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Jones Group Shares Tick Ahead Following Earnings

Gross margins and cost controls drive improvement at the apparel giant.

NEW YORK — Shares of The Jones Group Inc. climbed 3.3 percent Wednesday after the apparel giant reported better-than-expected second-quarter profits driven by improved gross margins and cost controls.

The company said income attributable to Jones for the three months ended June 30 rose 55.8 percent to $8.1 million, or 10 cents a diluted share, from $5.2 million, or 6 cents, last year. On an adjusted basis, excluding charges related to the impact of severance, asset impairments in retail locations to be closed and other restructuring activities, EPS was 22 cents, compared with 33 cents a year ago. Analysts were expecting EPS of 7 cents on revenues of $867.1 million.

Total revenues for the quarter decreased 3.7 percent to $854.8 million from $887.4 million. That included a 3.7 percent decline in wholesale sales to $844.3 million from $876.7 million. Licensing income was down 1.9 percent to $10.2 million from $10.4 million. At retail, domestic revenues fell 9.5 percent to $150.6 million from $166.5 million. In the international retail segment, revenues jumped 82.2 percent to $97.3 million from $53.4 million as the firm received a healthy boost from its Kurt Geiger acquisition last year.

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Shares of Jones closed Wednesday at $9.90 in Big Board trading, compared with $9.58 the previous day.

Better cost controls, such as tighter inventory levels at Jones’ own outlet stores and improved gross margins, were factors that helped the company surpass analysts’ expectations. Gross margin for the quarter improved to 38.2 percent of sales compared with the year-ago quarter’s level of 36.4 percent.

Executives participating in the conference call to Wall Street said the firm believes it can improve margins by 70 basis points or more for the full year.

Wesley R. Card, the firm’s chief executive officer, told analysts during the call, “As we undergo a significant transformation in our core brands, we’re completely focused on product enhancement and innovation so that all of our products are modern and relevant. This complements the implementation of a fresh and strong approach to the brand management.”

In the quarter ended, footwear and accessories, jeanswear and casual sportswear were the strong categories, while traditional sportswear remained challenging.

For the fall product offerings just hitting store floors, Card said there’s been positive initial reaction to the jeanswear, footwear and accessories lines. It was too soon to get any reaction to the sportswear collections, which should be hitting store floors over the next two weeks.

Card told WWD the primary Jones New York and Anne Klein sportswear lines will see improved styling and fabric upgrades in the fall product offerings at “really good price points.”

Jeanswear is expected to do well, given the early reaction to L.E.I. and Gloria Vanderbilt. While there’s already been so much color in the category, Card said interest in denim is not likely to abate anytime soon.

“There’s heavy emphasis on printed jeans, with different prints, such as animal skin and other prints. It gives a different texture and look to the jeans,” Card said.

For now, Card is optimistic about the consumer, noting that she “seems to be spending.” He’s also bullish on back-to-school, noting that the juniors customer is expected to buy more this year.