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joe’s jeans inc q4 2009 earnings call transcript-Breitex-img

joe’s jeans inc. q4 2009 earnings call transcript

by:Breitex      2020-06-20
Joe\'s Jeans Company(NASDAQ:JOEZ)
Q4 2009 earnings call at 4: 30 p. m. on February 3, 2010, OfficerHamish, chairman and chief executive officer of ETExecutivesLori Nembrikow general CounselMarc Crossman, signed-chief finance officeranalysis Pierce-Roth Capital Partners 【
Spencer Capital Management[
Richard milanski-Matt Communications
Joe\'s Jeans\'s conference call for the fourth quarter and year-end earnings Welcome to Camp. (
Operator instructions)
I would now like to hand over the report of today\'s meeting to your moderator, Lori nembrico, general counsel for the company.
Thank you for joining us today.
Marc Crossman, our President and CEO, and Hamish Sandhu, chief financial officer, attended a conference call on the results of our discussion.
Before we start, let me review the safe harbor language of the company.
This call may contain forwarding-
A statement by the Company or management of future intentions, hopes, beliefs, expectations or forecasts.
There are risks and uncertainties in these statements that can lead to a big difference in our actual results.
Please be careful not to rely too much on the striker --
Forward-looking statements made only from the date of publication.
I also present to you our report to SEC, which includes our 2009 Annual Report on Form 10K filed today.
The information included in this report may also lead to significant differences in our actual results from the results contained in any projections that may be made during this call.
Through any forwarding-
Looking for report companies is not obligated to update them after today for revision or change.
Finally, a copy of our earnings release and a recording of this call will be provided on our website www. joesjeans.
Com and phone replay will last for a week starting today.
Now I transfer the phone to mark.
Mark Crosman thanked Lori for joining us today.
I will start by talking about the results for the fourth quarter and year end, and then I will transfer the call to Hamish to discuss our financial position.
Finally, we will end with a Q & A session.
Our net sales rose 42% in the fourth quarter to $25.
At 2 million, our operating income increased by 164% to less than $3 million.
Net sales for the whole year increased by 16% to $80.
1 million, operating income increased by 48% to $8. 1 million.
It is worth noting that sales actually increased by 2009 in 2008.
Apparently, 2009 is a more productive year despite the economic downturn.
We achieved significant sales growth in 2009, most of which was achieved in the second half of the year, thanks mainly to the new fashion denim fabric, the transformation of our core infrastructure plan and the successful introduction of two new product categories.
Before we dive into our financial results, I would like to take a moment to describe the two categories in more detail.
They will continue to make a meaningful contribution to our revenue growth in 2010.
The first of our two new categories is woven shirts, which I talked about during the third quarter conference call.
Although we have provided woven shirts in the past, this time we differentiate ourselves from the rest of the package by creating a sub-brand called shirts under Joe\'s umbrella.
It includes a line of all kinds of novelty fabrics and printed men\'s and women\'s woven shirts available for $98. 00 at retail.
This shirt has its own unique marketing packaging and labels, while also incorporating the JD logo that we are familiar.
There is no doubt that in many cases this shirt can indeed exist independently in the contemporary sector.
The second new product category we launched in November is true trouser legs, but it is made of denim, not knitted.
Denim leggings are sold on the market as denim leggings, similar to shirts, and have their own unique marketing and labels while joining our familiar JD logo.
Because jeans are made of jeans, we are able to provide a variety of finishes that are not reproducible in jeans.
We are the first high-end cowboy company to offer this new product classification.
Also, we offered it for less than $100. 00.
To be sure, Jean Legging\'s success has driven not only the novelty of the category, but also the retail price below $100.
00 fills the gap that the department urgently needs without affecting our Cowboys.
Despite shipping less than a month this quarter, our net sales were $1. 5 million.
We also coordinated a marketing blitz and invested in advertising behind the launch of this product, which we believe helps to achieve this level of sales in such a short period of time.
This product offers a new business layer that all of our major retailers have accepted and booked for spring.
