Online Jewelry Auctioneer Sports Most Profitable Crown

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In such a tumultuous economy, it might seem that no company could remain profitable.

Yet nearly 100 local public companies recorded a positive return on equity during the past year and even more were profitable over the past three years.

Each year, the Business Journal ranks the most profitable L.A. companies as of June 30 according to three-year return on equity.

Despite a dip in net income this past year, online jewelry auction company Bidz.com Inc. claimed the top spot on the list, breaking the three-year stranglehold of apparel maker Cherokee Inc.

Ironically, Bidz, headquartered in Culver City, has fared well while brick-and-mortar jewelry retailers such as Zale Corp. have struggled. Bidz, which specializes in low-end jewelry, has appealed to consumers who want to save a few bucks while bringing home the bling. The company had an average return on equity of 88.2 percent over the past three years.

The company has not been without controversy, though. Bidz is the target of multiple class-action lawsuits resulting from allegations of “shill-bidding,” which involves driving up auction prices through phony bids. The company also has been accused of failing to disclose the criminal histories of a current large shareholder and a former executive.

In the process, its stock price has dropped by more than two-thirds since last year, prompting management to buy back hundreds of thousands of shares at the depressed price. The company has denied the lawsuit allegations and defended its buy-back strategy.

Coming in at No. 2 was Herbalife Ltd., a dietary and nutritional supplement distributor that also claimed the second spot last year. The company has increased its return on equity each of the past three years as it has focused its marketing on sporting events and sought to erase a controversial past linked to its multilevel marketing practices.

Many of the most profitable L.A. companies are clothing retailers, including Cherokee, which fell to No. 4, denim company True Religion Apparel Inc. (No. 8) and clothing company Guess Inc. (No. 10).

Holly Guthrie, an analyst with Boenning & Scattergood Inc., said the apparel industry has benefited from sales growth while costs, such as overseas manufacturing, have come down though the recent downturn in spending has hurt.

Some of the biggest losers were real estate companies; some watched their profitability evaporate entirely. The return on equity of brokerage CB Richard Ellis Group Inc. dropped to negative 184 percent from 36 percent a year ago. As a result, the company dropped 129 spots on the list to No. 139.

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