One of L.A.’s hottest premium denim makers owes much of its success to … aprons?

Before it ever started making pants, Joe’s Jeans Inc., which has hit its stride with $150 jeans despite the slow economy, was a top producer of aprons, canvas tote bags, and other inexpensive and unglamorous products.

Indeed, it was Joe’s Jeans’ solid footing in the knitwear industry that allowed the company to take the startup jeans brand and turn it into a force in the premium denim industry.

“The business has certainly come a long way in the last couple of years,” said Elizabeth Pierce, an analyst with Roth Capital Partners LLC who follows Joe’s Jeans. “The company has evolved from a private label manufacturer for a lot of other companies to its own brand.”

The City of Commerce company has since shed its other product lines and now focuses exclusively on jeans and accessories, which can be spotted on both stylish celebs such as Katie Holmes and Beyonce, and billboard ads around town.

But while the snug and comfortable pants have been popular for several years now, only recently has the company been a hit with investors. The stock reached a two-year high of $2.39 last week only six months after the company was almost delisted from the Nasdaq in September. At the time, when shares traded for little more than a quarter; investors apparently were less than comfortable with a barely profitable company making a pricey discretionary product during a grim recession.

But investors have been buoyed of late by surprisingly strong fourth quarter earnings as the economy picked up. The company reported record revenue in excess of $25 million, up 42 percent from a year ago, while operating income was up 164 percent to nearly $3 million.

Meanwhile, Joe’s Jeans is opening up retail stores at a healthy clip and is branching out into related apparel, including leggings and shirts. New products accounted for $1.4 million in revenue last quarter.

The stock is no longer in violation of Nasdaq rules and Chief Executive Marc Crossman expects shares to continue to rise now that earnings match the strength he sees in the brand.

“We’ve been able to bring the financials up to where the brand is,” the 38-year-old executive said.

Aprons to pants

The company’s predecessor, known as Innovo Group, was far from high fashion: It made its money producing aprons and similar products for retailers such as Wal-Mart.

In 2000, Innovo, which was headquartered in Knoxville, Tenn., relocated to Los Angeles and began producing knitwear for retailer J. Crew. The company expanded private label operations and its licensee business, making clothes for retailers and brands such as Mossimo.

“Over the years,” Crossman said, “we’ve done a multitude of different things.”

But that was not always such a good thing. The product lines lacked any synergy and in the private label business, Crossman pointed out, “the margins were razor thin.”

In 2001, veteran L.A. clothing designer Joe Dahan started his eponymous line and inked a deal with Innovo to produce the goods. Innovo also dabbled in other high-end brands, producing premium denim for Betsey Johnson’s line beginning in 2004. The deal was arranged by Innovo shareholder and premium denim trailblazer Paul Guez, but fell apart after little more than a year when sales faltered.

(Guez, who parted ways with Innovo not long after, founded Blue Holdings Group, which has seen its premium denim brand Antik struggle in the ultracompetitive industry.)

In the ensuing years, Innovo shed its other licensed brands and in 2007 decided its future was with Joe’s Jeans, acquiring the brand for $17 million and adopting the new name. Dahan is the company’s single largest shareholder with 21 percent of outstanding shares, but it’s Crossman, who joined Innovo in 1999 as a director and became chief executive in 2006, who Pierce considers instrumental in turning a hodgepodge company into a leading premium denim maker.

“One of the things that he spent the first few years doing as CEO was getting the house in order,” Pierce said.

To save costs, the company in mid-2008 moved manufacturing operations from Los Angeles to facilities in Mexico and Morocco. At the same time, the company began adding more fashion details to the jeans, including hand-stitching.

Alex Guney, manager of the Blue Jeans Bar, a boutique in Santa Monica that sells more than 20 different brands, said Joe’s Jeans is popular among customers for its high-quality denim, good manufacturing and fit.

“They sell really well,” Guney said. “Joe’s is a brand that has a strong following. People come in and ask specifically for them.”

Retail expansion

While the jeans are sold mostly in boutiques and department stores, Joe’s Jeans is building a network of company-owned stores.

In October 2008, as Crossman was helping to improve the brand, the company opened its first retail store – in Chicago – and added a second location shortly thereafter. Last year, the company opened four more, and just last month, executives signed leases with Simon Property Group to open nine outlet stores across the country. The ambitious retail expansion likely won’t end there. Crossman said the company hopes to have as many as 50 retail stores by 2013.

“We see a lot of growth in front of us,” he said.

Indeed, with the recent retail expansion, the company has grown its employee ranks to 150, up from about 100 last year. Pierce believes the company will be able to finance the expansion out of its cash flow and a line of credit. Joe’s Jeans had $13.2 million in cash at the end of the year and relatively low debt.

Ilse Metchek, president of the California Fashion Association, said despite the proliferation of premium denim brands in recent years, only a handful have had staying power, including Joe’s Jeans, 7 for All Mankind and True Religion.

And while many small brands sell mostly online or in a select few boutiques, those that are most successful, she said, are the ones opening their own stores.

“The brick-and-mortar is still the king,” she said. “The ones that are successful are the ones going into retail.”

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