By  on August 17, 2006

NEW YORK — Jones Apparel Group is a house in need of remodeling, but buyers couldn't see the potential value so the company decided to take itself off the market and finish the work.

That is how Peter Boneparth, Jones' chief executive officer, described the company's decision to stop pursuing its sale, in a Wednesday morning conference call with Wall Street analysts.

"The question is whether the buyer of that remodeled house wants to see it remodeled before they purchase it and what is the buyer willing to pay for it before they see it remodeled," Boneparth said.

The answer was, apparently not enough. After months on the market and hiring Goldman, Sachs & Co. to broker the sale, the Jones board said Tuesday it had decided to remove itself from the auction block. Boneparth would not comment on the discrepancy between the asking price and any potential offers. Financial sources said the sale process fell apart after Bain Capital, the only remaining company in the bidding, was eyeing an offer of $28 a share, while the Jones board was keen on $36.

"We believe there is substantial intrinsic value in the company that has yet to be realized," Boneparth said on the conference call. "The best alternative to maximize shareholder value is to continue executing the company's strategic business plan."

Boneparth denied rumors that Jones had ever contemplated selling off pieces of the company and said: "We hold fast to the belief that the whole is worth more than the sum of its parts."

The ceo also stuck by Jones' business plan and his own leadership abilities, despite speculation the Jones board might come under pressure to replace Boneparth. While he admitted the company has work to do on some of its brands, including Nine West, he said the benefits of the strategic plan were already visible in terms of better margins.

"I feel very confident not only in my own ability, but also in the ability of the management team here," he said. "Many of the things we started talking about last year are beginning to work."

This includes foregoing acquisitions and instead focusing on improving existing brands, said Boneparth, adding the existing strategic plan includes shifting sourcing to be more timely, bolstering cash flows and trimming overhead. There has been speculation that Jones, in order to spur growth, might become more aggressive on the acquisitions front.For the first six months of the fiscal year, net income plummeted 55.9 percent to $62.5 million, or 53 cents a diluted share, from $141.8 million, or $1.17, in the same year-ago period. Total revenues declined 9.4 percent to $2.29 billion.

As Jones hangs on to the lowest corporate ratings level, Boneparth emphasized the importance of its investment-grade rating as something it highly values and will work to maintain as it transitions back to business as usual.

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