So, oil drops by 4%, very close to a new low. Talks of oversupply and $30/barrel rumors. Stock market is down 150 points...and Matador is almost green. Not sure what's happening, but I'll take it.
Silver Jeans did that, but the retail division was a separate company from the start.
Judging by Q4's numbers, may be more than a speed bump for the blue jean industry...more like hitting a wall. Joe's tried their hand at athleisure and it appeared to be working early on in the fall...seems as if a lot of retailers stocked it, but by February, it was very heavily discounted at places like Macy's and Lord and Taylor (around 75% off). Unfortunately, Joe's is known for one thing...jeans. They do that well, but everything else over the past 4 years (shirts, t's, else, athleisure) has failed. In the athleisure case, probably tough to break into a market with Lululemon, Under Armour and Nike.
If they never made the Hudson acquisition, they may have weathered the storm since they had $16M in cash to fall back on, but if denim doesn't pick up, it may have only been a matter of time, anyway. They got themselves in trouble with long leases for failing stores, and I don't know if their $16M in cash would've lasted long enough to get them to 2018 when the leases started to come to an end.
There just was never enough of a market for $150-$200 jeans for all of these stores. They should've remained a wholesaler (like Hudson), with maybe a small handful of stores as a showcase. I guess just a classic case of a public company trying to create growth that ultimately destroys the company. It will be interesting to see what becomes of other premium denim brands like True Religion, who has over 100 stores. Those have got to be bleeding red ink right now. It is pretty easy to find a pretty wide selection of premium denim deeply discounted (Amazon, Nordstrom Rack, 6pm), so there isn't any relief in sight.
I think the banks hold the cards now. If Joe's can't come up with a good explanation of why they lost $4M in Q4 (that does not include the one time write-off), I don't know why CIT would continue to issue them working capital. I think there's $13M left on the revolver, which is down significantly from the $20M they had 3 months prior. I would think they would cut them off and stop their losses.
If Joe's could prove they could at least come close to breaking even, they could be extended, but it appears as if one of the filings said that they didn't produce a business plan or 2015 earnings projection that they were supposed to. One of the many red flags over the past few weeks.
That's a pretty good guess with Nordstrom. The online site for Nordstrom Rack must've just opened recently. I had searched before but didn't find an online site until the last few months. It's great for Joe's shoppers, I bought quite a bit of stuff from them, but not so good for Joe's the company. Kind of hard for Joe's to sell their product at $150, when so many styles are available at $70-$80.
I don't think we'll ever get an explanation from Joe's on the quarter, it will remain an unsolved mystery. The stock price may bounce around for a while, hopefully the long-timers here will have an opportunity to save some of their investment. Sad, $16M in cash and no-long term debt was just a year and a half ago.
I would imagine the last Joez conference call ever was in October. The huge revenue drop Q4 is puzzling, especially when looking at their order book as of Nov 30, which is actually up almost 5% compared to last year. The only thing that could save them would be by explaining the drop was a one-time thing....but they've chosen to remain silent, which can't be a good sign.
You have to go to the 10-K, which you can find under investor relations at their website. You have to do the math to figure out the quarterly figures, it's just the annual report.
By the way, in the "too little, too late" department, Mrs. Dahan (the $175,000 a year consultant) was removed from the payroll in November.
To add to the mystery of the 4th quarter revenue miss, in the 10-K it states that their order book as of November 30th has increased from $44M to $46M YOY.
Q3- sales up low single digits
Q4- sales down over 20%
Q1- order book up single digits
kwaijhie suggested earlier that the drop in sales may have been a result of having a shortage of working capital, and not having product to sell, but inventory levels seem normal, finished goods is actually up.
Well, midway through the quarter Crossman reported that both men's and women's bookings "looked pretty good", so I guess we're left to assume that hermaphrodite sales must've really dropped off.
Take out the goodwill charge and looks like they wound up with $40M rev and $4.5M loss in net income or -.065 the last quarter. That's a 23% drop YOY in sales, even though they had an extra month of Hudson. I wonder what happened. People just stopped wearing jeans? Did a main customer cut ties? August quarter sales were up. Were the books accurate?
Wow. Same store sales don't look horrible for the year, it must all be in wholesale. If you go back to the last CC, Crossman said " our bookings actually looked pretty good going into the fourth quarter on the women side and the men side". And that was on October 9th, 39 days into a 90 day quarter.
When I first saw the cancellation, I thought..."Oh, no!.", but delaying it because resolution to the debt issue could be weeks or even days away doesn't seem like bad news to me. We shall see. I appreciate that they actually included so much detail in the news release. Rare for them.
Yeah, when we find out things like Jr's been making $240,000 a year as a consultant, it just makes me wonder what a fresh set of eyes could do for this company. I bet someone could come in and slash a couple of million off of that SG&A per year without much digging. That could go a long way to taking down the principal on those loans.
The sad thing is that they should've been aware that there was going to be a breach when the contract was written September 2013, which is probably why Crossman is gone. Those EBITDA guidelines were very difficult to reach considering the transaction expenses they incurred that first year, as well as the fact that CGS savings wouldn't kick in for over a year after the original transaction.
Well, first of all, just glad they're having what appears to be a normal conference call. While I think Q4 should actually be pretty strong, I've been shell shocked by previous news releases, so I feared that they would push back the CC to the last possible day (Feb 27th) and also announce that they weren't going to take any questions.
As far as the default issue, would be nice to get some clarity on what they're trying to do, but you're right, we may not get anything on that.
Yeah, some times I think too much is made of the timing, but interesting that it's the earliest Q4 report that I think they've had.
At least we'll finally get some questions answered, it's been a long time since the default announcement in early November. The floor appears to be open for questions, so that's good news.