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Joe’s Jeans Inc. has agreed to pay creative director Joe Dahan $9.2 million in place of earn-out allowances tied to the company’s gross profit.
This story first appeared in the February 20, 2013 issue of WWD. Subscribe Today.
The sum will be divided into weekly installments stretched over a 33-month period ending in November 2015. It replaces a provision dating back to the 2007 acquisition of Dahan’s company, JD Holdings Inc., by a subsidiary of Joe’s under which Dahan received a percentage of the company’s gross profit over a 10-year period.
Under the original agreement, Dahan received 11.3 percent of fiscal-year gross profit between $11.3 million and $22.5 million and smaller percentages of profit beyond those amounts, down to 1 percent of profit above $40.5 million.
The arrangement had been lucrative for Dahan, who also serves as a director of the company and, with 17.4 percent of its shares outstanding, is the largest shareholder. He received $1.8 million in earn-out compensation for both fiscal 2011 and 2010 and $1.7 million for fiscal 2009, according to filings with the Securities and Exchange Commission.
Marc Crossman, president and chief executive officer of Joe’s, said that, with the change, Dahan’s “sole financial incentive comes from stock price appreciation through revenue and earnings growth….As we continue with our retail strategy, we expect our gross profit and gross margin to grow. Now that we have purchased the earn-out, the company fully benefits from retail store and other growth going forward.”
Joe’s currently has 13 full-price stores and 17 outlets. Crossman told WWD that his plans include more emphasis on full-price stores going forward, including penetration of various international markets. Sales last year were estimated to be between $115.8 million and $117.1 million.
Shares of Joe’s Tuesday closed at $1.42, up 2 cents, or 1.2 percent.