Source: Joe's Jeans.

There's still money to be made in blue jeans, and Joe's Jeans (NASDAQ:JOEZ) is making it happen. The designer denim specialist opened sharply higher on Friday after posting another unexpected quarterly profit.

Net sales soared 56% to hit $48.2 million in its fiscal second quarter, but that's not the impressive part of Joe's Jeans' report. In fact, that's actually a bit disappointing. Analysts were holding out for closer to $49 million on the top line, and it's important to remember that the reported growth is not organic. 

Joe's Jeans acquired Hudson Clothing Holdings back in September, and that new subsidiary contributed $17.9 million in wholesale net sales and $0.8 million on the e-tail front for the quarter. Back that out and Joe's Jeans posted a decline of 5% in organic sales. Adding three new retail locations over the past year and a 1% uptick in comps weren't enough to offset the large drop in its organic wholesale business.

However, the market's still cheering the report -- and an analyst is even upgrading Joe's Jeans -- based on how the addition of Hudson is helping to improve its operations. Operating profit improved by 55% and net income nearly doubled to $2.3 million or $0.01 a share. This may not be much of a profit given the larger number of diluted shares outstanding these days, but analysts were forecasting a deficit of $0.03 a share. This is actually the third quarter in a row that finds Joe's Jeans in the black with Wall Street 

B. Riley & Co. moved to upgrade the stock this morning on the bottom-line surprise. The analyst's rating is going from neutral to buy and its price target is getting jacked up from $1.30 to $1.70. The market's clearly setting aside the organic sales decline. The stock opened 21% higher this morning. 

Joe's Jeans took a gamble last summer in acquiring the company behind Hudson Jeans for roughly $97.6 million in cash and convertibles notes, but that premium denim line's access to new retail partners, obvious cost-saving synergies, and having a second high-end brand are proving valuable now at a time when Joe's flagship business is softening at the wholesale level.

Investors will want to keep an eye on how Joe's Jeans is holding up on the organic front until September rolls around, but if Joe's Jeans comes through with another quarterly profit  for the new period -- and analysts are once again stubbornly betting on a deficit -- this may be a bottom-line growth story anyway. Joe's Jeans is the right fit for Mr. Market today.

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Rick Munarriz has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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