Luxury retail has been popular at this stage of the economic recovery, and we'll find out a bit more when Joe's Jeans (NASDAQ: JOEZ ) reports quarterly results after Monday's market close.
Joe's Jeans is a trendy retailer of high-priced denim. It's the stuff that celebrities wear. It's the stuff that the affluent, who want to be celebrities, wear. The branded apparel starts at $158 for a pair of jeans, and the price points can get substantially higher after that.
Joe's Jeans is a small, but actively traded, company. Now that larger rival True Religion (NASDAQ: TRLG ) is going private, it's going to be a more widely watched bellwether in the realm of luxury casual apparel.
Yes, True Religion is finally leaving us as a publicly traded company. The edgy marketer of upscale denim was exploring strategic alternatives last year, finally settling for an $835 million buyout at the hands of private equity firm TowerBrook Capital Partners.
Brean Capital actually downgraded True Religion earlier this week, but entirely based on expectations that the deal will close later this month. The stock's at $31.80. Investors are getting cashed out at $32 in a matter of days. No one else is coming around with a sweeter offer. There's no need to be bullish anymore.
However, there are reasons to be bullish when it comes to Joe's Jeans. Analysts see revenue growing 15% this fiscal year ending in November, accelerating to a 16% clip next year. A surprising quarterly loss last time out dropped Wall Street targets for all of fiscal 2013 to $0.04 a share for Joe's Jeans, but that deficit would've actually been a small profit if it wasn't for a one-time charge. Those same pros see profitability bouncing back to $0.13 a share next year.
That may not seem like much, but keep in mind that, given the low share price, we're talking about just 13 times forward earnings. That's a pretty reasonable price for a company growing its top line in the mid teens.
Are there faster sprinters in luxury retail? Absolutely. Michael Kors (NYSE: KORS ) has become the new darling in the luxury handbag space. Revenue soared 57% in its latest quarter, fueled primarily by a nearly 37% spike in same-store sales.
Yoga apparel retailer lululemon athletica (NASDAQ: LULU ) has had its hiccups lately. There was the embarrassing recall of its black Luon pants in March because the fabric's sheerness made them see through. Investors were stunned to learn that its celebrated CEO stepped down last month. Despite the recall that kept a popular product line out of stock, lululemon came through with a 21% spurt in sales in its latest quarter.
However, you can't buy Kors or lululemon for 13 times next year's earnings. They fetch forward multiples just north of 20.
Naturally, Joe's Jeans' small size will trigger volatility. It also has active wholesale and retail businesses that don't always perform in lockstep. However, with True Religion leaving the exchange, it's time for Joe's Jeans to prove itself worthy as a bellwether for pricey denim.
Three more retailers worth watching
The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.