Troubled jeansmaker Joe’s Jeans Inc. fell to a loss in the second quarter as its top line dropped nearly 2 percent.
The company recently received forbearance from its two principal lenders, Garrison Loan Agency and CIT Commercial Services, after it fell out of compliance with the profitability requirements of its financing agreements last year. Both firms helped put the financing in place for Joe’s acquisition of Hudson Jeans in October 2013.
In the second quarter ended May 31, the Los Angeles-based denim company registered a loss of $3.3 million, or 5 cents a diluted share, versus a profit of $2.3 million, or 3 cents, in the comparable 2014 period.
Sales dropped 1.9 percent to $47.2 from $48.2 million in the prior-year quarter and gross margin fell to 41 percent of sales from 47 percent a year ago. Gross margin was negatively affected by a $1.9 million inventory writedown.
Wholesale revenues slumped 16.9 percent to $14.3 million, from $17.2 million, while retail sales were down 5 percent to $5.1 million from $5.4 million.
Operating profits were down 27.4 percent, to $8.4 million from $11.6 million, in the wholesale segment and down 3.9 percent, to $99,000 from $103,000, in the retail business.
The Hudson brand accounted for $563,000 of the $2.9 million decline in wholesale revenues. Within the retail organization, Joe’s retail stores saw a sales decline of $735,000 due principally to lower traffic, partially offset by an increase of $214,000 in Hudson’s e-commerce business. Same-store sales were off 14 percent at Joe’s stores, respectively, while increasing 27 percent for e-commerce under the Joe’s brand and rising 26 percent at Hudson’s e-shops.
For the six months, the company recorded a net loss of $24.9 million, or 36 cents a diluted share, versus net income of $161,000, or zero cents a share, in last year’s period.
“Sales of our men’s and women’s denim bottoms continue to be impacted by a weakening in the overall denim market,” the company said, “as consumer preference shifts to non-denim bottoms. Both brands have been focusing on designing new products in a variety of fits and washes with new and innovative fabrics to give the customer a reason to purchase a new pair of jeans,” the company commented.