BREADTH KEYS JONES’S STRONG NET
Byline: Jennifer Weitzman / Anne D’Innocenzio
NEW YORK — Diversification has been the key to Jones Apparel Group’s sweet success this year and globalization is a part of the plan for 2001.
One year after purchasing Nine West, Jones, aided by the strength of its acquisition, posted a standout second quarter with a 74 percent increase in profits and 77.6 percent increase in revenues, and disclosed plans to sell its successful licensed Lauren by Ralph Lauren and Ralph by Ralph Lauren lines to wholesale accounts in Europe and Asia next year.
The company also said it plans to launch Nine West’s subbrand Nine & Co. to the mass market for fall 2001. Jackwyn Nemerov, president of Jones Apparel, said the firm hasn’t decided whether to develop an exclusive partnership with one retailer, or sell to several chains. It is expected to make a decision in the next few months.
Jones’s other moves, to be launched for fall, include:
Redefining Jones Sport, which had a difficult year, as a dressy casual line, adding fabrics like Tencel and more tailored looks.
Broadening the appeal of its Ralph line to cater to the 16 to 28-year-old, instead of the 16 to 24-year-old.
In its first quarter, ended July 2, Jones posted net earnings of $55.5 million, or 46 cents a share, from $31.9 million, or 28 cents a share, a year ago. Sales skyrocketed to $906.6 million from $510.4 million, reflecting the $425 million in sales from Nine West.
Jones’s core businesses also contributed to the growth. Its main driver, the wholesale apparel group, including Lauren by Ralph Lauren, Jones New York, Rena Rowan Career Collection and Polo Jeans Company, grew 17.4 percent to $441.4 million or 49 percent of total revenues.
Sidney Kimmel, chairman, said he believes “the key to our ongoing success has been our strategy of growth through diversification.”
The company remains bullish regarding its first cross-selling venture: the launch of Nine West apparel, to be unveiled in stores next month. As reported, it is expected to generate “several hundred million dollars in sales” over the next few years, and should play into fashion’s current friendly mood toward leather and suede.
The company is also getting ready to relaunch Jones accessories during the third quarter, capitalizing on Nine West’s expertise in that area.
Meanwhile, company officials said that Jones’s fall and holiday product lines were well received by its retail customers.
Kimmel added that Jones “has evolved into an organization with key attributes that set us apart from the rest of our industry in terms of greater product diversification, stability and balance within the various consumer segments of our market.”
On a conference call, Nemerov said the company has reduced its share of volume in department stores to 65 percent from 90 percent in 1997. The remainder is in specialty stores, which are being used as “laboratories” for new trends without having to compete with department store pricing.
And what Jones also brings to the table, company officials maintained, is its full array of product offerings — including apparel, jewelry, accessories and footwear — that provides the foundation to build a complete lifestyle brand to serve a broad array of consumers.
Todd D. Slater with Lazard Freres & Co., said Jones’s performance was particularly outstanding in today’s rough apparel environment. “They have a wide group of product categories from top to bottom and outstanding channel distribution diversification to help carry them,” he said.
Nemerov said the Jones and Rena Rowan career lines drove sales, compensating for disappointment in its casual sports line and Polo Jeans, due to a market oversaturation. “The career collection business has continued to be one of the strong categories,” Nemerov said. “Throughout this year we have steered carefully through the downtrend of career lines in 1998 and in early 1999 by developing many new strategies including a replenishment program and key items.
Nemerov said that she is optimistic about the fine-tuning of the Jones Sport business.
“We are now concentrating on selling outfits, not just twill pants,” said Nemerov. “We believe that the scales tipped too heavily in casual, and that there were a lot of pressures in casual.”
Lauren by Ralph Lauren continues to be a stellar performer, including larger sizes, petites, jeans and dresses.
Evan-Picone, repositioned to moderate from better, is selling well, expanding its apparel and footwear lines and should reach 750 new stores by the fall. Also in moderate, Joneswear is performing well at J.C. Penney.
Wholesale footwear and accessories under the Jones label grew to $191.6 million or 21 percent of total revenues.
Jennifer Black at First Security Van Kasper said people were skeptical about the Nine West acquisition, but now realize that Jones integrated the company better than they thought it would.
To further add new dimensions to its product offerings, Jones is getting ready to roll out Victoria + Co., a maker of branded and private label costume jewelry under brands including Napier and Nine West and numerous private labels. It bought the firm this year for $90 million, including the assumption of $65 million in debt.
Margaret Mager of Goldman Sachs said Jones did as well as could be expected. She said the company faced increased shipping prices that hurt gross margins, but was left with a clean inventory.
Mager added that she is looking for Jones’s top line to increase in the mid single-digit range, adding that she expects it to reach $4.16 billion, the top end of the firm’s estimated volume range of $4.125 billion to $4.175 billion.
Black stated that Jones would continue to perform well into the second half: “I think this last selling season for apparel was tough and Jones navigated through the tough time well. Now they have the momentum with Ralph and Nine West coupled with the resurgence of career lines which will all bode well for them into fall.”