Shares of apparel maker Joe's Jeans (Nasdaq: JOEZ) plunged recently as it swung to an unanticipated third-quarter loss. Results were slammed by a $1.62 million writedown of its jean leggings, non-denim pants, and age collection products, along with a fall in sales in its wholesale segment. Let's dive into the details.
Total revenues dropped by 5% to $24.2 million for the quarter, resulting largely from a sales dip in the wholesale segment, with net sales down to $19.7 million from $21.3 million a year ago. That drop was partially offset by a gain in the retail segment, though, and the men's sales channel saw a robust 40% boost, helped by an increase in the company's distribution channels.
Last quarter, Joe's spent more on advertising and marketing efforts to help perk up its women's business. Toward the end of Q3, it also launched the Joe's Wild Collection, which has already met with positive response. Its initial production run sold out, and more orders are being placed.
Globally, however, the jeans maker is still finding it hard to gain a solid footing. Sales in its largest market, Japan, declined again this quarter. On the bright side, Joe's has expanded its product offerings and business has started to pick up in Japan as well as the rest of its international channels. Q4 orders are up from the same quarter last year.
A downer for investors
Joe's reported a loss of $0.03 per share, beating the average profit estimates of $0.02 from analysts polled by Thomson Reuters. Shares plunge by around 26% in after-hours trading on the news. In fact, Joe's investors haven't had much to smile about this year, with the stock down a staggering 63% this year.
Apparel makers in general have seen a lot of volatility in their stocks this year, possibly because of the prevailing uncertainty of economic conditions that may have magnified negative market reactions.
Peer American Apparel (AMEX: APP) has seen its stock fall by more than 52% this year, for example, while Liz Claiborne (NYSE: LIZ), which recently put up its namesake brand for sale in an effort to reduce debt, was down for most of the year. However, the stock has regained some of its lost value after the company announced that it will sell off a few of its units to reduce its debt burden and is currently up 5.3% year to date.
A Fool's takeaway
Joe's Jeans may see its initiatives to improve the performance of its women's segment pay off in the coming quarter, which would nicely complement the growth in its men's channels. With the stock currently near its 52-week low, it may be worth considering as Joe's expects more revenues as the year rolls on. However, input prices may weigh on its bottom line unless it can successfully pass off rising commodity prices to its consumers.
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