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Joe’s Jeans Earnings Jump

Strong sales and offshore sourcing help lift third-quarter profits for Los Angeles-based denim label Joe's Jeans.

Strong sales and a move to offshore sourcing boosted Joe’s Jeans Inc. to major earnings gains in the third quarter.

The Los Angeles-based premium denim label said earnings vaulted to $2.2 million, or 4 cents a diluted share for the three months ended Aug. 31, compared with $913,000, or 2 cents, in the same period a year ago.

“We are pleased with the progress we made this quarter and we look forward to capitalizing on our position in the marketplace for 2009,” said Marc Crossman, president and chief executive officer.

Sales in the period rose 16.2 percent to $18.2 million from $15.7 million, with growth across the company’s women’s, men’s, international and children’s businesses.

Hamish Sandhu, chief financial officer, said women’s sales at domestic department stores gained 24 percent during the quarter.

“We’re not seeing canceled orders,” Crossman said of the department store channel. “They’re clearly ordering closer to the vest. When you look at premium denim as a whole within the department store, it’s obviously a bright spot.”

However, he acknowledged that what qualified as a bright spot in this retail environment could mean business was down 5 percent or flat.

Gains among department stores were partly offset by declining orders from the company’s specialty store customers, many of which have been forced to reduce inventories or have gone out of business because of the difficult economic environment. Crossman added that specialty stores’ denim businesses were adversely affected by the heavy promotional activity of department stores during the summer months.

Results also were driven by a shift from domestic sourcing to lower-cost facilities in Mexico and Morocco. Sandhu said 86 percent of all product shipped was manufactured outside the U.S., compared with 79 percent in the previous quarter.

For the nine months through August, earnings spiked to $5.1 million, or 9 cents, compared with $1.2 million, or 3 cents, for the same period a year ago. Sales rose 15 percent to $51.4 million from $44.7 million.

Joe’s is looking to expand its company-owned retail network. Last week, the company opened its first store, in Chicago’s Bucktown neighborhood. Crossman said the company is on track to open three more units by the end of the year. A second store is to launch in the last week of this month at Woodbury Commons in Woodbury, N.Y.

Crossman said Joe’s will be able to achieve single-digit growth during the fourth quarter and will introduce a revamped core women’s range to kick-start the new year.

“You have to be a lot more creative to pull away from being a basic five-pocket, so that runs the gamut on everything you can do with the jeans,” he said.

More emphasis is being put on details such as hand-stitching, embellishments and distressed looks. Management hopes its more mature customer will remain willing to pay for premium products.