NEW YORK — Peter Boneparth reached the end of a bumpy road at Jones Apparel Group on Thursday, abruptly resigning as president and chief executive officer.
He is succeeded by Wesley R. Card, the company's chief financial officer and chief operating officer. The appointment of a financial executive to the ceo slot heightens speculation that the Jones board is ultimately looking to sell the company, either whole or piecemeal.
Card, 59, joined Jones in 1990 as cfo, and is said to be more in sync with the board than Boneparth. Before Jones, he held senior operating and financial positions at Warnaco Group Inc. and Carolyne Roehm Inc.
Card will be succeeded as cfo by John McClain, 46, chief accounting officer of Avis Budget Group (formerly Cendant Corp.), where he worked since 1999.
Boneparth, 47, who had been in the top job since 2002, was seen as a polarizing figure at Jones. While some industry observers felt he did a good job with his restructuring and streamlining strategies, others said he clashed with the Jones board and his unorthodox personality and blunt demeanor was a strained fit for the personality-driven Seventh Avenue.
Although some people pooh-poohed when Boneparth said he was about to buy Barneys New York in 2004, he proved the naysayers wrong: Jones is about to net the company more than $300 million from the Barneys sale.
"With the pending sale of Barneys New York and the previously announced decision to exit or sell certain moderate sportswear businesses, Peter and the board agreed that this was an appropriate time to transition our leadership," Sidney Kimmel, chairman of Jones, said in a statement. Kimmel, whom Boneparth succeeded as ceo, was unavailable for further comment. Neither Boneparth nor Card could be reached for comment.
Disclosure of the changing of the guard at Jones sent shares up 1.1 percent to close at $28.39 in New York Stock Exchange trading.
The resignation was effective Thursday, according to a regulatory filing with the Securities and Exchange Commission. The filing said that Boneparth gets a bonus of $1.6 million, as well as a severance payment of $9.2 million, payable monthly from August 2007 through March 2009 at a rate of about $458,333 per month. With stock options, it is believed his total package will come to $15 million.Card has his employment agreement amended to reflect his new position with the company. The filing said that his annual salary will be a minimum of "$1.6 million."
The timing of Boneparth's resignation was unexpected. Last March, Boneparth and Jones issued each other "non-extension notices" saying Boneparth's contract would not be renewed past its March 31, 2009. Sources speculated that Boneparth has known since then that he would resign and has spent the last three months negotiating his contract.
Though his tenure had its snags — the loss of the lucrative Polo Ralph Lauren licenses, the company's failure to inspire a sufficiently high offering price last year when it was put up for sale and general market conditions that did not favor Jones' predominately moderate portfolio — the timing of Boneparth's resignation caught many off guard. Jones is currently in the middle of a deal to profitably sell Barneys New York, the acquisition of which was Boneparth's brainchild.
UBS analyst Jeffrey Edelman, in a research note, called the resignation a "surprise to us, especially when considering the various positive initiatives under way at the company, including the recent profitable sale of Barneys."
Edelman wrote that Boneparth has already done the heavy lifting and has laid the groundwork for a more positive momentum ahead. The analyst also pointed out that Boneparth "inherited an undermanaged company for which he was held responsible….His restructuring and streamlining strategies which began several years prior are finally beginning to bear fruit, but investors, eager for immediate results, seemed unimpressed by his leadership."
Analyst Brian McGough of Morgan Stanley wrote in his research note, "We think that new ceo Wes Card [17 years with JNY] is one of the best operators in the industry, but we think that even the best ceo in corporate America would see that there is only one real answer to JNY's issues. That is to make up for six years' worth of underinvestment by reinvesting in its content to drive the top line. We assume that this happens in 2008, which should take [earnings per share] down to $1.75, which is 30 percent below consensus. Might we need to wait another quarter or two before our thesis becomes evident? Perhaps. But we're increasingly confident in our '08 numbers."Analyst Jennifer Black, whose firm bears her name, noted that despite Boneparth's "rocky" relationship with the company's board, he did help reposition Jones for a turnaround. "The board and Peter didn't see eye to eye and with the product at Jones' divisions getting better, I think Peter decided the time was right for him to move on. With Wes Card as ceo, this announcement really gets the whole group together where there is no uncertainty. It is back to being Sidney Kimmel's group. Card's been with the company for 17 years. People know him, and choosing him was a natural choice. It could be a win-win situation for everyone, including Jones' employees."
Marc Cooper, managing director at investment banking firm Peter J. Solomon Co., who is handling the sale of Barneys New York, said of his dealings with Boneparth: "Peter is smart. I've worked on three transactions with him, when we sold Anne Klein to Jones, when we sold Barneys New York to the company and recently when Jones put Barneys up for sale. Peter is fair, he knows what he wants and tells it like it is. It was a pleasure doing business with him."
Last month, Jones agreed to sell Barneys New York, the upscale chain it acquired for $397.5 million in 2004, to Dubai-based firm Istithmar for $825 million. However, earlier this month, Japan's Fast Retailing Co. submitted a $896 million (at the then-three-month average exchange rate), nonbinding offer to Jones for the high-end retailer. Fast Retailing is known in the U.S. for its Uniqlo stores.
