Weak Traffic, Else Brand Hit Joe’s Jeans Net

Poor traffic trends at its stores and a weak performance from its Else brand took a toll on Joe’s Jeans Inc.’s third-quarter results.

A look from Joe's Jeans' Else brand.

Poor traffic trends at its stores and a weak performance from its Else brand took a toll on Joe’s Jeans Inc.’s third-quarter results.

This story first appeared in the October 16, 2013 issue of WWD.  Subscribe Today.

Marc Crossman, president and chief executive officer of Joe’s, informed analysts on a Tuesday afternoon conference call that Else, distributed exclusively through Macy’s stores since its launch last year, is now being sold through two other department store accounts — Dillard’s Inc. and Von Maur.

In the three months ended Aug. 31, the Los Angeles-based jeans company logged a net loss of $287,000, or zero cents a share, compared with net income of $1.4 million, or 2 cents, in the comparable period in 2012. Excluding costs related to its Sept. 30 acquisition of Hudson Jeans, earnings per share would have come in on the positive side at 1 cent a share, below analysts’ consensus estimates for EPS of 2 cents.

Revenues declined to $29.4 million, 3 percent below the $30.3 million logged in the 2012 period and below the $33.4 million expected, on average, by analysts. Wholesale revenues declined 6.9 percent to $23.1 million, with the entire decrease attributable to a $2.1 million decline in its Else business. Retail revenues grew 14.5 percent to $6.4 million despite a 6 percent decline in same-store sales.

RELATED CONTENT: WWD Earnings Tracker >>

Gross margin was off 190 basis points to 43.7 percent of sales from 45.6 percent in last year’s quarter. Wholesale gross margin slid to 37 percent from 40 percent, while retail margin fell to 67 percent from 71 percent a year ago. The company’s store count moved to 33 from 25 a year ago.

Crossman told WWD that, despite “double-digit declines in traffic,” the company’s same-store sales turned positive in the final month of the quarter. “We were late to the promotional party but, as we got more promotional, traffic was up and comps went up,” he said. “The key was building up conversion and transaction size. Everyone who came into our stores got treated like gold because, as far as we were concerned, they were gold.”

On both the wholesale and retail sides of the ledger, the waning of the trend for colored denim posed a serious challenge. “We did extremely well with our 55 Colors program last year,” Crossman commented. “We’ve gone from one big thing to a lot of smaller trends.”

Still, women’s wholesale managed a 2 percent increase in the quarter with the men’s portion of the business down only about $100,000 compared with a year ago.

Crossman said Joe’s by Nov. 30 will file a Form 8-K with the Securities and Exchange Commission providing a pro-forma profile of its operations and finances following the Hudson merger.