Peter Boneparth

Higher holiday promotions and problems in better lines dragged down Jones Apparel Group's fourth quarter net by 18 percent to $34.1 million.

NEW YORK — Higher holiday promotions and some difficulties in better-priced collections put a crimp in Jones Apparel Group’s style in the fourth quarter, dragging profits down 18.4 percent to $34.1 million, or 28 cents a diluted share.

“In some respects we made some product decisions that were clearly not on track with the consumer,” said chief executive officer Peter Boneparth on a conference call Wednesday. “But even against that backdrop, the overall promotional environment led to the vast majority of the issues that we faced.”

The profit drop was in line with Jones’ warning last month that earnings would come in at 28 to 30 cents a share, well below earlier guidance of 40 to 45 cents. Shares of the firm fell 7 cents, or 0.2 percent, to close at $33.70 on the New York Stock Exchange Wednesday.

The quarterly profits compared with earnings of $41.8 million, or 33 cents, a year earlier.

Revenues for the three months ended Dec. 31 advanced 10.5 percent to $1.08 billion from $980.1 million.

“The promotional cadence we saw in our core department store channel over the fourth quarter only continued to validate in our minds the need to continue to differentiate, to reach different customers,” said Boneparth.

In December, Jones acquired retailer Barneys New York for $397.3 million.

Within its existing brands, Jones is also planning to branch out with the launch of Treza, a plus-size retail concept that will feature a range of the firm’s brands, including Jones New York, Gloria Vanderbilt, Bandolino, Kasper and Anne Klein. Three to five Treza stores will open during the second quarter, and as many as 15 of the units might open by yearend.

By business segment, wholesale better-priced apparel had the most difficulty during the quarter, recording an operating loss of $5.3 million, versus earnings of $3 million a year ago. This was juxtaposed with a 12.4 percent increase in sales to $360.3 million.

“I was a little surprised that they ended up with an operating loss on better apparel,” said Tradition Asiel Securities analyst David Griffith. “It just goes to show how really tough the markdown environment was for them.”

This story first appeared in the February 17, 2005 issue of WWD. Subscribe Today.

Within better apparel, the Jones New York Signature casual business, which bowed in stores with spring fashions last year, was slow to adopt the trend toward milder colors for fall and also suffered from a lack of stand-alone pieces for holiday gift giving.

Boneparth reiterated his support of the business, though, and said early spring reads were promising.

Moderate apparel, with brands such as Bandolino and Gloria Vanderbilt, was stronger, producing $10.7 million in operating income, a 20.2 percent rise. Sales of $263.2 million represent a 2.3 percent uptick.

Retailers, after easing out of moderate in favor of a slate of new and rejiggered better brands — such as Signature and Lauren by Ralph Lauren from Polo Ralph Lauren Corp. — are taking another look at lower-priced fashions. “In some cases, there’s a little bit of a rebalancing that’s going on,” said Boneparth.

Jones’ moderate division has also been ramping up its infrastructure to support launches, specifically expanding its business with Sears, Roebuck & Co., which already has an exclusive on the Anne Klein subbrand A-Line.

Wholesale footwear and accessories registered an 18.3 percent drop in operating profits to $26.7 million, while sales increased 15 percent to $252.3 million.

On the footwear front, Dillard’s has dropped the Jones’ Nine West brand from its stores. Boneparth said the business, which was similar to the store’s private label offerings, had already contracted to represent only $5 million in sales, and its shuttering will not have a material impact. At least some of the void is being filled by an uptick in the Easy Spirit business at Dillard’s.

For the year, Jones’ earnings slid 8.2 percent to $301.8 million, or $2.39 a diluted share. This compares with $328.6 million, or $2.48, in 2003. Revenues increased 6.3 percent to $4.65 billion from $4.38 billion.

In 2005, Jones anticipates profits of $2.75 to $2.90 a share, an increase of 15 to 21 percent. Sales are slated to rise to the $5.3 billion to $5.35 billion range.