Joe's Jeans Inc. (the "Company") (NASDAQ: JOEZ) today announced
financial results for the third quarter ended August 31, 2010.
Highlights were:
-- Net sales increased 20% to $25.5 million over the prior year
comparative period;
-- Gross margin increased sequentially to 46% from 44%; and
-- The Company generated operating income of $1.5 million.
For the third quarter ended August 31, 2010, overall net sales
were $25.5 million compared to $21.2 million from the prior year
comparative period, or a 20% increase. Our overall gross profit for
the quarter increased to $11.8 million from $10.4 million from the
prior year comparative period, or a 14% increase. Our overall gross
margins were 46% compared to 49% in the prior year comparative
period and operating expense in the third quarter of fiscal 2010
was $10.3 million compared to $7.5 million a year ago. We generated
operating income of $1.5 million compared to $2.8 million in the
prior year comparative period and earnings per share of $0.01
compared to $0.03 in same period a year ago.
Wholesale
Net sales for our wholesale segment increased by 7% to $21.3
million compared to $19.9 million in the third quarter of fiscal
2009. Within our wholesale business, all three sales channels,
men's, women's and international, experienced growth. Marc
Crossman, President and Chief Executive Officer, commented, "While
the premium denim business remains challenging, we have been able
to offset declines by utilizing our existing distribution channels
as a gateway to expansion for our non-denim categories. This is
evidenced by our sales mix of non-denim products increasing from 3%
of sales a year ago to 16% of sales this year." Gross margins for
our wholesale segment were 45% compared to 48%. Our wholesale gross
margin decreased as a result of a higher mix of sales from our new
product categories which currently carry lower margins than our
core denim. However, gross margins increased sequentially from 42%
to 45% as a result of improving sourcing of our non-denim products.
Wholesale operating expense in the third quarter of fiscal 2010 was
$3.8 million compared to $3.0 million a year ago. Our wholesale
expenses increased over last year mostly due to the addition of our
own customer service representatives, increased sample costs for
our new product classifications, and staffing expenses for our shop
in shop program in France. In the third quarter and prior year
comparative period, our wholesale operating income was $5.7 million
compared to $6.5 million.
Retail
Net sales from our retail segment increased 223% to $4.2 million
compared to $1.3 million in the prior year comparative period. The
growth in retail sales was driven by same store sales comp
increases of 23.5% and revenue contribution from growing our store
base from five to 14. Gross margins for our retail segment were 55%
compared to 66% in the respective comparative periods. Mr. Crossman
commented, "The decrease in our gross margins is attributable to a
strategic decision we made to liquidate the remnants of old
collection items after the launch of our new product categories.
Having sold the balance of the old collection items between June
and September, our gross margin has rebounded to the 66% level."
Retail operating expense in third quarter of fiscal 2010 was $2.3
million compared to $968,000 a year ago. Retail expenses increased
as a result of additional store payroll and rent costs associated
with operating 14 retail stores compared to five in the prior year
period and pre-opening costs associated with our full price store
in Santa Monica, California. Our retail operating loss narrowed to
$10,000 compared to $108,000 a year ago.
Corporate and Other
For the third quarter of fiscal 2010, our Corporate and other
expense was $4.2 million compared to $3.6 million a year ago.
Corporate and other expenses increased due to the additional
employee overhead as we increased our headcount to support the new
product categories. In addition, income taxes had an impact on our
net income. For the third quarter, our effective income tax rate
was 60% compared to 30% in the prior year period. Because of the
non-deductibility of the earn-out we continue to pay as part of the
original merger consideration with JD Holdings Inc., our reported
income tax rate is substantially higher than the statutory rate of
40% and our cash tax rate of 15%.
The Company will host a conference call on Thursday, October 14,
2010 at 4:30 p.m. Eastern Time with the Company's Chief Executive
Officer, Marc Crossman, and its Chief Financial Officer, Hamish
Sandhu, to discuss financial results for the third quarter of
fiscal 2010.
To access the live call, please dial (800) 901-5218 (U.S.) or
(617) 786-4511 (International). The conference ID number and
participant passcode is 76034836 and is titled "Q3 2010 Joe's Jeans
Inc. Earnings Conference Call." The information provided on the
teleconference is only accurate at the time of the conference call,
and the Company will take no responsibility for providing updated
information. A telephone replay of the conference call will be
available beginning at 7:30 p.m. Eastern Time on October 14, 2010
until 11:59 p.m. Eastern Time on October 21, 2010 by dialing (888)
286-8010 (U.S) or (617) 801-6888 (international) and using the
conference passcode 96189492. In addition, the conference call will
be archived for two weeks on the Company's website at
www.joesjeans.com.
