By Andria Cheng
Jones Apparel Group Inc. (JNY) said Wednesday its first-quarter
profit tumbled 98%, hurt by restructuring charges and lower demand
for most product categories as consumers cut discretionary
spending.
To bolster profit, Jones plans to shut 225 single-branded
underperforming stores, or about 20% of its store base, over the
next two years even as it continues to test and evaluate new
concepts such as the multi-branded ShoeWoo, said Chief Executive
Wesley Card in an interview. The company also has undertaken
additional cost-saving moves, including cutting an additional 375
jobs in the first quarter on top of the 185 previously
announced.
Jones Apparel said first-quarter net income fell to $300,000, or
less than one cent a share, from $19.5 million, or 23 cents, in the
year-earlier period. Revenue in the quarter ended April 4,
including licensing income, declined 8.6% to $891.1 million from
$975.4 million.
Excluding asset write-down costs, store-closing and other
restructuring charges, the company said it would have earned 28
cents a share.
Analysts, on average, estimated the company would earn 9 cents a
share, according to FactSet.
Profit excluding items exceeded Wall Street expectations due to
expense and inventory control. Card said orders from the company's
department store customers also "held well."
Margins were unchanged at 32.9% during the quarter.
"We are seeing signs of optimism," such as improvement in
consumer confidence, Card said. "Margins were solidified. We
dramatically controlled expenses. But we are being careful. We have
ways to go."
The company's shares were recently up 15.6% to $9.32
Jones Apparel said its department store customers cut orders and
demanded more markdown support in a continuing promotional
environment. Its own chains - Nine West and other retail stores -
likewise weren't immune to the economic downturn, as they posted a
10.6% decline in same-store sales, or sales at stores open at least
a year.
Jeans sales to other retailers, including l.e.i. at Wal-Mart
Stores Inc. (WMT), Gloria Vanderbilt at Kohl's Corp. (KSS) and J.C.
Penney Co. (JCP), were a bright spot, with sales up 3.4% because of
their low-end pricing.
The stores to be shuttered include Nine West and other
single-branded locations that are smaller, 1500-square foot
locations in less-traveled malls, Card said. He said Jones is "
committed to retail as a concept" and will plan to open more
outlets for ShoeWoo, which he said "is doing very well." The store,
currently with only one location in Menlo Park, N.J., carries the
company's various brands from Nine West to Anne Klein.
To spur demand, Card also has introduced New Balance for Nine
West at select stores under the two labels and will enter into the
fashionable, contemporary space with the launch of a label produced
exclusively for Macy's Inc. (M).
-Andria Cheng; 415-439-6400; AskNewswires@dowjones.com