By  on April 10, 2014

Joe’s Jeans Inc. is adjusting distribution of its Else subbrand to life after Macy’s, and moving more of Hudson’s production to Mexico.

On a conference call Wednesday to discuss first-quarter financial results, which surpassed expectations, Marc Crossman, chief executive officer, told analysts that the company was no longer shipping the Else brand to Macy’s stores, their sole point of sale when it was conceived two years ago as a lower-priced alternative to Joe’s premium offerings.

Else is being tested with Dillard’s and Von Maur stores in the U.S. and soon will begin shipping to an unidentified Canadian chain and be sold through a European distributor.

“We continue to believe that the brand has a place in the market, both domestically and internationally,” Crossman said.

However, in the first quarter, its sales fell 98 percent from the prior year. At its peak, Else was carried in more than 300 Macy’s stores.

In the three months ended Feb. 28, Joe’s registered a net loss of $2.2 million, or 3 cents a diluted share, lower than the $6.4 million, or 10 cents, loss incurred in the first quarter of 2013. Eliminating special charges, mostly associated with its September acquisition of Hudson, it would have reported net earnings per share of zero cents, above the 4-cent loss expected, on average, by analysts.

Revenues rose 60.9 percent to $47.3 million from $29.4 million. Eliminating $18.3 million in revenues from Hudson, sales were $29 million, 1.3 percent below the year-ago mark. Wholesale revenues were up 71.6 percent to $39.6 million from $23.1 million, but down 3.3 percent to $22.3 million when Hudson revenues are excluded.

Retail sales rose 21.9 percent to $7.7 million from $6.3 million as the addition of four stores to its fleet, which now numbers 34, and Hudson e-commerce revenues helped offset a 4 percent decline in same-store sales.

Crossman said that the company’s stores were able to compensate for lower traffic to some degree with higher conversion rates and average unit retail prices.

“Traffic in general has been down 10 to 12 percent, in that range,” he said on the call. “That’s not something that’s specific to us; that’s what we’re hearing from the malls and when we get our traffic data.”

He said the declines in traffic were fairly uniform, with outlet stores, which constitute the majority of Joe’s units, hit with declines similar to those of full-price stores.

He noted that Joe’s currently has no plans for additional stores in the U.S. and is focusing on its investments in Hudson. “Right now, we’re cautious [about retail].…We’re not seeing a big change in traffic patterns relative to rent rates.”

Joe’s continues to work toward placing more Hudson production in the Joe’s manufacturing facility in Mexico. “Make no mistake,” the ceo said. “There’s a huge opportunity here to dramatically reduce the cost per garment on the Hudson side of the business, and that remains something we’re fully committed to and more than excited about because that’s where we’ll get the real cost savings.”

He said the shift in sourcing should be evident by the third quarter.

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