beder of Brean Murray Carret & Co LLC, the only analyst who regularly covers the firm.
Blue, a designer and manufacturer of high-end denim brands, attempted to acquire Washington, D.C.-based Long Rap Inc., which operates Up Against the Wall stores, but talks broke off this fall. Up Against the Wall is a youth-oriented retailer with 24 locations California, Virginia, Florida and Washington, D.C.
“They didn’t have management equipped to do that acquisition and keep the business working,” Beder said. “They focused on the acquisition and the rest of the business has slowed. They weren’t as efficient, weren’t as aggressive.”
In addition to the termination of the Long Rap talks, the company attributed the weak quarter to late deliveries of its Taverniti and Antik brands in June and July, which resulted in cancellations on key accounts and loss of reorders. Blue was also bruised by inventory it produced for a European distribution agreement, which fell through.
“While we are disappointed with our quarterly results, we remain confident and excited about the many opportunities we see ahead for Blue Holdings,” said Blue Holdings Chairman and Chief Executive Paul Guez.
Guez said he remains confident about the company’s ability to turn around, citing Blue’s recent 50 percent acquisition of Life & Death clothing line, one of the most-lauded new brands of 2006.
Beder also believes Blue will turn around, but isn’t confident that it will happen this year.
“I think this is a warning to the company that they really need to focus on the core business,” he said, citing late shipments and product deliveries.
“When this kind of thing happens, you have to rebuild your credibility and bring back the product.”
Piece of Cake
Calabasas Hills-based Cheesecake Factory Inc. reported last week that it was going to get some of the fat out of the company’s bottom-line.
The popular chain, alternately famous or notorious for plate-piling, will take a stock option charge estimated between $5 million and $6 million, a relatively minor amount. The penalty will result in a loss of between 6 cents and 8 cents from fourth-quarter earnings.
Cheesecake stock surged 8 percent on this news because analysts had expected a management shakeup, possibly including the departure of chief executive David Overton, highly respected for helming the chain through its long reign as a Wall Street darling.
Cheesecake also delayed filing third-quarter earnings due to an internal stock option probe, which still isn’t complete.
“I think the reason the stock reacted favorably was the implied magnitude of the restatements is relatively minor and, although there was no commentary on whether any management changes will occur, the amount of the restatement would imply that a shakeup is unlikely,” said Sharon Zackfia, an analyst with William Blair & Co.
Cheesecake is starting to rebound in a tough year. After taking a major hit during the summer’s casual dining slump, when company stock fell to its 52-week low of $21.65 in August, from a high of $39.28 in February, sales have rebounded slightly and company stock closed at $28.55 Thursday.
“I wouldn’t say sales have been robust,” Zackfia said, “but they’ve been in line with the overall industry.
This and That
Noah’s Naturals LLC is introducing its products at 366 Wal-Mart Stores Inc. locations. Noah’s It’s All Good body and hair products, Heal Thyself aromatherapy line and Honest to Goodness hair, body and face products will anchor Wal-Mart’s new department, the Organic Bodycare Oasis.
The retail giant has grabbed headlines in recent months for its stated commitment to more organic products in its stores. The company has also made efforts to grow the organic section of its groceries departments. Several new stores are opening at the Grove in time for the Christmas crush. Kiehl’s, selling high-end, natural skincare products; Davante, an eyeglass boutique; and the Wrapper, a gift-wrapping store, are all opening at the mall. Robeks Corp. has a new chief executive. Sheri Miksa was previously helming Rubio’s Restaurants Inc. The Manhattan Beach-based smoothie chain also opened its 100th location last month.
Staff reporter Emily Bryson York can be reached at (323) 549-5225, ext. 235, or at
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