In the fourth quarter, we are pleased to report our sales together with all our distribution channels;
Sales of domestic women\'s clothing, domestic men\'s clothing, International Men\'s clothing and retail women\'s clothing have all experienced growth.
Our domestic women\'s business grew the fastest this quarter.
Not only because of the addition of new categories, but also because of our bread and butter Cowboys.
Female Department store net sales rose 27% in the fourth quarter.
As we have said in the past, this is our most mature and fully penetrated distribution channel, and it turns out that we have almost all the better department stores in the country.
So the number of our doors is flat.
Significant revenue growth in the channel is driven by strong sales growth per store.
We achieve this by maximizing the existing denim business and selling new product categories.
Just nine months ago, we revised our core program to take advantage of low retailer holiday inventory and our strong sales on the floor to replenish in a timely manner.
This gives us the opportunity to grow our denim business as many of our competitors see a decline.
In addition to maximizing our existing denim business as described earlier, we have created an additional $1.
4 million of this quarter\'s revenue comes from our two new product categories.
Our store\'s net sales grew in double digits in the fourth quarter.
Over the past year, this has been a difficult distribution channel for us for economic reasons.
However, similar to the department store channel, strong denim retail sales, low retail inventory and our ability to quickly transform products through our core replenishment program have led to high double-digit growth in our denim business.
In addition, sales of new product categories have further driven our growth.
Our domestic male business grew by single digits this quarter.
While we got some surplus revenue from our shirts, most of the business and growth in the quarter came from our denim fabric.
Our men\'s department store sales grew by 13%, driven by the growth of high single-digit denim.
As we said before, our male business has been supported by our department store, accounting for 27% of Nordstrom growth and 25% of Bloomingdale growth.
Sales of our specialty stores declined slightly this quarter.
The men\'s store business was the first and worst victim of the recession.
However, as we build new product layers in the spring, we expect growth in this area in 2010.
Our international sales grew by 16%.
Our growth is driven primarily by our European business.
For example, in November, we launched four new stores in the Lafayette kitchen and Petron, bringing our total to six.
We hope to continue running our stores and stores throughout the year, as our products are performing very positively in this case.
Our non-European business has also grown thanks to Jean Legging.
Our retail business generated $1 in revenue.
Gross profit margin for the quarter was 6 million, or 65%.
At the end of November, we opened the fourth direct selling store, with a total of six stores.
We are again very pleased with the retail store\'s performance this quarter.
In 2009, we were very cautious about the promotion of retail business.
After a full year of operation, we believe we already have a team to develop the department more actively in 2010.
So in the coming months, we will have more say in the opening of full and low-priced retail stores.
I will now transfer the call to Hamish to discuss our financial results.
Net sales rose to $25 this quarter.
2 million from $17.
As Marc just discussed, the same period of the previous year was 8 million, and the gross profit margin of 48% increased by 1% over the same period of the previous year.
Our retail sector has a higher profit margin and the increase in license revenue exceeds a slightly lower profit margin associated with our new product classification.
SG & A was $9 in the third quarter.
Compared with $7, 3 million.
1 million a year ago.
Compared to last year, the growth was mainly due to the additional head count and rental costs of our retail stores that opened in the fourth quarter of 08 and the two stores we opened in 2009.
We also recorded additional advertising costs as we invested more money in advertising to match the launch of our leg line and related to facilities and distribution due to increased sales volume
Depreciation and amortization expenses increased from $29,000 last year to $135,000 in 2009, an increase of $106,000.
This increase was due to the additional depreciation charges associated with the purchase of lease improvements when the other two retail stores opened in 2009.
Pre-tax operating income increased by 164% to $2.
9 million from $1.
The previous year was 9 million.
In the fourth quarter, we withdrew the valuation subsidy for deferred income tax assets because we believe that we will make full use of deferred income tax assets in the next few years.
The original valuation allowance is recorded on the basis of our deferred tax assets to explain the difference between the book basis and the tax basis for certain items, such as the benefits of carrying forward net operating losses, various allowances, stock compensation fees, etc.
