NEW YORK — Jones Apparel Group was expecting a tough third quarter and it got one.

Earnings slid by 27.7 percent on a 7.9 percent dip in sales. Additionally, the firm announced that the Rena Rowan business will be shuttered by next fall, although with little financial impact.

Still, results weren’t quite as bad as Wall Street expected and the career and better businesses, each key to Jones’ well being, are coming to life. Also, the acquisition of Kasper A.S.L. should be finished up in early December, further bolstering those categories.

Net income for the period ended Oct. 4 fell to $93.9 million, or 71 cents a diluted share, from $129.8 million, or 95 cents, a year ago. Analysts had the firm pegged at slightly lower earnings of 68 cents, according to Thomson/First Call.

Having had their expectations muted by a warning last quarter, though, investors reacted positively to the results, as well as forward projections from the firm, driving up its shares $2.48, or 7.7 percent, to close at $34.78 on the New York Stock Exchange Tuesday.

Operating margins slid 350 basis points to 13.9 percent during the quarter. Most of that erosion, or 330 basis points worth, came from the combination of roughly $28 million worth of expenses to exit the Lauren by Ralph Lauren business, which has been taken in-house by Polo Ralph Lauren Corp., and high markdowns in the Polo Jeans Co. unit.

Sales for the three months slid to $1.17 billion from $1.27 billion a year ago. Inventories at the end of the quarter of $554.9 million were down 3.7 percent versus a year ago.

“We are quite pleased that these results surpassed our expectations,” chief executive officer Peter Boneparth said in a statement, putting a positive spin on the relatively drastic, though anticipated, decline in profitability.

Notwithstanding a pickup in consumer spending in September, the ceo on a morning conference call noted consumers were cautious for much of the quarter and the company would be as well until stronger trends emerge.

“We continue to be in a posture right now of managing this business for cash and operating margins, preserving our financial position and obviously watching our balance sheet,” Boneparth said.Given all the changes recently at the firm — the transition from the Lauren better business to the new Jones New York Signature line and the pending acquisition of Kasper A.S.L. — Jones has reviewed its better segment and rationalized some overhead.

Accordingly, the Rowan business will be closed by fall 2004, creating a $4.4 million writedown of the trademark portfolio value during the fourth quarter. In a phone interview, Boneparth said there were no plans to shutter additional lines.

The Signature launch is going better than expected, though. Anticipating volume of at least $200 million in 2004, the line will launch in more than 800 department store doors and 300 specialty store units. Previously, Jones was looking for the line, which hits stores in February, to bow at 700 department store doors and 200 to 250 specialty units.

J.P. Morgan analyst Noelle Grainger noted, “The [stock] market’s reacting to the fact that…dressy career looks are selling in the marketplace right now both in apparel and footwear, and Jones is positioned pretty well in that area.

“They’ve been conservative with respect to the outlook and they haven’t really assumed that things will get better, but if they do, they have the capability to chase the business,” she noted. “There’s some upside to the numbers if retail picks up.”

With results for the third quarter in, earning estimates for full-year were placed at $2.45 to $2.50 a share, on revenues of roughly $4.3 billion. Previously, the firm predicted earnings in the wider range of $2.40 to $2.50.

Despite the quarterly drop, earnings for the nine months rose 7.5 percent to $286.8 million, or $2.15 a diluted share, from $266.9 million, or $2.07, a year ago. An accounting change deflated year-ago income by $13.8 million, or 10 cents. Without the change, net income inched up a milder 2.2 percent. Revenues for the year-to-date period advanced 0.5 percent to $3.37 billion.

In 2004, the firm anticipates that sales will slide to $4 billion and produce earnings of $2.25 to $2.50 a share, excluding impact of the Kasper acquisition, changes in the firm’s existing capital and debt structure and other acquisitions. Cash flow from operations next year is slated to exceed $400 million.Debt-rating agency Standard & Poor’s also confirmed Jones’ credit rating at “BBB” with a stable outlook. S&P had put the firm’s debt on CreditWatch in June.

“The rating affirmation reflects S&P’s comfort with Jones’ progress in replacing lost 2004 revenues and operating profit from the Lauren license,” analyst Jayne Ross said in a statement.

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