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NEW YORK — The ghost of the Christmas just past visited Jones Apparel Group’s bottom line.
With higher markdowns and more off-price selling than expected, the vendor reduced fourth-quarter guidance Friday.
Earnings for the quarter ended Dec. 31 are now slated to range from 28 cents to 30 cents, well below previous guidance of 40 cents to 45 cents. Last year, the firm turned in fourth-quarter profits of 33 cents.
Chief executive officer Peter Boneparth said that, despite the detrimental impact on profits, the decision to move more goods through off-pricers helped keep inventories in-line.
“As good as things were in the first half, they became increasingly difficult in the back half,” Boneparth said on a conference call.
The challenging environment is anticipated to continue. The company reduced earnings projections for 2005 to a range of $2.75 to $2.90 from the $3 to $3.10 previously anticipated. That new guidance represents a 15 to 21 percent increase over 2004 projected earnings.
Investors reacted to the warning by trading shares of the firm down $2.30, or 6.4 percent, to $33.44 on the New York Stock Exchange Friday.
Jones will hold another conference call to give final results of the quarter and year on Feb. 16.
Part of the problem was that consumers didn’t get revved up about apparel and footwear, two of Jones’ bread-and-butter categories, until late in the season.
“Better apparel and footwear clearly were increasingly promotional,” Boneparth said. This prompted the stores to try to cancel their orders with the vendor, which pushed more goods to off-pricers. Since other vendors were apparently doing the same, an excess of supply kept prices down, even for the off-price channel.
“We continue to learn about the buying patterns in the fourth quarter, and most of our business is being very, very gift-driven, very item-driven,” Boneparth said.
January is also no longer purely a clearance month, with at least some consumers, armed with gift cards, picking up new fashions, he said.
Part of the quarter’s weakness came from the Jones New York Signature casual better collection, which first hit stores last spring.
“Our Signature business was not as strong as we would like it to have been, and I think it was less a reflection of the merchandise, but in the merchandising,” Boneparth said. “I don’t think we were gift-orientated enough. I think we were too collection-y, if you will. That is addressable and will be addressed.”
Accessories also proved to be a difficult area for Jones.
Barneys New York, which Jones acquired last month, has continued to show strength under its new ownership.
“We see absolutely no signs, even today as we speak, of the luxury market slowing up in any respect,” Boneparth said.
Even with the hiccup, which followed a warning in October, Jones said it was far from being financially strapped.
“We ended the year with $69 million of short-term borrowings and $331 million of outstanding letters of credit against our $1.5 billion committed bank lines, allowing us significant financial flexibility,” chief operating and financial officer Wesley Card said in a statement.