Because we have generated more and more taxable income in the past three years and believe that we will generate taxable income in the future, we have released a $20 valuation subsidy. 3 million.
This led to a $16 Income tax offer.
The fiscal year 4 million was 2009.
Due to non-cash tax benefits, our net income for the fourth quarter was $20. 5 million.
Due to the significant tax benefits, we believe that the better indicator of comparison is our pre-tax income, which has almost tripled to $2.
Compared to $1, 9 million.
The previous year was 9 million.
In summary, these results resulted in net income of $20.
Compared to $1, 5 million.
The previous year was 1 million. We earned $0.
In the fourth quarter of 2009, it was $33 per share, compared to $0.
02 per share of 2008.
Now I\'m going back to Mark.
Before we return the phone to the operator for a question, I want to make a few concluding remarks.
Despite the economic environment of the past 12 months, 2009 is a great year for Joe, actually better than 2008.
We are able to develop top business, raise gross margin, build important cash balances, add two new licensees, open four retail stores, and most importantly, gain a foothold in the two new product categories.
2010 our strategy is simple.
We will open retail stores at a faster pace, continue to add new license holders and introduce more product categories.
There is no doubt that the successful implementation of our strategy in 2010 will result in considerable revenue and profit growth.
We are ready to answer questions now. Question-and-
Answer session operator (
Operator instructions)
Your first question is from Elizabeth Pierce-Rose capital partner.
A few questions about how we should consider next year\'s advertising spending are the $9 million we see in SG & A, how many of them are advertising, how should we look at the future of bit picture SG &.
Marc CrossmanJust conceptually, we introduced a lot of core ad incremental growth in the fourth quarter, and I think you\'ll see a reduction in the future transformation of the US based on traffic advertising, and start doing more things in the book.
So I don\'t think you will see such a large amount of advertising spending for the rest of 2010.
I think it could be $450,000 incremental ads that go into the fourth quarter, and I don\'t think you\'ll see a much larger number from incremental ads.
Elizabeth Pearce-Rose capital partner, but if we just look at the fact that you didn\'t have the same campaign the year before, what I really want to be sure about is the components of G &, what we should think about is meaningful in the current business.
You add people, staff, any guidance you can direct to us will be very helpful.
Marc GrossmanAdvertising usually accounts for about 2% of sales, I think sales have risen to about 3% this year, and I think that number, our sales will increase to 2010, but I don\'t think this percentage is going to go up a lot, which is probably the best way to answer this question.
So it will be in the range of 3% to 4%.
Elizabeth Pierce-Rose capital partner, then total G &?
Marc GrossmanWe did not give much guidance on this as we will open a lot of retail stores in 2010 and you already have all the pre-
Opening fees, etc.
So we did not give specific guidance.
I think we closed this year for 38%.
I think the goal is to maintain relative stability in 2010.
What is the difference between the gross profit margin of Elizabeth Pierce-rose Capital Partnership, non-cowboy and T-shirts?
If we reach 40% on a mix basis, or 50% on a mix basis over the course of the year, Marc GrossmanIt is basically right now, and what I would say is, relative to our cowboys, it could be five to seven points lower.
So if you model the company in 2010, it will be one of the current trends, but, of course, one of the rising trends we will face is retail expansion, this will begin to become a more important part of gross margin.
Elizabeth Pearce-rose Capital partner when you look at the performance in 09, I realize that this may be affected by the current economic environment, but whether it\'s the outlet or the whole line, are their performance consistent with the indicators you set earlier?
They\'re mark grosmanis.
For us, the business of the four walls, in general, these stores are above the balance of payments business, I think now, the business of the four walls is between 15% and 18%, in this range
But what we have seen on our comps is proof of these stores, our comps have grown significantly, we have posted some information about this, but we have seen 40% comp numbers
So when we look back on 2010, our profit margins will rise significantly.
