Stock Preacher

Joe’s Jeans Inc. (Nasdaq: JOEZ)

Joe’s Jeans Inc. (JOEZ) engages in the design, development and marketing of apparel products worldwide. Its product line comprises women’s, men’s and children’s denim jeans, pants, shirts, sweaters, jackets and other apparel products. Its principal apparel products bear the Joe’s brand name. The Company also offers handbags, belts and small leather goods under a license agreement. It sells its products to various retailers, including department stores, specialty stores and distributors, as well as through its retail stores.

As of August 31, 2009, JOEZ operated two retail stores in Chicago, Illinois and San Francisco, California, as well as three outlets in Central Valley, New York; Orlando, Florida; and Camarillo, California.

The Company was founded in 1987 and is headquartered in Commerce, California

Source: Reuters.com, SEC Filings. Fiscal year ending November 30

Financial Summary

For the third quarter, the Company’s overall net sales were $21.2 million compared to overall net sales of $18.2 million from the prior year comparative period, a 16% increase. This increase can be primarily attributed to an increase of 13% in women’s domestic net sales and the addition of sales from JOEZ’s retail stores and the woven shirts in the third quarter of fiscal 2009 that the Company did not have in the third quarter of fiscal 2008. Gross profit for the third quarter of fiscal 2009 was $10.4 million compared to $9.0 million, a 16% increase. For the third quarter of fiscal 2009, gross margins were consistent at 49%. SG&A expenses during the third quarter of fiscal 2009 were $7.4 million compared to $6.5 million in the third quarter of fiscal 2008, a 13% increase. These results translated into net income for the third quarter of fiscal 2009 of $1.9 million and earnings per share of $0.03

For the nine months ended August 31, 2009, the Company generated $5.3 million of cash flow from operations and used $0.4 million for purchases of property and equipment mostly in connection with the operation of its retail stores.  JOEZ received net proceeds of $1.3 million in factored borrowings.  The Company’s cash balance stood at $9.5 million. As of August 31, 2009, the Company had a net loan balance of $9,950,000 with its factor, CIT Commercial Services Inc., a unit of CIT Group Inc., for factored receivables, a loan balance of $3,813,000 for inventory advances and no letters of credit outstanding.

Source: Yahoo! Finance, SEC Filings

In early October, JOEZ stock jumped by 25 cents, or 21%, to $1.45, after the Company posted better than expected third-quarter earnings. Volume topped 2.4 million shares, compared to the 50-day average daily volume of 289,000, according to the Nasdaq. JOEZ’s shares have traded between 22 cents and $1.59 during the past 52 weeks.

Analyst Consensus

One analyst polled by Thomson Reuters rates JOEZ with “Buy.”

Source: http://markets.ft.com/tearsheets/analysis.asp?s=JOEZ

Investment Highlights

The Company designs, sources and distributes its Joe’s® and Joe’s Jeans™ branded apparel products to more than 1,200 retail doors in the United States and abroad. JOEZ’s products are designed internally and sourced to specification from suppliers primarily located in the United States, Mexico and Morocco. The non-denim products are primarily manufactured in Asia, including Hong Kong and China. Finished goods are distributed directly to the Company’s customers from its distribution center in Los Angeles. JOEZ maintains third-party showrooms in New York and Los Angeles to showcase its products for its customers. The Company also opened a branch office in Paris to distribute its products.

The Company’s products are sold to consumers through high-end department stores and boutiques located throughout the world. It currently sells to domestic department stores such as Macy’s Inc., which includes Bloomingdale’s and Macy’s, Neiman Marcus, Nordstrom, Saks Fifth Avenue, Von Maur, Lord & Taylor, Dillard’s and Belk stores and specialty retailers such as American Rag, Anthropology, Atrium, Barneys New York, Bergdorf Goodman, Henri Bendel, Lisa Klein, Ron Herman, Fred Segal and Scoop NYC in the United States. Internationally, JOEZ sells to retailers such as Galleries Lafayette, Le Bon Marche, and Le Printemps in France, Barney’s Japan, Isetan, and Mitsukoshi in Japan, Top Shop, Harvey Nichols and Selfridges & Co. in the United Kingdom, Ztampz in Hong Kong and Gio Moretti in Italy.

