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The Deal: dELiA*s Wins Over Investors With Turnaround Plan

Gardner has already identified changes that should improve the comapny's operations and sales margins quickly, Tilson said. For example, in clothing retail, tops, or shirts, are more profitable to sell than bottoms, or pants and skirts, and most retailers account for this discrepancy by stocking tops and bottoms in a three-to-one ratio, Tilson explained.

However, dELiA*s used to stock merchandise with a one-to-one ratio--something Gardner changed when she came on board, Tilson said. Furthermore, although dELiA*s sends out 20 million catalogues per year, it was not sending one out during the retail-bonanza week after Thanksgiving. Tilson said a post-Thanksgiving catalog is in the works this year.

Merchandising was also a problem for dELiA*s. Tilson noted that instead of designing great clothes and telling factories to make those clothes, dELiA*s was buying from generic lineups that factories pitched to them and stocking clothes that were also available elsewhere. The retailer is now working on new designs, with some slated to appear in the back-to-school collection and the bulk of the design effort coming in for the holiday collection.

"There's a many-month lead time to get new clothes out," Tilson explained. He expects Gardner to bring in new talent to help right the ship in the next few months. DELiA*s shares closed up nine cents, or 6.3%, to $1.50 on the Nasdaq Wednesday, giving the company a market capitalization of $47.91 million.

--Written by Lisa Allen

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