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Joe's Jeans generates operating income of $1.5 mn in Q3
Oct '10
Joe's Jeans Inc. announced financial results for the third quarter ended August 31, 2010. Highlights were:

• Net sales increased 20% to $25.5 million over the prior year comparative period;
• Gross margin increased sequentially to 46% from 44%; and
• The Company generated operating income of $1.5 million.

For the third quarter ended August 31, 2010, overall net sales were $25.5 million compared to $21.2 million from the prior year comparative period, or a 20% increase. Our overall gross profit for the quarter increased to $11.8 million from $10.4 million from the prior year comparative period, or a 14% increase.

Our overall gross margins were 46% compared to 49% in the prior year comparative period and operating expense in the third quarter of fiscal 2010 was $10.3 million compared to $7.5 million a year ago. We generated operating income of $1.5 million compared to $2.8 million in the prior year comparative period and earnings per share of $0.01 compared to $0.03 in same period a year ago.

Net sales for our wholesale segment increased by 7% to $21.3 million compared to $19.9 million in the third quarter of fiscal 2009. Within our wholesale business, all three sales channels, men's, women's and international, experienced growth.

Marc Crossman, President and Chief Executive Officer, commented, "While the premium denim business remains challenging, we have been able to offset declines by utilizing our existing distribution channels as a gateway to expansion for our non-denim categories. This is evidenced by our sales mix of non-denim products increasing from 3% of sales a year ago to 16% of sales this year."

Gross margins for our wholesale segment were 45% compared to 48%. Our wholesale gross margin decreased as a result of a higher mix of sales from our new product categories which currently carry lower margins than our core denim. However, gross margins increased sequentially from 42% to 45% as a result of improving sourcing of our non-denim products.

Wholesale operating expense in the third quarter of fiscal 2010 was $3.8 million compared to $3.0 million a year ago. Our wholesale expenses increased over last year mostly due to the addition of our own customer service representatives, increased sample costs for our new product classifications, and staffing expenses for our shop in shop program in France. In the third quarter and prior year comparative period, our wholesale operating income was $5.7 million compared to $6.5 million.

Net sales from our retail segment increased 223% to $4.2 million compared to $1.3 million in the prior year comparative period. The growth in retail sales was driven by same store sales comp increases of 23.5% and revenue contribution from growing our store base from five to 14. Gross margins for our retail segment were 55% compared to 66% in the respective comparative periods.

Mr. Crossman commented, "The decrease in our gross margins is attributable to a strategic decision we made to liquidate the remnants of old collection items after the launch of our new product categories. Having sold the balance of the old collection items between June and September, our gross margin has rebounded to the 66% level."

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