Say It Ain't So, Joe's

Not every luxury retailer is raking it in these days.

Shares of Joe's Jeans (NASDAQ: JOEZ  ) were slammed today after posting disappointing quarterly results.

The retailer of high-priced denim clocked in with roughly half of the revenue growth that Wall Street was targeting. Declining profitability also missed the mark.

Joe's Jeans grew its net sales by 8%, to $30.9 million, fueled largely by its chain store expansion efforts.

Analysts were holding out for top-line growth of 15%, but that obviously didn't happen. The 6% uptick in its wholesale business was disappointing, but the real letdown happened at the retail level. Joe's Jeans managed to post a 14% increase in net sales for the quarter, but that was with eight new store locations that have opened over the past year. Same-store sales actually plunged 6% during the period, and that's the real dagger.

Investors had been treated to largely positive trends when luxury retailers were reporting fresh financials.

Michael Kors (NYSE: KORS  ) -- the Hong Kong-based retailer of luxury handbags -- saw its revenue soar 57% in its latest quarter. Comps popped a hearty 37% during the period. Yoga darling lululemon athletica (NASDAQ: LULU  ) is still coming through with double-digit growth, even after an inventory-sucking recall and bolting CEO.

Weakness at Joe's shouldn't worry Kors and lululemon investors. Kors should crank out another strong performance when it reports in three weeks, and if lululemon survived the embarrassing Luon pants fiasco of March to post 21% growth in sales during that quarter, it should hold up well in the near term.

The problem at Joe's is limited to Joe's, though if it's general weakness when it comes to premium denim, it would be easier to justify the decision of larger rival True Religion to go private. Some investors -- and a lot of class action lawsuit-chasing attorneys -- seem to think that True Religion is letting itself go cheap in the $835 million buyout that should close this week. But what if there's more to the shortfall at Joe's than meets the eye?

Joe's realizes that organic growth may not be enough to please investors right now. It announced a deal to acquire premium denim rival Hudson Clothing for $97.6 million in cash and convertible notes last night.

It's a smart move, given the synergies that should be realized as two smallish players combine, but right now, it's hard to convince investors that Joe's Jeans is the growth stock that they thought they were buying into before Monday night's report.

Retailer stocks that may be a better fit than Joe's Jeans right now
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.


Read/Post Comments (1) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2540770, ~/Articles/ArticleHandler.aspx, 12/19/2014 9:39:22 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement