Aggressive inventory management helped Jones Apparel Group Inc. post higher-than-expected first-quarter profits Wednesday as the firm raised revenue guidance for the year.
This story first appeared in the April 29, 2010 issue of WWD. Subscribe Today.
For the three months ended April 3, income attributable to Jones was $39.2 million, or 45 cents a diluted share, up from $300,000, or breakeven, in the year-ago quarter. The consensus among analysts polled by Yahoo Finance was 34 cents. Total revenues rose 0.4 percent to $887.3 million from $891.1 million despite a 0.4 percent dip in sales to $876.1 million from $879.4 million.
By segment, the company saw a 3.4 percent decline in wholesale better apparel sales to $319.8 million; a 3.5 percent decrease in wholesale jeanswear sales to $221 million; a 2 percent gain in wholesale footwear and accessories sales to $242.4 million, and a 0.5 percent uptick in retail sales to $141.9 million. Same-store sales at apparel stores were down 1.4 percent. Total volume doesn’t add up to $887.3 million due to adjustments reflecting in part a restructuring of the costume jewelry business and an exit from or restructuring of the moderate sportswear operation and certain other product lines.
Wesley R. Card, chief executive officer, told analysts on a conference call that the company continues to “manage our balance sheet, with inventories down 25 percent from the prior year level and working capital continuing to be very well managed.”
He explained inventory levels at retail were in balance with demand, with much less clearance merchandise on the selling floors.
Card told WWD inventories at the firm’s outlet stores have been tightened to levels similar those at department stores to which it wholesales and also at its own full-priced stores. After closing 63 locations during the quarter, Jones finished with 877 sites, a number it expects to reduce by an additional 110 by yearend. At that time, Jones expects outlet locations to represent 70 percent of the store base.
He also said the company will increase inventory levels slightly, in line with orders and sales growth trends. Jones is taking a slight risk in fabric positions by ordering more for certain basic replenishment items, but not for fashion offerings, Card said. However, it is making adjustments as needed for subsequent deliveries on future orders on goods that sell through.
According to Card, most of the merchandise at the outlet sites is created specifically for those locations. “We do ship in some excesses,” he said, adding the outlet customer isn’t as fashion-forward as the mall shopper, and the fashion merchandise is a “little bit toned-down from the fashion version.”
Richard Dickson, the Estée Lauder Cos. Inc. veteran who joined Jones in January as president and ceo of branded businesses, spoke briefly on the conference call about “strengthening our own brands’ identity.”
Card told WWD much of Dickson’s work centers on creating a unified approach for each brand and he is using his licensing expertise to expand the company’s international and strategic partnerships. “The Jessica Simpson line is an example of our licensing model,” said Card. “We’ll also see growth via acquisitions on a selective basis [with] Robert Rodriguez as our model. It is a small acquisition, and it’ll take time to move the top line, but it complements our existing distribution.”
The company raised 2010 revenue forecast to the range of $3.4 billion and $3.54 billion from the prior estimate of between $3.3 billion to $3.48 billion in February.