By  on February 11, 2009

Jones Apparel Group on Wednesday reported a net loss of $822.9 million for the fourth quarter — but its shares soared almost 10 percent anyway.

The reason the shares went one way while earnings were headed in the opposite direction? The results beat Wall Street’s expectations and analysts applauded Jones’ strong balance sheet and drive to expand into areas including private label. Because of these factors, president and chief executive officer Wesley Card believes Jones is well positioned despite the recession.

“Our brands really fit in with where the consumer is shopping. They are trusted value brands at good price points. It’s a tough time, [but we’re] in a good spot,” Card told WWD.

The company warned Wall Street last month that quarterly results would be hit with a substantial impairment charge, and its net loss of $822.9 million, or $10.08 a diluted share, also reflected deep discounts and promotions by retail customers over the tumultuous holiday period.

However, stripping out impairment and other charges, adjusted earnings per share came to a loss of 4 cents a share, 1 cent less than analysts’ consensus estimates. Wall Street applauded the results, and Jones’ shares closed Wednesday’s New York Stock Exchange session at $3.58, up 32 cents, or 9.8 percent.

The deficit for the three months ended Dec. 31 came against a loss of $89.8 million, or $1.06, in the year-ago quarter and included an $813.2 million charge for goodwill impairment. Boosted by the introduction of its L.E.I. brand at Wal-Mart stores, total revenues inched up 1 percent to $846.9 million from $838.5 million. In its retail unit, comparable-store sales were down 6.1 percent and fell 6.4 percent last month.

Card told Wall Street during a conference call, “Virtually all retailers concentrated on promoting and moving inventory, and we did the same thing in our own chain of retail stores. On the positive side, it’s evident that unit sell-throughs were up significantly, but this is a good thing [because] it is essential that inventories have cleared and remain under control in this environment.”

He also told analysts that consumers are still “very much in a buy-now, wear-now mode and more than ever buying only items they truly need.” The company believes it is well positioned for fall in suits and dresses.

Jennifer Black, analyst at Jennifer Black & Associates, observed, “Jones is offering merchandise to wholesale accounts at higher initial markups, with enough cushion to allow for additional markdowns while still protecting margins. Jones is able to do this without raising actual prices of merchandise because it has seen reductions in its own costs of sourcing and transportation costs.”

Despite the tough retail climate, Jones has some breathing room, with ample cash and limited debt. The company recently completed a $600 million amended and restated bank credit agreement. According to John T. McClain, chief financial officer, Jones ended the quarter with $338 million in cash, an increase of $35 million from a year ago. The company’s debt balances remain at $780 million, unchanged from last year.

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