Blue Holding executive says company can turn around.

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."

Staff reporter Emily Bryson York can be reached at [phone], ext. 235, or at [e-mail].