Jagged Edge Files For Ch. 11 Bankruptcy Protection

One year after Jagged Edge, a Moab, Col.-based clothing manufacturer and retailer, downsized its staff and moved its corporate offices in a reorganization move — click here to read our SNEWS® report — the company filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court, District of Colorado. Court documents filed May 24 list total assets of $721,302 against total debts of $1,338,698.

Just as in reorganization a year ago, the catalog is being cited as the reason for the latest setback. Last year, there was too much success, overwhelming the small company, which we reported in May 2001. This year, the company banked on growing the catalog business and went so far as to bump up the print and mailing run from 475,000 in 2000 to 750,000 in 2001.

Then came Sept. 11 followed by an anthrax scare. Jordan Campbell, Jagged Edge marketing and PR director, told us that many of their customers did not even receive a catalog, while still many others didn’t receive catalogs until January 2002 — in spite of all being mailed USPS bulk service in October 2001.

Jagged Edge, an 11-year old company, went public in 1998 and reported $2.2 million in sales in 1999, $2.8 million in 2000, and $3.2 million last year. That sales success is being currently dragged down by the weight of expenses from the catalog failure as well as unsold goods built to meet demand expected to come from catalog sales. For that reason, Jagged Edge is also restructuring its business model, focusing on its retail biz as well as putting more emphasis behind growing the wholesale side of the line according to Jordan.

“Our retail business remains strong and we’re still moving ahead with the July opening of a 1,100-square-foot retail space in Park City,” Campbell told us. “No employees are affected by this at all, as unfortunate as the situation is, and no doors are being shut. We remain convinced — and our customers validate this feeling — that our brand name is still strong.”

SNEWS® View: Dropping or de-emphasizing the catalog side of the business has to hurt, but bruised egos aside, it is the right move for now. It’s a side of the business that, along with wholesale for whatever reason, the company cannot seem to master. While Jagged is bemoaning its catalog failures of the last two years, we can point to many other companies who were doing very well. Luck? Not likely. Just a different and perhaps more effective execution of a business plan.

We note that Jagged has yet to make a profit in its 11 years of existence. Recent SEC reports — click here to read — would imply that Jagged is making some steps in the right direction, but needs to do much more if the company hopes to survive, let alone prosper. The company can blame 9/11 if it wishes, but Jagged was already in a tailspin before then: Between Aug. 1 and Oct. 31, retail sales dipped 11 percent, from $295,222 to $262,599; wholesale plummeted 98 percent, from $286,180 to $5,101; and catalog/mail-order sales went AWOL showing a 100-percent drop from $36,661 to, yes, $0. The three months from Nov. 1 to Jan. 31 aren’t any rosier: Retail sales dipped 22 percent from $379,262 to $294,469; wholesale managed to claw slightly out of the abyss by dropping only 91 percent, from $678,357 to $64,305; and catalog/mail-order sales dropped 23 percent, from $564,797 to $434,811.

Without catalog distractions, perhaps now Jagged has the chance to grow what should be a successful wholesale and retail business and to focus on both delivering goods and making good on a profit equation. Jagged has some super product that could and should resonate well with specialty retailers seeking a line that consumers might embrace and that they can’t find at a discounter or just down the street. Now that the catalog side is gone, that will allow retailers to take a more serious and perhaps loyal look toward a line that, finally, may be focusing on them.