NEW YORK — Peter Boneparth and Jones Apparel Group will be parting company when Boneparth's current contract expires.
Boneparth, chief executive officer and president of Jones, and the company have agreed not to extend his contract past March 31, 2009, according to a regulatory filing with the Securities and Exchange Commission.
The briefly worded document, on a Form 8-K, was filed March 27. Boneparth and Jones each delivered a "non-extension notice" to the other regarding Boneparth's employment agreement. Boneparth will continue as president and ceo through March 31, 2009, the end date of the existing contract. Had they agreed to an extension, Boneparth's contract would have been extended by one year.
Company executives have declined comment.
In a separate SEC filing, also on March 27, Efthimios Sotos, chief financial officer, resigned and was succeeded by Wesley Card, who once held that post before becoming the firm's chief operating officer.
During Boneparth's tenure, the company has had several notable successes and challenges, including:
-- Sales that have fluctuated between $4.6 billion and $5 billion over the past three years, as Jones absorbed several high-profile acquisitions, including Nine West, Anne Klein and Barneys.
-- A failed attempt to sell the company. Jones Apparel hired Goldman Sachs last year to shop the company around. Bids came in, but were too low, according to financial sources. In August of 2006, Boneparth said the "board has concluded that at this time, the best alternative to maximize long-term shareholder value is to continue executing on the company's strategic business plan."
-- A decline in the moderate market, which has challenged the company's ability to deliver robust earnings. In 2004, Jones posted net income of more than $300 million (and operating income of $528 million), but by 2006, the bottom line bottomed out with a loss of $144 million (and an operating loss of $166.7 million).
-- Challenges in pursuing acquisitions to grow the business. Boneparth told the WWD/DNR CEO Summit as far back as 2003 that smaller acquisitions — of less than $100 million — could be difficult to justify. "In our world, at that level, smaller deals really just don't move the needle," he said. "It probably comes across as arrogance, but it's really not. It's reality."-- On Jan. 22, 2006, Polo Ralph Lauren Corp. and Jones reached a settlement over the lawsuits each had filed against the other in 2003. As part of the agreement, Polo paid Jones $355 million to buy back the Polo Jeans business of women's and men's casual apparel and sportswear in the U.S., which was licensed to Jones. The dispute was one of a series of entanglements between the firms that began when an unconventional Boneparth abruptly sued Polo — one of Jones' biggest licensors — for breach of contract.
-- Barneys New York, which has been a bright spot for the company. In Jones' most recent quarter, the chain has posted double-digit comps on top of same-store sales gains a year earlier. The shop for the well-heeled consumer has more than doubled in size since Jones became its parent in 2004. Barneys is planning to hit its goal of $1 billion in sales by opening more flagships and smaller Co-op contemporary units. Jones upped its capital expenditures budget for Barneys last year to more than $60 million from $18 million in 2005, according to financial sources.
-- Earlier in the year, independent board members Allen Questrom and Anthony Scarpa left the board. Questrom, known for his ability to turn around retail operations, joined Lee Equity Partners, a private equity firm Thomas Lee founded after leaving Thomas H. Lee Partners, the buyout firm he formed in 1974.
Staying on the board would have been a conflict of interest for Questrom. A source close to the company said Scarpa elected to leave the directorship for personal reasons so he "could spend more time traveling with his family." Scarpa was a senior vice president at J.P. Morgan Chase & Co. at the time of his retirement from the banking firm.
Amidst these ups and downs, the recent management changes (and Boneparth's and the firm's mutual decision not to extend his contract) at Jones have raised some questions from the investment community.
According to equity analyst Virginia Genereux of Merrill Lynch, in a research note from March 29, "Management attributed [Sotos'] resignation to personal reasons and said there are no accounting issues or other financial improprieties involved."Brian McGough at Morgan Stanley wrote in a research note issued March 28, "While we're unsure if this news [regarding Boneparth] was sparked by changes to the underlying business, we still point out that Jones had its highest profile board member (Allen Questrom) and its cfo leave within five weeks of one another. We can't imagine that this happened because the company's prospects have turned for the better."
McGough added, "We maintain our view that even with a change in management, [Jones'] challenge is that its brand investment base has been managed down over the past five years, which gives the company little to stand on as the industry's margin structure hits a negative secular inflection point in 2007."
Jeffrey Edelman, an analyst at UBS, wrote in his note Monday that the departures of Questrom and Sotos "do not discredit the turnaround which appears to be gaining momentum."
He also noted that better apparel appears to be accelerating and that Nine West footwear is gaining additional floor space in department stores driven by stronger product offerings. "At a time when some are having issue with Jones, we believe the turnaround is in progress."
Jennifer Black, an independent research analyst of the firm that bears her name, said, "I think that the businesses at Jones are improving. The company is analyzing every aspect of its business, which is the right move in today's world. I would not be surprised to see the company sell out at some point at a higher price than the $32 per share last summer when they walked away from a potential deal, or even higher than the $38 that the board sought when the company was first put up for sale in March 2006."
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