Wesley R. Card is hanging tough at Jones Apparel Group Inc. — and it's not for sale.
Card, a 17-year Jones veteran who took over as chief executive officer in July after the departure of Peter Boneparth, has a three-pronged business focus: people, product and execution — in that order. Every employee now has the slogan on repeat as his or her computer screensaver, the ceo said Tuesday, nodding to the terminal in his Manhattan office. He believes in the company's core brands and the wholesale model even as department stores and wholesale competitors cope with a challenging economic climate.
"I'm not a designer and not, technically, a merchant," said Card, Jones' former chief financial officer. "But I can see the difference between a good product and a bad product....Our goal is just to be the best supplier to retailers."
Third-quarter earnings for the $4.74 billion company, which are being released today, show that, for the three months ended Oct. 6, profits increased to $400 million, or $3.97 a diluted share, from $63 million, or 56 cents, in the same period last year. Most of the gain is attributable to the sale of Barneys New York.
Excluding the effects of the sale of Barneys' retail operations and its related results, the impact of severance and other expenses related to restructuring activities and certain other charges, adjusted earnings per share from continuing operations for the third quarter of 2007 were $0.51 compared with $0.59 for the same period last year.
Total revenues slid to $1.03 billion from $1.08 billion, including wholesale sales of $1.01 billion from $1.06 billion a year ago, with the balance from licensing income.
For the quarter, wholesale better apparel revenues rose 1 percent to $367 million, while wholesale moderate apparel fell by 7.6 percent to $266 million. Wholesale footwear and accessories saw a gain of 6.2 percent to $293 million, but retail sales dropped 8.8 percent to $177 million.
The company sold the Barneys luxury chain, purchased for $397.5 million in 2004, to Dubai-based investment firm Istithmar for $942.3 million. It is also liquidating businesses after being unable to find buyers for the 9 & Co., Norton McNaughton, Rena Rowan, Duckhead and Pappagallo brands.For the nine months, income was $400.9 million, or $3.77 a diluted share, from $125.5 million, or $1.10, last year. Total revenues were $3.01 billion compared with $3.08 billion. Revenues include wholesale sales of $2.97 billion compared with $3.03 billion last year.
Unlike Boneparth, who had been described as often being at odds with the Jones board, Card said: "My vision and the board's vision is completely unified. The board has always wanted to grow the company and thinks there is growth in the core brands" — Jones New York, Nine West and Anne Klein.
Card, who joined Jones in 1990 as cfo and added the chief operating officer title in 2002, said he has no intention of selling the company either as a whole or piecemeal — a move some had speculated could be likely with a financial executive in the ceo slot. That seems to be having a positive impact on company morale, said analyst Jennifer Black of the firm that bears her name.
"There's a big difference between running a company to sell it, which creates uncertainty and morale issues, and running the company to have a solid business, and I hear that morale is very good at Jones," she said. "The people who are there now really want to be there."
Card, 59, focused entirely on his chief operating officer role starting last year, when Thimio Sotos took over the financial responsibilities. After Sotos resigned in March, Card again wore both hats. Before Jones, Card held senior operating and financial positions at Warnaco Group Inc. and Carolyne Roehm Inc.
John McClain, 46, took over for Card as chief financial officer in July. McClain had been chief accounting officer of Avis Budget Group (formerly Cendant Corp.), where he had worked since 1999.
The two men — one the father of three teenage girls (McClain) and the other the father of three grown boys and also a grandfather — are trying to prove the wholesale model is still relevant.
Black said Jones is "totally dedicated to reinvigorating all of the brands. In the department store channel, Nine West has been gaining space where some of the Liz brands were, and the updated Anne Klein line looks really good."Card "definitely knows the company inside and out, and if you are staying the course, it's best to have an inside guy," said Brad Stephens, an analyst for Morgan Keegan & Co. Inc. "If they have another 18 months of issues, which they could have based on the market they are in, they could need a fresh set of eyes."
Referring to Jones $4.99 billion competitor Liz Claiborne Inc., which is restructuring and on Tuesday reported a 65 percent drop in third-quarter profit, Stephens said: "Liz decided to go one way and Jones decided to go the other. The investing community sees what [ceo] Bill McComb did at Liz as the right strategy, but Wes will tell you that being a wholesaler is still a viable business. And he's right, but you have to be in the right brands and the right categories, and Jones' aren't. What could be tougher right now than women's ready-to-wear, moderate and footwear?"
On today's earnings call, Jones is expected for the first time to break out brand revenues in a slide presentation in the interest of clarity to the investment community, which is bearish about apparel stocks in the midst of cautious spending among consumers. The slides break out brand contribution to 2007 full-year revenue: Nine West with 22 percent; Jones New York, 20 percent; Anne Klein, 8 percent; L.E.I./Energie, 8 percent; Easy Spirit, 6 percent; Gloria Vanderbilt, 6 percent; Bandolino, 5 percent; Kasper, 4 percent; the exited moderate brands, 6 percent, and other brands making up the balance of 15 percent.
While Jones' main focus is correcting the product offerings to grow its Jones New York, Anne Klein and Nine West brands, acquisitions remain a priority down the road. "Anything that would complement our core competencies, such as costume jewelry, footwear, apparel or retail, would be something we would be interested in," Card said.
He didn't rule out buying another retail chain, but acknowledged that those deals typically trade at higher multiples and that such an acquisition financially might not be in Jones' best interest. He described Barneys as a "phenomenal buy," and said the company hadn't intended to sell it, but that the price offered was "too compelling a value to forego."Card likened his new job to a favorite hobby. After running the Boston Marathon in April, when he raised $60,000 for charity, Card had planned to run the New York City Marathon this Sunday. "But unfortunately my job is getting in the way," he chuckled. "I'm running a different kind of marathon now.
"There are some similarities,'' he said. "In the beginning, the improvements are easy and feel great, but it gets harder all along the way. You really have to want to finish the last three or four miles. I want to finish with the company as a huge success. I'm only 59, and still young. I may feel old some days, but I want to stay as long as I am having fun, and I feel we can have some fun for the next three or four years."
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