As for the Barneys deal with Istithmar, Cooper said, "Nothing has changed. We have a contract. Istithmar is moving forward to closing the transaction under the contract. Nothing will change with Peter leaving."
With Boneparth out at Jones, there remains a question whether the company will put itself on the market again. In March 2006, the company went on the block, with the Jones board eager to get $36 a share. At the end of May 2006, when second-round bids were due, the average of three bids submitted was $32 a share. Two months later, only Bain Capital stayed in the game. Bain eventually walked from any deal, pushing for a bid of $28 a share. It was a per-share price that was far from the $36 the Jones board sought.One financial source said that while Kimmel initially favored Boneparth, that relationship soured as time went by and as the company hit some "rough" patches under Boneparth's leadership. With Card, a financial expert, at the helm, the source said that it might signal that the company could once again put itself on the block. The individual also noted that the problems at Jones are not necessarily all due to Boneparth, but that he started at the company during a down cycle in the moderate department store business.
An investment banker, who requested anonymity, said that he was surprised by the announcement, stating that it was something he would have expected once the sale of Barneys closed. "It certainly is a possibility that Jones could be back on the market now that the Barneys asset is sold."
Consultant Emanuel Weintraub said that he believes that Boneparth "left at the top of his game....As for the company, I don't think selling Jones as a whole would be an easy sell. Whether it's Jones or any of the Liz Claiborne brands up for sale, all of these are competing with each other and with the retailer's private brands."
Brad Stephens, a retail analyst at Morgan Keegan & Co. speculated that the strategic reorganization from competitor Liz Claiborne inspired the speedy action. "What really hurt Jones is yesterday's meeting by Liz, which told us the wholesale model is antiquated and there's really no growth potential," Stephens said. "The most likely case is they are going through strategic review, and they see what Liz is doing."
On Wednesday, Claiborne unveiled plans to shed many of its underperforming brands as it focuses on power brands Juicy Couture, Lucky Brand Jeans, Kate Spade and Mexx. Claiborne ceo William L. McComb shifted the company's strategy in the face of industry-wide issues, including retail consolidation, retailers' increased reliance on private brands, the rise of specialty retailers and changing consumer demands.
The brands Claiborne is emphasizing fall in the contemporary sector, an area in which Jones has no representation. Meanwhile, Claiborne has placed 16 of its traditional brands under strategic review, and those brands — including C&C California, Sigrid Olsen, Ellen Tracy and Dana Buchman — could go on the market.Boneparth had stuck by Jones' wholesale model with its largely moderate portfolio until the last few months. He delivered an ironic blow in May when he announced Jones' intention to sell some of its moderate brands, potentially including the brands he came to the company with, like Norton McNaughton and Erika. Sources report that Jones is having a tough time finding buyers for the underperforming brands, though.
But with Claiborne's 16 reviewed brands possibly entering the market, they will be competing for M&A dollars with the moderate portfolio Jones has been attempting to sell and Jones' "power brands" (Nine West, Jones New York and Anne Klein), which sources speculate the company could also sell if the price is right.
Meanwhile, in the last five years, Jones has made several acquisitions that many question and that Stephens dubbed "antiquated." The company continued to heavily invest in what has become a fledgling wholesale moderate market with Gloria Vanderbilt and L.E.I. in 2002, the troubled footwear market with a hostile takeover of Maxwell Shoe Co. in 2004, and the suit business in 2003 with Kasper Ltd., bringing Anne Klein to the company.
As Jones is trying to exit its moderate business, many speculate that it may also put parts (particularly Nine West) or the whole of the business up for sale again.
The bright spot of the Jones portfolio was the luxury retailer Barneys New York, which Jones acquired in 2004. The move was widely criticized at the time for not adding to Jones' economies of scale or for the capital expenditure required. Boneparth has said Jones acted as a private equity firm in investing in the company, and the former investment banker's decision to invest in the luxury retailer — at a time when luxury began to boom — might be his brightest legacy at Jones.
July 2007: Peter Boneparth resigns as president and chief executive officer of? Jones Apparel Group.
June/July 2007: Fast Retailing Co. Ltd. enters bidding for Barneys New York with a $896 million offer, trumping rival $825 million offer from Dubai-based equity fund Istithmar.
May 2007: Jones announces intention to sell parts of its moderate portfolio.March 2007: Boneparth's contract is not extended past March 31, 2009.
2006: Jones goes off the block after an unsuccessful attempt to sell itself.
2004: Acquired Barneys New York.
2004: Acquired Maxwell Shoe Co. Inc. in a hostile takeover.
2003: Acquired Kasper Ltd., which included Kasper, Anne Klein, Le Suit and Albert Nipon.
2003: Loses licenses for Polo Ralph Lauren brands that accounted for $548 million in volume.
2002: Acquired RSV Sport Inc., including L.E.I.
2002: Acquired Gloria Vanderbilt Apparel Corp.
2002: Sidney Kimmel steps down as ceo and is replaced by Boneparth.
2001: Acquired McNaughton Apparel Group Inc., including Norton McNaughton, Erika, Energie, Jamie Scott and Currants. Boneparth, McNaughton's president, named president and ceo of Jones moderate apparel group.
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