Higher tax rates pressured Joe’s Jeans Inc.’s first-quarter profits down 13.3 percent as new product lines and growth in its retail stores lifted sales 40.7 percent.
For the three months ended Feb. 28, net income was $694,000, or 1 cent a diluted share, compared with $800,000, or also 1 cent, in the year-ago quarter. Income before taxes jumped 41.3 percent to $1.3 million from $940,000.
The firm paid $634,000 in taxes at a 48 percent rate versus $140,000 at a 15 percent rate last year. It said in its quarterly filing with the Securities and Exchange Commission that last year’s quarterly results included a valuation allowance that was recorded against deferred tax assets. In addition to the lack of valuation allowance in the current quarter, the higher tax rate was also due in part to costs of acquiring a trademark.
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Sales in the period were $23.2 million compared with $16.5 million in the prior-year quarter as gross margin trended down to 49 percent of sales from 50 percent in the first quarter of 2009.
Boosting quarterly sales, the Los Angeles-based company launched a line of denim leggings for women and began selling woven knit tops and pants in other fabrications for men and women under the brand names The T and The Pant by Joe’s, which boosted first-quarter sales.
Marc Crossman, president and chief executive officer, noted that media support for new products is drawing to a close and that additional increases in marketing expenditures aren’t expected.
The firm said in the filing, “We believe our growth drivers for 2010 include the performance of our retail stores, continued improvement in our international and men’s sales,” as well as licensees performing under their respective agreements.
The company plans to open seven outlet stores this year in addition to the six already in operation, including a unit at the Seattle Premium Outlets center opened this week. Joe’s also operates two full-price stores.