Market Overview

How to Trade Joe's Jeans

Joe's Jeans (NASDAQ: JOEZ) posted better than average sales this year as compared to last. Share price for the clothing designer opened up this morning, dropped, and then rallied a percentage point from Friday's close.

Competitors at the revenue level and in the same market as JOEZ posted no gains, marking Joe's out as the strongest designer jean stock over the weekend.

Joe's Jeans make higher-end jeans that may be seen by consumers (in some income brackets) as luxury items. This may make the company vulnerable in a sluggish economy where consumers lack disposable income.

The company also follows typical clothing consumer cycles seeing increased sales at the beginning of fashion seasons, although with this relatively small clothing company, investors are perhaps accustomed to the pattern of sales, and seem unaffected by revenues that shift throughout the year.

While this stock has shown historically volatile investor confidence, the company, perhaps in its attempts to expand market share, has shown a tendency to hold more inventory in proportion to its sales. This has served to drive down the return on inventory (and implicitly turnover) in a consumer industry that generally thrives with high turnover.

This kind of performance could show a long-term weakening of the company, but it might also be part of broader strategy to expand in expectation of larger sales.

For comparison, competitor True Religion Apparel (NASDAQ: TRLG) posted share price declines on Monday.

ACTION ITEMS:

Bullish:

  • Joe's share performance seems to be pointing skyward with some price volatility.

Bearish

  • Long term trends could be pointing toward future declines in performance.
  • Competitor True Religion Apparel may see their market share reduced as Joe's Jeans tries to expand. Look for shifts in market share between these companies.

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

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