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NEW YORK — Despite one-time charges that hurt the bottom line, The Jones Group Inc. had a good third quarter as conservative inventory planning and operating margin improvement boosted results.
This story first appeared in the October 25, 2012 issue of WWD. Subscribe Today.
Net income for the period attributable to Jones shareholders for the three months ended Sept. 29 dropped 57.6 percent to $17.4 million, or 22 cents a diluted share, from $41 million, or 49 cents, a year ago. Excluding one-time charges and other adjustments related to foreign currencies, the company said adjusted per-share profits were 57 cents versus 48 cents last year. That bested Wall Street’s adjusted expectations by 25 cents.
Revenues were essentially flat, down 0.8 percent to $1.03 billion from $1.04 billion, which included a 0.5 percent dip in net sales to $1.02 billion from $1.03 billion.
By business segment, the best-performing category in the quarter was domestic wholesale footwear and accessories, which climbed 9.7 percent to $289.9 million. Domestic wholesale jeanswear was second, at an 8.1 percent gain to $202.3 million.
In contrast, domestic wholesale sportswear was the worst-performing category, with sales dropping 14.4 percent to $208.7 million, due in part to a planned reduction in shipments of Jones New York product and the change in the retail strategy at J.C. Penney. International wholesale sales fell 5.3 percent to $94.3 million.
For the retail businesses, the domestic retail segment — which includes Jones’ U.S. ready-to-wear outlets and its e-commerce sites — declined 6.7 percent to $140 million, offset by a 5.2 percent uptick to $89.7 million for the international retail operation. There were 100 fewer Jones U.S. stores in operation in the current quarter compared with last year.
In a conference call to Wall Street analysts, Wesley R. Card, chief executive officer, said, “I’m very pleased to note that our operating margin improved to 7.1 percent this quarter, which exceeds the 6.7 percent we recorded last year in 2011….Our approach to planning in the current economic and political environment is paying dividends. And we continue to plan conservatively as we proceed through 2012 into 2013.”
In a telephone interview, Card said the company’s jeanswear has been a “phenomenal business.” He attributed the performance to the design team for being ahead of the competition with product offerings, from both a color and fabrication standpoint.
Jeanswear for holiday has included more patterns and prints on colors. For spring, Card expects color to remain a dominant theme and that animal prints on colored denim will likely be strong sellers, as well as anything printed that is viewed as different.
About 21 percent of the firm’s business is international, and growing. According to Card, that’s also the segment that has held up well, particularly in Western Europe, despite what has been a difficult retail backdrop. The company’s business in Asia is still relatively small compared with that in Europe.
Stuart Weitzman was a top performer in the quarter with strong worldwide sales and good international comps, said Card. Its other top footwear and accessories performer is Kurt Geiger, which is London-centric and geographically where Card noted that the luxury consumer has started to spend again.
In Asia, Card noted that in the better zone, brands such as Nine West have continued to see some slowdown in sales, but emphasized that “business is still good.”
Card said the predictions for holiday indicate an expectation that it will be a “robust Christmas season.” The ceo noted the consumer has been resilient so far this year, adding that Thanksgiving will be early and the extra week will be a boost to holiday shopping.
Richard Dickson, president and chief executive officer of branded business at Jones, said, the company has more gift-giving programs for holiday this year, coordinating with destination products and key items that are part of the specific initiatives for each brand under the Jones portfolio.