The addition of Hudson Jeans helped Joe’s Jeans Inc. improve its profits and margins in the third quarter, despite weakness in its retail operations.

Marc Crossman, president and chief executive officer, said expansion of the company’s non-denim assortment — such as a new fitness collection — was providing opportunities to expand its business with its existing wholesale customers and develop new ones in the activewear channel.

For the three months ended Aug. 31, the company reversed a small year-ago loss with a small profit, with net income of $276,000 versus a year-ago net loss of $287,000. With rounding, earnings for both periods were zero cents a share, whereas financial analysts, on average, expected a profit of 1 cent a share in the 2014 quarter. Figures for the more recent quarter included a $332,000 charge for retail-store impairment.

With the addition of $22.7 million in revenue from Hudson Jeans, acquired a month after the end of last year’s second quarter, net sales rose 79.2 percent, to $52.7 million from $29.4 million, with wholesale up 97.5 percent, to $45.5 million, and retail up 12.6 percent, to $7.1 million. Excluding $22.1 million in Hudson wholesale revenue and $585,000 from its e-commerce transactions, wholesale was up 1.7 percent, to $23.4 million, and retail up 8.9 percent, to $6.5 million.  

Unlike earnings, the sales total exceeded the expectations of analysts, who, on average, had estimated revenues of $51.6 million.

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Despite the promotional climate at retail, gross margin benefited from the addition of Hudson, rising to 46.4 percent from 43.7 percent a year ago. However, the operating loss of the company’s retail unit nearly doubled, to $1 million from $524,000 a year ago, and retail gross margin slid to 65 percent of sales from 67 percent. Same-store sales were off 2 percent.

“Both our Joe’s and Hudson brands experienced the same top-line trends this quarter,” Crossman said. “More importantly, our brands are well-positioned with non-denim offerings as we move into the fourth quarter. For example, our Joe’s brand has created a fashion-forward fitness collection that launched just this month that will be available not only with our existing retail partners but also in several new and significant fitness-apparel retailers.”

While sales of the Joe’s brand were up 4 percent, sales of the fledgling Else brand, started in 2012 as a lower-priced denim offering with premium cachet and initially distributed exclusively through Macy’s, fell 72 percent, to roughly $200,000, following the end of its relationship with the department-store group.

“We believe the future of the Else brand…is limited, and we are evaluating its marketability internationally versus domestically,” the company said in its quarterly Form 10-Q filing with the Securities and Exchange Commission.

For the nine months to date, Joe’s registered net income of $437,000 versus a year-ago loss of $5.5 million, while revenues, again lifted by the addition of Hudson, rose 65.2 percent, to $148.2 million.

Joe’s operates 13 full-price and 20 outlet stores under the Joe’s banner.

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