Money McBags wanted to get to the JOEZ earnings release today because as you all remember after their last Q when the stock was trading ~$1.80, Money McBags broke JOEZ down and said he wouldn’t pay more than $.90 for them and well, after their quarterly release on Friday they dropped ~25% to $1.10, so jizzzzzzzzzzzzzzzzzzzz.  Seriously, with TMRK, DTLK, NEI, and RICK all killing it in the last few weeks and now with SAAS about to break out, Money McBags is making it rain as if he were Tlaloc or as if he were a zombie Chris Henry at a Rick’s Cabaret.  Money McBags has been on more fire than Charlie Sheen’s dick (and not just because Mr. Sheen likely has gonorrhea) so hopefully you’re all riding this fucking wave with him because all good things must come to and end (though if it is Jessica Biel’s end, then that will certainly be a good thing) so just allow Money McBags this last paragraph of self-fellation.

As for JOEZ Q, well, it was more fuckawful than a Charlotte Bronte anthology or getting a butt implant from someone called Black Madam (perhaps that should have been the warning).  Money McBags has always admired this company’s ability to grow revenue while shrinking earnings, but in this Q they managed to both shrink revenue and shrink earnings, so who said you can’t teach a dog of a company new tricks?  Below are Money McBags’ thoughts on the Q:

1.  Revenue at JOEZ was down with their core customer proving that shrinkage isn’t just something that happens when you dive in to a cold pool wearing only a pair of Brixtons.  That’s right, revenue was down 7% led by a double digit drop in their core women’s business because jeggings turned out to be a shorter fad than MySpace or palm pilots.  Topline fell from $25.2MM to $23.6MM and this has always been the main problem with a company that sells overpriced trendy shit, and that is that once you miss a cycle, you are more fucked than Alexis Texas in Need for Seed.  And the thing is, this company sucked even before they missed the cycle because their management team hasn’t figured out how to manage simple things like costs, cash flows, and not screwing shareholders (as their terrible buyout caused a tax rate more inflated than Whtney Tilson’s ego, and nice job there Whitney on NFLX, really, perhaps you could lead with that next time you headline at the Value Investor’s Conference where the scent of hubris is think enough to choke a whale).

2.  Gross margins were deceptively flat:  Yeah, gross margins surprisingly held up at 49% even as JOEZ saw pricing erosion across the board as they had to liquidate the fuck out of shit to get it off the shelves.  Of course the good analyst would ask “are those real?” while the better analyst would ask “how the fuck did gross margin maintain if in both of their segments there was gross margin erosion?”  Simple, volume.   Actually, their higher margin retail segment just became a bigger part of overall sales as they increased their unprofitable stores from 6 to 17, and that segment has 60% margins (for now) vs. 40% margins for the retail business.  The key takeaway from this is that 1.  Of course they were fake and 2. the entire business is eroding except for their men’s business and here is a little secret, MEN HATE FUCKING SHOPPING, so if they are counting on their men’s business to be some sort of catalyst to lift them out of the doldrums, unless they start giving away free blumpkins from India Reynolds with their overpriced jeans, that’s probably not a great long-term strategy (like using your real email address when cheating on your wife).

3.  They continued their spurt of unprofitable growth:  New stores were up from 6 to 17 but their retail segment lost $145k vs. only $45k last year.  Ok, ok, Money McBags knows there are start up costs associated with new stores so that bottom line may be more deceiving than Alexis Arquette‘s, but their same store sales for stores open for a year were down 5% and their average revenue per unit was down 13%.  Holy shit does that suck.  So basically, if they hadn’t opened up 11 more stores, their revenue would have been down another ~$2.6MM (since retail revenue was up from $1.6MM to $4.1MM and that $1.6MM was down 5%) which means overall topline would have been down 20 fucking %.  Shit, do you spell YIKES with one “we’re fucked” or two?

4.  How can Karen McBags get a facebook page and yet Money McBags can’t? And this has nothing to do with JOEZ, but it is very concerning.

5.  Cotton costs are still going up because despite all of Bernanke’s denials, inflation is here.  Now cotton isn’t a huge fucking part of their costs, but this needs to be watched (though not as much as this needs to be watched).

6.  Cash continues to be a concern:  If cash is King, these guys would be the court jester’s fluff girl because their cash balance went down by ~$6.8MM for the year and they only have ~$6.5MM left.  For the year, cash from operations was down ~$4.1MM though it was actually up in Q4, so good on them.  The point is, if they want to continue their unprofitable growth strategy of opening up new stores, and they want to keep updating inventories when their shit doesn’t work, they don’t have a hella lot of margin for error.  Money McBags would not be surprised to see these guys have to raise some kind of equity or debt in the next six to nine months, especially if sales continue to tank more than the ratings for Sarah Palin’s Alaska.

So what the fuck do we do here other than collect our winnings (and don’t forget to tip your analyst) and make sure there will actually be champagne in the champagne room?  The company just earned a whopping $.01 eps so we could say that is the new run rate and call this a $.04 company and Money McBags wouldn’t pay more than $.40 for that.  But, shit, let’s credit them for some growth and say best case scenario they figure out the next jegging (perhaps the bracon) and grow top line 20%.  Throw a 45% margin on that because inputs costs are rising, they still have inventory to clear, and the middle class’ wealth is shrinking faster than multiculuralism in France, then bump operating costs up 10% due to new store openings and just generally sucking at their business, and unleash a 55% tax rate because that is how they roll (dear shareholders, fuck you. love JOEZ Management), and you get $.07 in annual eps.  So in a best case scenario, and if Money McBags were feeling more generous than Bill Gates or Sabrina Deep, he would pay 12x for that and thus get to an upside scenario of $.84, still 27% below the closing price.

So we should be shorting the fuck out of this now, right?  Eh.  Shorting a $1 stock can be trickier than finding the right hole if you’re hella drunk and in a hurry because getting the borrow on shit that small can be ridonkulously difficult.  If you’ve been short with Money McBags, you’ve made the easy money so you might as well just cover your shit and buy some of those super cool jeggings (especially because they’re now all on deep discount).  If you’re feeling lucky, there is still money to be made here as Money McBags thinks this stock should be worth at most $.84, but you’re on your own at these levels as it just takes one good Q for people to get excited.  Remember, the first rule of investing is don’t get greedy and the second rule of investing is to remember rule number one.

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