Lower Sales, Charges Drive Joe’s Jeans to Loss

Lower sales and onetime charges dropped Joe’s Jeans Inc. to a third-quarter loss.

For the three months ended Aug. 31, the net loss was $2 million, or 3 cents a diluted share, against net income of $558,000, or 1 cent, in the year-ago quarter. Included in the loss were a $1.6 million inventory writedown and a $1.1 million charge for store impairment.

Sales in the quarter dropped 5.4 percent to $24.2 million from $25.5 million in the 2010 period as wholesale revenues declined 7.7 percent, to $19.7 million, and retail revenues rose 6.2 percent, to $4.4 million. Gross margin, hurt by the inventory writedown, slipped to 40.3 percent of sales from 46.2 percent in the 2010 period, with gross margin in the wholesale business descending to 34 percent from 44 percent. The company estimated that the writedown subtracted 8 points from the wholesale unit’s gross margin result.

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Marc Crossman, president and chief executive officer, said recent sales trends, including the performance of the fall collection in stores, have been encouraging. New products, “combined with cross platform advertising, [have] resulted in sales outpacing stock levels and generated numerous reorders in our fourth quarter. In addition, our men’s business continues to grow with a 40 percent increase and driven not only through expanding our distribution channel, but also by increasing sales dollars in our current department and specialty store channels.”

The company noted that gross margin in its retail segment was 67 percent of sales, 12 points higher than a year ago, as a result of “an increase in pricing and less promotional activity at our retail outlet stores.”

Results were disclosed after the close of the markets Tuesday. Shares were down 14.3 percent, or 10 cents, to 59 cents in early trading Wednesday.

For the nine months, the company’s net loss was $1.1 million, or 2 cents a diluted share, against net income of $1.8 million, or 3 cents. Sales contracted 6.1 percent to $70 million from $74.6 million in the first three quarters of 2010.