Close-Out Sales Squeeze Innovo Group

Innovo Group ( INNO) swung to a first-quarter loss Wednesday as hiring costs and close-out sales squeezed margins at the apparel maker.

For its first quarter ended April 2, Innovo posted a loss of $5 million, or 19 cents a share, reversing the year-ago profit of $282,000, or 2 cents a share. Sales rose 39% from a year ago, to $16.6 million.

The Los Angeles-based company attributed the gross margin shortfall to increasing private-label and close-out inventory sales. Innovo also cited costs related to the acquisition of the Blue Concept Division, and marketing expenses tied to the Joe's, Shago and Fetish brands.

"As is traditional during our first quarter, our revenues were significantly lower than is anticipated in future periods and with the Company's recent historical and anticipated future growth, an infrastructure currently is in place which requires higher revenues and greater gross profit to generate profitability," CEO Jay Furrow said. "We believe that in future periods revenues will continue to grow, and we are constantly improving our ability to increase our gross profit."

Innovo shares were flat in early action at $2.18, after earlier touching an intraday 52-week low at $2.05.

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