By and  on May 3, 2007

Jones Apparel Group plans to trim its brand portfolio — and Norton McNaughton and Erika could be among the first to go.

The company, which posted a jump in first-quarter earnings on Wednesday, said it plans to eliminate $300 million in business in the moderate sportswear sector by yearend, but will remain in the category with a limited number of labels that will provide a bigger margin boost to the bottom line. Management did not disclose which brands would be eliminated, but industry sources said Norton McNaughton and Erika were on the block.

"What's most important for us is to start 2008 fresh and to do [that] we need to remove that low-margin business, obviously, from our operating statements," said Peter Boneparth, president and chief operating officer, during a conference call to Wall Street analysts. He did not disclose which businesses the company would sell because of ongoing conversations with retail partners regarding strategies for those labels. Aside from Norton McNaughton and Erika, several analysts and bankers believe Evan-Picone could be sold, although at least one banker believes the label is a candidate for licensing. A decision to drop the Norton McNaughton business would be ironic given that Boneparth ran that company until selling it to Jones, which is what brought him into management of the group.

"It will play out in a variety of different ways, depending on the brand and the customer base," Boneparth told WWD. "It could involve an outright sale, a license or [even] be discontinued entirely. It's too early to tell. However, we will not be leaving the moderate business entirely."

Boneparth declined comment on Barneys New York, which is said to be on the market. As reported in WWD, there's been strong interest from potential buyers from the Middle East. Banking sources said discussions are ongoing.

For the quarter ended April 7, net income for the company rose 85.3 percent to $47.8 million, or 44 cents a diluted share, from $25.8 million, or 22 cents, in the same year-ago quarter, when profits were depressed by retail consolidation. Excluding certain charges for severance and restructuring, earnings per share were 50 cents. Analysts were over-optimistic, however, expecting 60 cents a share.

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