Joe’s Jeans, Inc. (JOEZ)
Q2 2010 Earnings Call Transcript
July 15, 2010 4:30 pm ET
Lori Nembirkow – General Counsel
Marc Crossman – President and CEO
Hamish Sandhu – CFO
Liz Pierce – Roth Capital Partners
Steven Chang – Rudder Capital [ph]
Previous Statements by JOEZ
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Good day, ladies and gentlemen, and welcome to the second quarter 2010 Joe’s Jeans Incorporated earnings conference call. My name is Divette and I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of the conference. (Operator instructions)
I would now like to turn the call over to Lori Nembirkow, General Counsel, please proceed.
Thanks, operator, and thanks to everyone for joining the call. Present on our call today to discuss our results are Marc Crossman, our President and CEO, and Hamish Sandhu, our CFO.
Before we start, let me review the company’s Safe Harbor language. Today’s call may contain forward-looking statements, which are statements of the company’s or management’s intentions, hopes, beliefs, expectations, or predictions of the future. These statements are subject to risks and uncertainties that could cause our results to be materially different. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of date they are made.
I also refer you to our reports that are filed with the SEC, which include our second quarter 2010 report on Form 10-Q filed today. This report includes information that could also cause our actual results to be materially different from those contained in any projections, which may be made during this conference call. By making any forward-looking statements, the company undertakes no obligation to update them for revisions or changes after today.
Finally, a copy of our earnings release and a recording of this call will be available on our Web site, www.joesjeans.com and a telephone replay will be available for one week from today.
Now, I will turn the call over to Marc.
Thanks, Lori, and thanks to everyone for joining us today. I want to start by bringing to your attention our new reporting format. We are pleased to say that revenue from our retail division now exceeds 10% of our overall volume. Accordingly, we are going to disclose segment information, including sales, gross margin and operating profit for our wholesale and retail businesses and break out our corporate expenses.
We filed an 8-K this afternoon providing a quarterly breakdown of this segment data for the last five quarters. I will talk about our segment information for our wholesale and retail division and then Hamish will discuss our corporate expenses and consolidated income statement and balance sheet. I will conclude with some closing remarks on the third quarter outlook and then we will open the call for Q&A.
Turning to our business, for the second quarter of 2010, we generated record revenues of $25.9 million, a 51% increase over the prior year period. Gain share in the quarter came from virtually all product categories and channels of distribution.
Our wholesale business experienced a 42% increase in sales versus the year ago period. Within our wholesale business, we grew all three of our distribution channels, men’s, women’s and international. In addition, our core denim business experienced growth and we continued to layer on new revenue from our non-denim product classifications.
Our domestic women’s wholesale business expanded by 49%, during the quarter, our denim sales were up, with the vast majority of the gains coming from specialty stores. No doubt last year was an extremely difficult year for specialty stores.
During 2009, while we were able to maintain the number of accounts we served, the turnover was extremely high with many stores going out of business. I think we are finally seeing that distribution channel start to show signs of stabilization. In fact, during the second quarter, we opened new specialty store accounts.
Department store business was slightly more challenging. We’re maintaining our market share on the floor, but we’re not seeing department stores expand their space or get aggressive behind denim. Fortunately, our introduction of new product classifications comes in at an opportune time, as we continue to make inroads with our non-denim products.
Excluding leggings, during the quarter, 11% of our domestic women’s wholesales sales came from non-denim products, up from 8% last quarter. As you can see, we made progress further penetrating the distribution channel with our tees, woven shirts and non-denim bottoms. As a side note, due to the seasonality of the legging, I excluded them from both numbers as sales dropped dramatically during the warm summer month.
Our domestic men’s wholesale business grew 56%, many of the overarching trends from women’s translated into men’s, mainly our core denim business growth was led by the specialty store channel and we continued to increase the footprint of our non-denim products.
In fact, we increased our non-denim products to 11% of revenue in the second quarter. The notable difference between the domestic men’s and women’s business is that we are taking significant market share in the men’s department store channel.
The last piece of our wholesale division to discuss is our international business. International wholesale sales increased by 3% on a year-over-year basis. The growth was largely attributable to our growth in Europe, where our sales rose 19%. This lift in sales is a result of our Shop and Shop [ph] program in France.