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Jones Group Sales Outlook Disappoints

The economy in Europe and weather in the U.S. hurt company's first-quarter profits.

The Jones Group Inc. pinned disappointing first-quarter results on economic weakness in Europe and the impact of cold weather on sales of spring goods.

This story first appeared in the May 2, 2013 issue of WWD.  Subscribe Today.

The company, which recently undertook an effort to restructure its business, also said sales this year might miss Wall Street projections. The company is looking for revenues of $3.8 billion up to $3.95 billion, opening up some downside to the $3.95 billion consensus estimate from analysts.

Shares of the company dropped 5.71 percent to $13.20 on Wednesday.

Jones’ first-quarter net earnings totaled $500,000, or 1 cent a diluted share, and compared with losses of $1.2 million, or 1 cent, a year earlier.

 

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Adjusted profits of 15 cents a share were less than half the 31 cents earned a year earlier, but in line with projections from the company.

Jones is trimming down to boost profits and last week said it would shutter 120 stores, on top of the 50 that were already planned to go dark. It is also streamlining its wholesale business. All together, the restructuring is expected to boost profitability by about $40 million annually, with one-time costs of up to $60 million.

Revenues for the quarter ended April 6 rose 7.8 percent to $1.01 billion from $936 million.

“The cold weather did have a very negative impact on sales of spring merchandise in the first quarter,” said Wesley Card, chief executive officer, on a conference call with analysts. “While cold weather carryover seasonal product sales such as boots were very strong, new spring items including fashion apparel and footwear were weaker. Jeanswear, particularly long denim, bottoms and casual pants, sold well and that was evidenced by the strength in that jeanswear segment.”

In Europe, Card pointed both to cold weather and “weakness in economic conditions.”

 

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“In general, we’re maintaining our overall conservative approach to planning in the current economic environment and it still remains unclear how consumer discretionary spending’s going to develop in 2013,” Card said. “We certainly can react quickly as and if the environment improves.”

Richard Dickson, president and ceo of the company’s branded businesses, said the namesake Jones New York brand “has been the greatest challenge to our corporate transformation story and recent performance.”

After nailing down “go-to” elements of the line, such as denim and easy care looks, the company tried to go after a more fashion-forward crowd.

“With dramatic improvements to our design capability in place, we sought to improve the performance of the fashion component of the brand by dialing up style and it didn’t work,” Dickson said. “But we learned from it. We learned that fashion only goes so far in this segment right now and that value is fundamental to the brand’s target consumer. We learned that Jones New York is valued for functional fashion and great fit. And most importantly, we have gained valuable understanding of the fact that Jones New York’s equities as classic American careerwear offer greater potential than we had imagined as a foundation for innovation and growth, particularly among the brand’s current loyal consumer base, women 45 and older who want to look fashionable.”

Card said the company’s sportswear product issues have been addressed and that performance would improve in the category in the back half of this year.