Joe ? ?s Jeans Serves As A Tight Fit
Just how do you put on a quarterly earnings report from Joe’s Jeans (Nasdaq: JOEZ)? We have to move it one leg at this time?
The rates corduroy consultant published unimpressive inexpensive results, will be fledgling retail business was everywhere in the map. The result was really a sharp dip in profitability, despite a greater-than-expected 20% surge in sales.
Let’s concentrate on the company’s bread-and-butter wholesale business, which is in charge of 84% of overall revenue. Revenue climbed 7%, with Joe’s Jeans growing its offerings beyond its flagship denim. Within the last few year, non-denim sales have cultivated from 3% to 16% of this wholesale top-line mix. Diversification is, but the implied diminish through jeans is problematic.
Absolutely, the economy continues as unfashionable as donning black socks in flip flop sandals. It is not local plumber to be pitching $200 jeans. However, the advantages see double-digit sales growth at rival True Religion (Nasdaq: TRLG) when it reports next month. It can’t be all the bad.
Wholesale gross margins dropped year over year, but did improve sequentially. That wholesale operating profit dipped 12% to $5.7 million isn’t good, but it is most certainly not a package breaker.
The gospel truth at Joe’s Jeans is tested when we turn our awareness of the fast-growing - but cash-sucking - retail division. This really is still one small chunk belonging to the revenue mix, however it is also the apparel company’s best potential catalyst.
During the last year, Joe’s Jeans moved from just five locations to 14 stores - with a lot of the recent openings taking place at high-traffic premium outlet malls. Retail sales much more than tripled to $4.2 million over the quarter, and the 223% surge wasn’t entirely the handiwork of expansion. Same-store sales clocked in at a remarkable 23.5%.
Unfortunately, the phone shop-level popularity emereged as the result of clearing out dated items at steep discounts. Gross margins took a winner, though towards the end during Joe’s Jeans’ retail operating loss narrowed substantially.
Joe’s Jeans’ decision that they are an upscale retailer is a wild card here. A hot brand can spawn a retail empire. Nike (NYSE: NKE) has been a wholesale winner in athletic footwear before rolling out its stores. Remember when Apple (Nasdaq: AAPL) didn’t have its page_seo_titlesake stores?
Has Joe’s Jeans earned the authority to be the next hot retailer? Not yet, but there’s potential. The company’s blog is rich with snapshots of celebrities photographed with Joe’s clothing. Growing its store base is likely to be as ambassadorial which is just good business.
We’re still a quarter away the telltale year. This is the time the thesis provides a shot in order to off. If Joe’s Jeans can deliver strong comps and healthy margins while in the retail level - and denim sales while in the wholesale level reclaim on the right track - this is a retail stock worth respecting. Outside of fast-growing yoga apparel specialist lululemon athletica (Nasdaq: LULU), could possibly shortage of hot public chains which can be still at the start of their expansion cycles.
True Religion Jeans is capable of it, but that long method to use to prove that it’s created to last.
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