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Joe's Jeans (JOEZ -19.4%) is having a rough go of it Tuesday after reporting Q2 earnings and...

Joe's Jeans (JOEZ -19.4%) is having a rough go of it Tuesday after reporting Q2 earnings and announcing the $97.6M acquisition of Hudson Clothing Monday evening. Roth Capital (PT $1.60 from $2.50), B. Riley (PT $1.65 from $2.15), and Sidoti all cut the shares to Neutral today following the news.
Comments (2)
  • Nitin B. Sharma
    , contributor
    Comments (159) | Send Message
     
    I traded in and out this stock last year. So, I have some knowledge of this company. I was very surprised by their acquisition of Hudson for two reasons:

     

    (1) Paying $100M to buy growth, which by the way is in itself very transitory in nature in the fashion world, when the company has only $13M in cash and a total of ~$50M in assets?
    (2) Never was acquisition a part of their growth strategy (as depicted in their investor presentation from last year). This change in strategy seems to show that JOE's growth has slowed down substantially (also noted from their results). Not a good sign!

     

    Tread with this stock carefully.

     

    Best, Nitin
    16 Jul 2013, 02:49 PM Reply Like
  • Garment Expert
    , contributor
    Comments (2) | Send Message
     
    The management of this company is really inept. They talk about the sales increases which is due to the sales force. But internally the company has lost control of its manufacturing costs. Where one makes money in the garment business is in the gross margin...the selling price less the price of the material in the product as well as the labor with some overhead allocation. It is here in the gross profit that the company is negligent. The company could now be in financial difficulty as a result of the acquisition and the major costs in both management and finances associated with it. It shall be more than 2-4 quarters before any investor may have future optimism for this company.
    16 Jul 2013, 04:19 PM Reply Like
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