This summer JOEZ signed a new license agreement with Vogue Trimmings Inc., a leading manufacturer of belts and decorative belt buckles, to manufacture and distribute Joe’s branded belts for men, women, girls and boys. The new line of belts debuted in September 2009 at the tradeshows Project in Las Vegas and Coterie in New York is available in time for the holiday shopping season nationwide in major department stores and specialty store retailers, as well as the JOEZ branded stores. In the same month, the Company signed a new license agreement with Kids Jeans LLC to manufacture and distribute apparel products for infants, girls and boys. The new children’s line also debuted at the September 2009 tradeshows, Project in Las Vegas and Coterie in New York. In exchange for the exclusive right to these product lines, the licensees paid to the Company non-refundable advances on the first year’s royalties and will pay it additional amounts on net sales in future years.

The Company opened its first full price retail store in October 2008 in Chicago, Illinois. By the end of the fourth quarter of fiscal 2008, it opened one additional full price store in San Francisco, California, and two outlets, one located in Central Valley, New York, and one in Orlando, Florida. In July 2009 JOEZ opened an outlet store in Camarillo, California. The Company expects to open a full price retail store in Santa Monica Place in Santa Monica, California, in 2010.  JOEZ continues to look for other retail leases for fiscal 2009 and beyond.

The apparel industry is growing at a very high rate with annual revenue of more than $1.3 trillion. The denim jeans industry is the most fragmented out of the total apparel industry. It is estimated that there are more than 800 million pairs of denim jeans bought in the world annually. The size of overall jeans market is estimated to be $50 billion annually. In its “Global market review of the denim and jeanswear industries – forecasts to 2014,” just-style estimates that the denim and jeans market around the world will increase to $56.2 billion by 2014. This is a rise of $4.6 billion, which is 8.9% over the seven-year period, equivalent to a cumulative growth of 1.25% per year. The size of overall U.S. jeans market is estimated to be $15.1 billion. The Company competes in the denim jeans market, which is approximately $5.2 billion.

Technical Analysis

Source: http://stockcharts.com/h-sc/ui

JOEZ is trading above its 13-day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock.

The MACD for the Company currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

JOEZ’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility. Additionally, JOEZ is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

Comparative Analysis

JOEZ is traded with discount to its peer P/E and P/S multiples.

With more than $20 million in net sales for the third quarter of 2009, the Company has succeeded to remain afloat during these challenging economic times. During the quarter, JOEZ experienced growth in domestic women’s wholesale as well as in international sales. The addition of new retail stores should enhance the Company’s net sales and gross profit and the outlet stores should allow it to sell its overstock or slow moving items at higher profit margins.

Source: Thomson Financial, Yahoo! Finance, Analyst estimates.

Insider Trading Activity

Net Share Purchase Activity

Report Disclaimer

DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS REPORT. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority.  We are neither licensed nor qualified to provide investment advice.

The information contained in our report should be viewed as commercial advertisement and is not intended to be investment advice.  The report is not provided to any particular individual with a view toward their individual circumstances. The information contained in our report is not an offer to buy or sell securities.  We distribute opinions, comments and information free of charge exclusively to individuals who wish to receive them.

Our newsletter and website have been prepared for informational purposes only and are not intended to be used as a complete source of information on any particular company.  An individual should never invest in the securities of any of the companies profiled based solely on information contained in our report.  Individuals should assume that all information contained in the report about profiled companies is not trustworthy unless verified by their own independent research.

Any individual who chooses to invest in any securities should do so with caution.  Investing in securities is speculative and carries a high degree of risk; you may lose some or all of the money that is invested.  Always research your own investments and consult with a registered investment advisor or licensed stock broker before investing.

Information contained in our report will contain “forward looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934.  Subscribers are cautioned not to place undue reliance upon these forward looking statements.  These forward looking statements are subject to a number of known and unknown risks and uncertainties outside of our control that could cause actual operations or results to differ materially from those anticipated.  Factors that could affect performance include, but are not limited to, those factors that are discussed in each profiled company’s most recent reports or registration statements filed with the SEC.  You should consider these factors in evaluating the forward looking statements included in the report and not place undue reliance upon such statements.

We are committed to providing factual information on the companies that are profiled.  However, we do not provide any assurance as to the accuracy or completeness of the information provided, including information regarding a profiled company’s plans or ability to effect any planned or proposed actions.  We have no first-hand knowledge of any profiled company’s operations and therefore cannot comment on their capabilities, intent, resources, nor experience and we make no attempt to do so.  Statistical information, dollar amounts, and market size data was provided by the subject company and related sources which we believe to be reliable.

To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information provided in the report, or for any direct, indirect, consequential, incidental, special or punitive damages that may arise out of the use of information we provide to any person or entity (including, but not limited to, lost profits, loss of opportunities, trading losses, and damages that may result from any inaccuracy or incompleteness of this information).

We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www.finra.org.

Popularity: unranked [?]