JOE'S JEANS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three months ended
--------------------------------
August 31, 2010 August 31, 2009
--------------- ---------------
(unaudited)
Net sales $ 25,534 $ 21,238
Cost of goods sold 13,732 10,864
--------------- ---------------
Gross profit 11,802 10,374
--------------- ---------------
Operating expenses
Selling, general and administrative 10,070 7,394
Depreciation and amortization 223 132
--------------- ---------------
10,293 7,526
--------------- ---------------
Operating income 1,509 2,848
Interest expense 113 90
--------------- ---------------
Income before provision for taxes 1,396 2,758
Income tax expense 838 824
--------------- ---------------
Net income $ 558 $ 1,934
=============== ===============
Earnings per common share - basic $ 0.01 $ 0.03
=============== ===============
Earnings per common share - diluted $ 0.01 $ 0.03
=============== ===============
Weighted average shares outstanding
Basic 62,841 60,177
Diluted 64,494 61,462
The following table sets forth certain segment information for
the three months ended August 31, 2010 and 2009, respectively:
JOE'S JEANS INC. AND SUBSIDIARIES
Segment Results
(in thousands)
Three months ended
-----------------------------------
August 31, 2010 August 31, 2009
---------------- ----------------
(unaudited)
Net sales
Wholesale $ 21,349 $ 19,943
Retail 4,185 1,295
---------------- ----------------
$ 25,534 $ 21,238
================ ================
Gross Profit:
Wholesale $ 9,498 $ 9,514
Retail 2,304 860
---------------- ----------------
$ 11,802 $ 10,374
================ ================
Operating income (loss):
Wholesale $ 5,741 $ 6,525
Retail (10) (108)
Corporate and other (4,222) (3,569)
---------------- ----------------
$ 1,509 $ 2,848
================ ================
About Joe's Jeans Inc.
Joe's Jeans Inc. designs, produces and sells apparel and
apparel-related products to the retail and premium markets under
the Joe's® brand and related trademarks. More information is
available at the Company website at www.joesjeans.com.
This release contains forward-looking statements within the
meaning of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, as amended. The matters discussed in
this document involved estimates, projections, goals, forecasts,
assumptions, risks and uncertainties that could cause actual
results or outcomes to differ materially from those expressed in
the forward-looking statements. All statements in this news release
that are not purely historical facts are forward-looking
statements, including statements containing the words "intend,"
"believe," "estimate," "project," "expect" or similar expressions.
Any forward-looking statement inherently involves risks and
uncertainties that could cause actual results to differ materially
from the forward-looking statements. Factors that would cause or
contribute to such differences include, but are not limited to: the
risk that the Company will be unsuccessful in gauging fashion
trends and changing customer preferences; the risk that changes in
general economic conditions, consumer confidence, or consumer
spending patterns will have a negative impact on the Company's
financial performance or strategies; the highly competitive nature
of the Company's business in the United States and internationally
and its dependence on consumer spending patterns, which are
influenced by numerous other factors; the Company's ability to
respond to the business environment and fashion trends; continued
acceptance of the Joe's® brand in the marketplace; successful
implementation of any growth or strategic plans, including changes
and new product offerings; effective inventory management; the
Company's ability to continue to have access on favorable terms to
sufficient sources of liquidity necessary to fund ongoing cash
requirements of its operations, which access may be adversely
impacted by a number of factors, including the reduced availability
of credit generally and the substantial tightening of the credit
markets, including lending by financial institutions, who are
sources of credit for the Company, the recent increase in the cost
of capital, the level of the Company's cash flows, which will be
impacted by the level of consumer spending and retailer and
consumer acceptance of its products; the ability to generate
positive cash flow from operations; competitive factors, including
the possibility of major customers sourcing product overseas in
competition with our products; the risk that acts or omissions by
the Company's third party vendors could have a negative impact on
the Company's reputation; a possible oversupply of denim in the
marketplace; and other risks. The Company discusses certain of
these factors more fully in its additional filings with the SEC,
including its last annual report on Form 10-K filed with the SEC,
and this release should be read in conjunction with that annual
report on Form 10-K, together with all of the Company's other
filings, including current reports on Form 8-K, made with the SEC
through the date of this release. The Company urges you to consider
all of these risks, uncertainties and other factors carefully in
evaluating the forward-looking statements contained in this
release.
Any forward-looking statement is based on information current as
of the date of this document and speaks only as of the date on
which such statement is made, and the Company undertakes no
obligation to update these statements to reflect events or
circumstances after the date on which such statement is made.
Readers are cautioned not to place undue reliance on
forward-looking statements.
Contact: Joe's Jeans Inc. Hamish Sandhu 323-837-3700 x 304
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