Your next question comes from [
Spencer Capital Management[
Spencer Capital Management
I would like to ask you, in terms of your long-term target profit, just because of the high-end retailers, where do you think these profits can reach, do you have some dominant niche in certain categories.
We seem to see that pre-tax numbers are attracted by high adolescent rates.
So, where do you think you can do this in the next two or three years?
Our target is 30%, 30% EBITDA profit margin, so that\'s where we\'re looking and we feel we\'re approaching that number. [
Spencer Capital ManagementHow many years? Five years?
This is very positive relative to the low teens you are doing now.
When we saw that number, we saw the company that was up 40% again.
In the absence of an increase in wages or rent, these companies are 40%.
So this is the two biggest costs you have for SG & A, so everything else starts to fall to the bottom. [
Spencer Capital Management
I \'d love to see it.
Can we talk about the new category, did you say that your new category accounted for the percentage of revenue in the fourth quarter.
Mark Cross Manno, we don\'t.
We mentioned this a bit.
It\'s about $1.
8 million out of $25. 2 million. [
Spencer Capital Management
Is that leggings and shirts?
Marc CrossmanYes, the leggings inside and the rest of the shirt. [
Spencer Capital Management
You said, did I hear it wrong? you said you only shipped it for a month?
Yes, there\'s Mark Crossman on the leggings. [
Spencer Capital Management
So it only took a month.
How does the new year continue?
Marc CrossmanWe was founded basically in the first month of November.
When we went into December, this initial setup, the rest of the product was released at the end of the setup, for example anthropology, and we were unable to ship them in November, but we showed them their initial gear in December.
So actually, November and December are the time frame for everyone to get their initial stock.
Compared to the business, about 25% of the sales we see now are driven by the legs, so that\'s what we really want in terms of stock-to-sales ratio for all our major customers[
Spencer Capital Management
Did I hear it wrong?
Do you want this year, or do you think this year\'s leggings account for 20% to 25% of your total revenue?
Is this a fair translation?
Marc CrossmanIt will not be part of our total revenue.
First, obviously we think there will be a slowdown in summer.
The second point is that this is all our major.
So if you really look at our business carefully, you have to pull out our specialty stores in our domestic women\'s business.
When you look at our total revenue figures, it will be relatively moderate. [
Spencer Capital Management
I don\'t think anyone has much experience with these new denim leggings, can you explain to me the seasonal slowdown in September? I mean, summer?
Marc CrossmanIt is basically a product that we think is more suitable for spring and fall than for summer.
What we see in the summer, even our denim slows down relative to other businesses, and we start to move into the realm of shorts and crops. [
Spencer Capital Management
To be fair, most of this quarter was driven by high-end luxury denim fabrics, just a slight rebound from last year?
I don\'t know how to explain it.
Marc CrossmanI can\'t talk to other people\'s business, but our business, you make a good point, yes, the increase in retail sales is helpful, yes, we have some leggings and new products.
But the main factor driving our business is denim fabric, our denim fabric not only performed very, very well in fashion denim fabric, but also performed very well in our core infrastructure projects.
I think we got a little bit of help too, because the retailer\'s inventory levels entering the holiday season are so low that we have the ability to quickly shift through our core replenishment program and that\'s what we see.
Our core supplementary plan is very well implemented.
That said, it\'s not just because the retailer\'s inventory is low;
Our stuff is sold in the retail market, so I\'m sure I\'ll tell you that our cowboys are our bread and butter and are doing very well in the fourth quarter. [
Spencer Capital Management
In terms of leggings, do you have a target for revenue this year or next, or where do you want to see this?
Mark crossmani can tell you what we see now.
We only have one and a half months and what we see is that it drives 25% of our business growth.
If we look at the numbers, if you look at our women\'s business, it may now account for 80% of our business, and in this range, our profession accounts for about 60% of the business.
The next question comes from Elizabeth Pearce-Rose capital partner.
Did Elizabeth Pierce-Ross Capital co-op book?
Is there anything else you can share with us other than spring?
Marc CrossmanRight is now on the wholesale side of the business, our backlog, again it\'s just the wholesale side, our backlog has increased by 29%.
