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Jones Profits Up 2% in Third Quarter

Jones Apparel Group cited high gas prices and soft consumer spending for a 2 percent quarterly profit rise, as sales gained 9.8 percent to $1.3 billion.

NEW YORK — Higher gas prices and muted consumer confidence held Jones Apparel Group to a 2 percent rise in third-quarter profits.

Net income for the three months ended Oct. 2 came in at $95.8 million, or 77 cents a diluted share. This compared with $93.9 million, or 71 cents, a year ago. Sales for the period picked up 9.8 percent to $1.3 billion from $1.18 billion a year earlier.

Business has improved since the quarter ended, the firm said, when weather became more seasonal and stores in the Southeast were unencumbered by hurricanes.

“Foot traffic is clearly up in our retail stores,” president and chief executive officer Peter Boneparth said on a conference call, noting wholesale accounts have had a similar uptick in traffic “over an absolutely dismal September.”

Jones softened the ground for the tepid increase with a profit warning earlier this month. Accordingly, the stock traded up $1.10, or 3.2 percent, on Wednesday to $35.60 on the New York Stock Exchange.

Jones wasn’t alone in overestimating the season. Kellwood Co. last week said its profits in the third quarter ended Oct. 30 would come in 7.8 percent below a year ago at $28.5 million, or $1 a diluted share. Previously, Kellwood had called for earnings of $32.5 million, or $1.15 a share.

Like Jones, Kellwood blamed at least part of the shortfall on a consumer who was constrained by high gas prices and poor weather. Kellwood also said it had missed the mark somewhat in some of its fashion offerings and would not get some of its brands completely back on track until fall 2005.

The grumblings by the vendors about the consumer were borne out in The Conference Board’s Consumer Confidence Index, which fell this month to 92.8 from 96.7 in September. The forward-looking Expectations Index slid 5.9 points to 92.

Liz Claiborne Inc., which reports on its third-quarter results today, has not adjusted projections.

Jones’ revenues in its wholesale better-priced area increased 6 percent for the quarter, with the Jones New York Signature brand adding $58 million, and Kasper and Anne Klein together adding $104 million. Signature was launched in spring and Kasper A.S.L., which included the Anne Klein name, was acquired in December.

“The wholesale better apparel business remains a very exciting and important category for the department store, and therefore is exciting and important for us,” Boneparth said. “It continues to be the bedrock of this organization.”

Jones helped spark a rush to the better arena last year when it returned control of the Lauren by Ralph Lauren brand back to Polo Ralph Lauren Corp. and launched Signature.

“There have been a lot of new entrants that have generated a lot of enthusiasm for the consumer, but I would say that results from that competition were at best mixed,” Boneparth said.

Names new to the department store realm, such as H Hilfiger from Tommy Hilfiger and Realities by Claiborne, had some trouble getting on their feet. Signature, on the other hand, has been identified by buyers as one of the better floor’s stronger performers.

For 2005, Jones is looking for a 1 to 3 percent sales rise from its better business.

The wholesale moderate business has also grown with the relaunch in Sears of A|Line, an Anne Klein subbrand, and the expansion of Bandolino into casual sportswear, denim and dresses for spring 2005. Jones, along with others in the industry, has adjusted its stance toward the business to avoid too much sameness at retail.

“We have strived to change the model, to move toward differentiated product, to give retailers value, give them something they actually can call their own, that they don’t have to promote day in, day out against their competition,” Boneparth said. “The early returns on that are very, very good. Our sell-throughs on the new brands are terrific.”

For the nine months, Jones’ profits slid 6.7 percent to $267.7 million, or $2.11 a diluted share, from $286.8 million, or $2.15 a year ago. Sales advanced 5.1 percent to $3.57 billion from $3.4 billion.