Shares of Jones Apparel Group jumped 14.3 percent in trading Wednesday after the company’s small first-quarter profit beat Wall Street’s expectations and the firm said it will prune 225 unprofitable store sites over the next 18 months.
This story first appeared in the April 30, 2009 issue of WWD. Subscribe Today.
Shares closed Wednesday at $9.21, up $1.15, on the New York Stock Exchange, their highest final price since Nov. 5.
For the three months ended April 4, income was $300,000, or zero cents a diluted share, versus income of $19.5 million, or 23 cents, in the year-ago quarter. Excluding pretax noncash charges for impairment of assets in connection with planned store closures and other items, adjusted earnings per share were 28 cents, compared with 37 cents a year ago. Wall Street analysts, who typically exclude one-time charges, were expecting a profit of 10 cents a share.
Total revenues in the quarter declined 8.6 percent to $891.1 million from $975.4 million, including an 8.7 percent decrease in sales to $879.4 million from $963.4 million. By category, wholesale better apparel revenues fell 10.9 percent to $331 million; wholesale jeanswear gained 3.4 percent to $229.2 million, and wholesale footwear and accessories fell 13.2 percent to $236.9 million.
Retail revenues dropped 11.1 percent, to $141.2 million from $158.9 million, and decreased 10.6 percent on a same-store basis.
“We were more than satisfied with our results in what, as you all know, is a very difficult and containing climate,” said Wesley R. Card, president and chief executive officer, on a conference call with Wall Street analysts. “I think the results reflect aggressive management of our expenses and inventory balances.”
He said orders during the first quarter “held pretty well,” the company “shipped well against the order book” and that there were “very minor” cancellations.
Card said the company continues to see softness in women’s apparel, although Jones New York Signature performed well and had some growth in the U.S.
Footwear selling was better than apparel, he said, even though it was heavily impacted by promotions. While jeanswear sales were positive, accessories and costume jewelry remained difficult.
Company executives said this was a good time for the firm to reevaluate its retail real estate sites, particularly since it plans to move toward opening more outlet stores. Jones has pinpointed 225 underperforming locations where either the leases are expiring or are approaching expiration and would cost less to exit. At the end of last year, the company operated 373 specialty stores and 644 outlets.
Jones expects expense savings to lift results by $3 million in 2009, $14 million in 2010 and $20 million in 2011.
John McClain, chief financial officer, said the firm’s revolving line of credit “remains undrawn, and we ended the quarter with approximately $195 million in cash.”
The company also has a new asset-based lending agreement that will provide up to $650 million of liquidity, and, essentially, leave them “without any financial covenants through April 2012,” the cfo said.
The company expects to close on its tender offer for senior notes due November 2009, which will be funded through existing cash. It extended the deadline until 5 p.m. on May 1.
Based on its view of the second half of fiscal year 2010, McClain said the firm expects total revenues for the year of between $3.3 billion to $3.5 billion.
Card told WWD the new Nine West Vintage America collection due out in fall strikes a “good balance” with the existing Nine West line. The rugged casual collection, sold into over 900 doors to start, is focused on boots and shoes but also includes a denim component priced to sell at under $100. The company is targeting value shoppers eyeing an alternative to status jeans.