Is the Elizabeth Pearce-rose Capital Partnership any specific product that drives it, or is it a full push?
Marc CrossmanIt is really comprehensive.
When we look at our business, our denim business is now strong and healthy.
All retailers see it, and we see it in the core foundation and fashion business.
We think we have a good portfolio in summer.
As I told you, spring\'s bookings are now up 29%.
Then our new product, we have two other categories, we are not going to discuss it now, but we will discuss it in the first quarter of the conference call, the research in this area is very amazing, many of them are based on our success in shirts and legs.
Elizabeth Pierce-Ross capital partnership can we infer one of these products as a derivative of the leg? Mark Cross Manno
We will have Jeggings but no, it will fall on our traditional denim fabric.
New products from Elizabeth Pierce-rose Capital Partnership.
Two new categories?
Mark Crossman
What is the status of Elizabeth Pierce-rose Capital Partnership and Jeggings?
Mark Kroger man we will have our wedding in April.
We will have a whole line of Jeggings.
We would have launched it with leggings, but we made a conscious decision that we really didn\'t want to start spitting.
We wanted to make a statement on leggings with real legs and really differentiate this product, so we thought it would be better to really go out with something other people don\'t have and stick to our Jegging program until April
Is the Elizabeth Pierce-rose Capital Partnership a denim clothing base or a Web base?
Denim fabric Marc CrossmanIts.
Just take our leggings off the elastic belt, put the zipper and buttons on it and put them in your pocket, that\'s what you have.
This is basically a very, very fitting pair of jeans, which is basically Jegging.
So it has hardware.
So it has a front zipper.
It has buttons.
It will have rivets.
We have pockets.
But you can think of it as a skinny pair of jeans.
You don\'t want to talk about these new categories until q1. Is it unisex?
Please stop.
Leave some excitement for q1.
When is Elizabeth Pierce-rose Capital Partnership in the store?
The next two categories will not be universal for men and women, but distribution channels for men and women.
This shirt is versatile for men and women, but also sold through distribution channels for men and women.
This is the only female product.
When will these new categories of Elizabeth Pierce-Ross capital partnership be in the store?
Mark Crossman they will be in the store from the end of this month.
Elizabeth Pierce-rose Capital partner if I just do a quick calculation, the income is about $0 if we come up with a tax benefit. 03.
Hamish samtu is about $0. 03.
Elizabeth Pearce-rose Capital Partnership, which means there is a huge . . . . . . Mark crossmani believes that I think we had a tax rate of about 11% last year, so if you use the same rate, it will get you close to $0.
05, if you use like to pay like tax.
Elizabeth Pearce-Rose capital partner, but from the EBIT point of view, you will come up with a $3 million EBITDA.
In fact, EBITDA will be higher than this.
About $3. 1 million.
Our operating income is $3 million.
Hamish sandhuthe\'s quarterly profit margin was 12%.
Elizabeth Pierce-rose Capital partner in Europe, you said you would open more new stores and stores.
I can\'t hear it.
Is it all Lafayette\'s kitchen?
Mark Cross Manno is the two of them.
Plan now, I hate to say that because it\'s always on comp and takes longer, but we plan a lot of plans.
They got it wrong.
We have a store for three months.
About six months. we\'re opening on Year 01.
As far as the same thing is given to us, it is staggered everywhere, but it is much more than we have.
In terms of the breadth of the product, Elizabeth Pierce-Ross Capital Partnership, how many products are we talking about?
Each has a different size, but we have the opportunity to control the product ourselves.
So if we want to cut leggings, egg sets, boots, whatever we want to put, shirts, leather jackets, I just name our existing two categories.
This is our ground space.
The footprint of each store will vary.
Elizabeth Pearce-Ross Capital Partnership show are you deciding the appropriate classification?
Mark crossmana: We have a history of selling the best things in Europe.
Many of the trends we see here, such as returning to clean washing, are also staged in Europe.
So we know what works for us.
As far as styling is concerned, we will continue what we see in the United States. S.
