Third-quarter net income at Joe’s Jeans Inc. fell 71.1 percent on higher costs despite 20.2 percent growth in sales.
For the three months ended Aug. 31, income was $558,000 or 1 cent a diluted share, down from $1.9 million, or 3 cents, a year ago. The quarter’s results were dragged down by higher selling, general and administrative expenses, as well as a 25.6 percent rise in interest costs.
Sales rose to $25.5 million from $21.2 million. By business operation, wholesale sales rose 7.1 percent to $21.3 million from $19.9 million, while retail sales grew more than threefold to $4.2 million from $1.3 million.
Marc Crossman, chief executive officer, said on a conference call that the gain in the retail segment was from the contribution of nine new sites as its store base rose to 14 from five. He noted that same-store sales rose 23.5 percent in the quarter.
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On the wholesale front, premium denim remains challenging, but Joe’s Jeans was able to offset declines by expanding its nondenim categories, which rose to 16 percent of sales from 3 percent last year.
Pointing to shop-in-shop programs in France and Canada, Crossman reported international wholesale revenues rose 28 percent.
Wholesale gross margins fell to 45 percent from 48 percent as the nondenim categories carry lower margins. In addition, Crossman said on the call that retail gross margins, 55 percent versus 66 percent last year, were hurt by the company’s decision to liquidate its old inventory rather than sell it at the same time it was launching its new product categories. Retail gross margins have returned to the 66 percent range now that the older remnant products have been liquidated, he said.
For the nine months, income fell 56 percent to $1.8 million, or 3 cents a diluted share, from $4.1 million, or 7 cents, last year. Sales gained 35.9 percent to $74.6 million from $54.9 million a year ago.