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Joe's Jeans Has Competitors Singing the Denim Blues

By Dan Caplinger - Apr 12, 2013 at 5:15PM

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The jeans-maker reports earnings next week.

Next Monday, Joe's Jeans (NASDAQ: JOEZ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed kneejerk reaction to news that turns out to be exactly the wrong move.

Joe's Jeans was one of the pioneers of the high-priced jeans niche. The jeans maker maintains a combination of full-priced and outlet stores of its own, as well as selling its products through other retailers. With three straight earnings beats, can the company make it four in a row next week? Let's take an early look at what's been happening with Joe's Jeans over the past quarter and what we're likely to see in its quarterly report.

Stats on Joe's Jeans



Analyst EPS Estimate


Year-Ago EPS


Revenue Estimate

$31.67 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Will Joe's Jeans give investors the perfect fit?
Analysts have gotten a lot more optimistic in the past several months about the earnings prospects for Joe's Jeans. They've doubled their consensus estimates for the just-ended quarter, and they've also boosted their full-year fiscal 2013 earnings-per-share call by $0.04 per share. The stock has followed suit, nearly doubling just since early January.

The high-priced jeans niche has been a lucrative place for retailers and, as the economy has recovered, so, too, have prospects for the companies that sell those jeans. Both Joe's and rival True Religion (NASDAQ: TRLG) sell jeans at prices in the $150 to $250 range. Although such high prices might seem like a recipe for disaster, Joe's has seen huge sales increases lately, with a 33% jump in revenue on 6% same-store sales gains during its most recent quarter. The company even managed to reverse its year-ago loss with a profit. Given its small size, Joe's has faster growth potential than True Religion, which expects sales to rise just 8% to 9% this year.

Moreover, some potential strategic moves elsewhere in the industry may also have investors excited about Joe's prospects. Earlier this month, reports surfaced that Fifth & Pacific (KATE) could seek to sell its Lucky jeans brand along with its Juicy Couture line, holding onto its Kate Spade brand. Lucky's price-point isn't quite as high as Joe's, but the trends supporting them are similar enough for potential buyers for Lucky to consider Joe's as a possible substitute. Considered in combination with True Religion's decision last October to seek strategic alternatives, all the activity in the space has interesting implications for the industry.

The big question is whether the boom in high-priced retail can continue. Michael Kors (CPRI 3.68%) has seen high demand for its prestigious lines of accessories, but some wonder how long it can outpace weaker competitors. Joe's relies on the same willingness for premium customers to pay premium prices for its wares and, while those trends have been favorable lately, they could reverse and send shares lower once more.

In the company's quarterly report, watch for Joe's Jeans to comment on the recent upsurge in its stock price. With Fifth & Pacific's Lucky brand reportedly up for sale, the time could be right for Joe's to open itself up for a potential buyout, as well.

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