Who the Heck Is Joe?

By Alyce Lomax | More Articles
August 27, 2010 | Comments (8)

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Fools can't stop talking about Joe's Jeans (Nasdaq: JOEZ ) . Me, I just want to know who the heck Joe is, and whether I should want his jeans -- or his stock.

CAPS blogger 20Percent PM outlined the fascinating history of Joe's Jeans in April. Longtime Fool Rich Duprey also mentioned it as one of Wall Street's unknown stocks. However, he also pointed out that its apparel is "the flavor of the month" for many celebrities, and that it's embarking on a risky path of opening retail stores. Fellow Fool Eric Bleeker dug deep into Joe's Jeans' most recent quarterly results as well

Joe's Jeans' form 10-K describes its 1987 birth as Innovo, which manufactured canvas and nylon products. It became Joe's Jeans in 2007, evolving into a premium denim provider, distributing its wares mostly through high-end retailers and boutiques at $120 and up. There actually is a Joe: the company's creative director, Joe Danahan.

High-priced denim was a hot niche for a while, but now it just sounds so 2007. Jeans are a crowded market, with Guess? (NYSE: GES ) , Liz Claiborne's (NYSE: LIZ ) Lucky Jeans, True Religion (Nasdaq: TRLG ) , and VF's (NYSE: VFC ) 7 for All Mankind all clamoring for a spot on shoppers' lower extremities.

Many retailers are now painfully aware of "the new normal," as consumers shop on tight budgets. Perhaps not coincidentally, Guess? shares plunged yesterday following its lackluster forecast. The second half of this year will be similarly difficult for many high-end brands and retailers. Can a relatively obscure name like Joe's buck the ugly trends?

I understand that a small company with a penny-stock price and lots of buzz might seem promising to some investors. I also see that Joe's is expected to generate impressive sales growth this year -- along with a precipitous drop in earnings. How sustainable is that sales growth? And is the expense of opening retail stores worth the risk in such a poor economic climate? American Apparel's (NYSE: APP ) recent fall from racy grace may be a good example of how quickly a promising growth story can go bad.

I'm leery of Joe's Jeans' stock, myself. I have to wonder whether the brand will enjoy long-term strength, or prove to be just another jeans fad. Even the company admits in its 10-K that it doesn't hold a dominant competitive position. Unlike a stylish pair of pre-torn jeans, it's not always a good idea to buy any stock whose investment thesis already has a few holes in it.

Let us know what you think about investing in Joe's Jeans in the comment boxes below.

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Alyce Lomax does not own shares of any of the companies mentioned. The Fool owns shares of Guess?. Try any of our Foolish newsletter services free for 30 days. The Fool has a disclosure policy.

Read/Post Comments (8) | Recommend This Article (10)

Comments from our Foolish Readers

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Report this Comment On August 28, 2010, at 11:58 AM, Randy3515 wrote:

Alyce Lomax is just trying to manipulate stock price action to benefit herself and others. I figured her and Jeremy Phillips out a long time ago. Beware of there advice in any articles they write.
Report this Comment On August 28, 2010, at 12:45 PM, blesto wrote:

Randy, that's a harsh accusation.
I believe the Fool will stand by it's disclosure policy. http://www.fool.com/help/index.htm?display=about02&ref=B...
Disclosure
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Report this Comment On August 28, 2010, at 4:36 PM, outoffocus wrote:

You know...Joe...from the party....yea....that guy... Good times. Good times.
Report this Comment On August 29, 2010, at 11:56 PM, safefool1 wrote:

Fool sure turned sour on Joe's. Go back and read all the previous posts of how excited they were. Joe's books, Joe's niche, the market, etc.
Now the last few articles, after succesful store launches, comes all these negative articles.
Which is it Fool, for or against Joe's?
If you do this, with this stock - how do I trust what you write about in others?
Report this Comment On August 30, 2010, at 10:55 AM, TMFJoeInvestor wrote:

Alyce, you can try on my jeans any time, though they might be baggy on you.
Report this Comment On August 30, 2010, at 2:25 PM, PeyDaFool wrote:

Hi Alyce,
Your raise some good questions, but have you ever tried on a pair of Joe's Jeans? Perhaps this is something you should try before shorting the stock's potential profitability.
There are quite a few manufacturers of cars, too, but it's quite obvious there is a difference between a Honda and a BMW. This distinction should be made clear when speaking about denim companies, too.
Report this Comment On August 31, 2010, at 5:05 PM, TMFLomax wrote:

Thanks for the thoughts - and thanks blesto for pointing out the Fool's disclosure policy, which we of course take very seriously. Exactly, I have no financial interest in Joe's Jeans, otherwise it would be disclosed. I just thought this was an interesting stock that I'd heard some buzz about recently, so I thought I'd take a look at what the buzz is about.
Thanks for your feedback, PeyDaFool, I take it that you think it's a high quality denim offering. (I'm a Lucky Jeans fan myself -- but that didn't actually increase my interest in LIZ as a stock given some of its recent challenges.) It should be interesting to see where JOEZ goes from here and if it's recent popularity will grow and be lasting compared to its many competitors. But I think it's always good to consider the idea something may be a fad.
I may have asked "who the heck is Joe," but I do know TMFJoeInvestor -- thanks for the offer, ha!
Thanks again for the comments.
Best,
Alyce
Report this Comment On September 04, 2010, at 8:27 PM, pappasjap wrote:

You are missing the boat on Joes Jeans. They will be a $5 stock in know time. I suggest you buy it now before you bang your head against the wall.

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