Elizabeth Pearce-rose Capital partnership just had too much discussion about issues like price points for premium Cowboys, and I know you launched a softer price a year ago.
It\'s not necessarily a failure, but you\'re not necessarily excited about it.
Do you continue to believe that there is enough demand to support the high end of your price range?
Did the retailer not put any pressure on you?
What we\'re seeing is that some retailers bring some lower-priced jeans.
They really want to charge that $100 in.
00 price, $99.
Use denim to blow out at 00.
We saw $99.
00 is not from the brand, it will not explode.
So the girl who came in is shopping to buy a brand.
No matter how good the jeans are, she doesn\'t want to buy only a beautiful pair of jeans without labels.
We saw this for $99.
00 jeans were there and we saw it on leggings as well.
The price of our leggings is between $78. 00 and $98.
00, it comes from a brand and sells things that are crazy.
What we do, because obviously we are always aware of the price point and we do not want to lower the price point to that level in any way, shape or form.
We thought it completely changed the market you were playing with, so we provided the legs and it was very successful as it filled the gap and was a great gift giving project.
There are many reasons why it works, but this is the way we sneak into a lower price point jean or walk for someone who needs it.
Elizabeth Pierce-rose Capital Partnership, but it does not eat into the wire or fashion.
It\'s really hard to say Mark Crossman.
I give you two points.
At one of our major retailers, we actually sell as many leggings as we do during the holidays, and when we go back and look, our jeans don\'t fall.
So it\'s just a new level of business.
Now, will our denim double?
No, you can\'t say that.
Of our biggest other customers, we saw it drive 25% of the business, but our denim fabric reached double digits.
So we don\'t see the phenomenon of cannibalism.
Will the numbers be better?
No one can answer the question.
All we know is that our denim is very strong and then we sell it in layers on this new business and the sales are very good.
What color does this leggings sell best?
You ate a lot.
We ate a lot.
We started 26 different treatments.
The best to sell is black, red, and then Indigo; very basic.
To make the presentation look really good, a lot of the other stuff is top-of-the-line buy or color fill.
But it makes sense.
If you go out and buy the first pair of leggings, you will want to be a little more basic and a little more exciting to buy the second time.
Elizabeth Pearce-rose Capital partner based on this, what do you see in the fall crystal ball when leggings may appear again, do we see a wider assortment, or do you think
There is no doubt that Mark Crossman.
Even in the spring, we continue to innovate and introduce new toiletries. Put on new treatments for leggings, but what I think you\'ll see is that the number of things we\'re buying and storing will increase relative to the basics.
I think you will see in the fall that you will have better sellers with something more extreme.
Your next question comes from [
Richard milanski-Matt Communications[
Richard milanski-Matt CommunicationsCongrats.
Huge quarter, huge year.
I just want to know what kind of sales you would like to add in the international market.
You said you would open more stores.
How many shops do you have to open at this point?
We haven\'t discussed it yet in the international market, but it\'s a double-digit number. [
Richard milanski-Matt Communications
If you have to make an estimate on this, what kind of potential sales do you expect in the international market next year?
Marc CrossmanWe pulled out of this year for around 7%-8% this year, and I think next year, the hard part is that this is a small part of our business right now.
There is a lot of room for growth at home, so I expect that we are excited about this growth at home, so it will be difficult to move the needle from a percentage perspective.
You will certainly see growth.
It is difficult for us to grow our international business faster than domestic growth, because all these new product categories, in fact, they occupy a place for us in the United States. S.
And then our distributors really started using it as the next floor.
We saw this on the shirt and the first delivery for all our holidays was almost $ 100%S.
But when we entered the spring, they saw our success in this area and they started to order a lot of products.
So this is one thing, it will hold this percentage too large in one direction or another.
No further questions.
I would like to hand over the phone to mark if there is any closing remarks.
Mark crossmani thanked everyone for the call.
We look forward to getting back to you after the first quarter, if you have any questions during this period, please feel free to call us. Thank you.
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