NEW YORK — Jones Apparel Group warned Tuesday of a tough year ahead — but outlined plans for everything from the launch of its new Signature line to an upcoming bid for Kasper A.S.L.

Good news from the company on Tuesday about its second-quarter results, the prospects for Signature and even stock dividends was washed away amidst its 15 to 20 cent reduction in earnings per share expectations for the year. As a result, Jones’ stock got pounded, falling $3.09, or 9.6 percent, to end the day at $28.98 in New York Stock Exchange trading.

This story first appeared in the July 30, 2003 issue of WWD. Subscribe Today.

For the three months ended July 5, income rose 6.9 percent to $71.1 million, or 54 cents a diluted share, from $66.5 million, or 49 cents, in the year-ago quarter. The consensus among analysts was 56 cents, according to data from Thomson/First Call.

Total revenues inched up 0.9 percent to $980.4 million from $972.1 million as sales picked up 0.9 percent to $974.7 million while licensing income dropped 5 percent to $5.7 million.

Chief executive Peter Boneparth said at the outset that it was a particularly challenging quarter because of macroeconomic reasons such as “weather, war [and] uncertainty in the economy. Clearly we feel our performance was admirable in light of those conditions.”

Boneparth emphasized that the “revitalization” of the Jones New York brand is paving the way for the launch of its new Signature cousin next February in at least 700 doors.

The firm is looking to replace the more than $500 million in annual revenues it has generated from the Lauren by Ralph Lauren license, which is now going back to Polo by Ralph Lauren.

Boneparth confirmed what the market has been anticipating for a few weeks: Jones will make a bid for bankrupt Kasper A.S.L. Ltd., which also owns the Anne Klein brand, next month at a court auction set for Aug. 7. He said the Kasper business is a “perfect strategic fit for us” because it is a “complement from a brand perspective [and] product perspective.” As reported, Kellwood Co. has been accepted by Kasper as the so-called stalking horse bid, which set the baseline valuation of Kasper at $163.5 million.

Also new for Jones is the declaration by its board of its first quarterly cash dividend of 8 cents per share. The company expects to make its first dividend payment on Aug. 29 to common shareholders of record as of Aug. 15.

The ceo told analysts that the strength of the Jones New York brand will be reinforced by the introduction of Jones New York Signature, and could pave the way for the Jones brands to become a $1 billion a year business.

Signature, Boneparth said, will be at least a $200 million business in 2004. He noted that while a good launch is between 200 and 250 doors, Signature will be launching in a minimum of 700 doors, with an expectation of an additional 200 to 250 doors for its special size segment. The ceo said pointedly that “Lauren didn’t even have that [many doors] when it started.”

As reported, Jones and Polo are locked in a legal battle over damages and royalty payments arising from licensing contract issues related to the Lauren license. Boneparth noted that the latest quarter represented the most difficult period for the Lauren line and added that Jones is working on transitioning the Lauren product in the “least offensive way.” Instead of “dumping” the back half of Lauren into the discount channel, Jones chose to “take the high road” for the benefit of the brand and its retail partners, he told analysts.

Market and financial sources said Jones was able to get into the large number of doors because it exacted from its retail partners commitments to carry the Signature line in exchange for certain concessions such as merchandise discounts of between 40 percent to 45 percent for fall and holiday orders of the Lauren collection being phased out by Jones.

In a phone interview, Wesley Card, Jones’ chief financial officer, denied any connection between the introduction of Signature and the phasing out of Lauren.

“We’re not prepared to say that the concessions were connected to the Signature line,” he said.

Concessions totaled about $50 million for fall and holiday orders, and Card said they were given because of “concern that some of those orders may be canceled” once the company announced it was getting out of the Lauren business.

He pointed out that the company viewed the concessions as a positive move to transition the product, and that it was obviously working with its retail partners on its Signature rollout.

Officials at Polo declined comment.

Expressing a degree of skepticism about Signature, Jennifer Black, analyst at Well Fargo, said, “They may be selling in 700 doors, but the $64,000 question is, ‘What will their sell-throughs be like?’ It will be interesting to see how Signature is different from the core line. Just because a consumer buys Jones doesn’t mean she will suddenly decide she has to have Signature, too. I think the jury is still out on this one.”

The company reduced fiscal 2003 earnings per share guidance to between $2.75 and $2.80 from between $2.90 and $3.10. After related costs for the Lauren transition, EPS is expected at between $2.40 and $2.50, on revenues of between $4.33 billion and $4.38 billion. For 2004, the company expects EPS in the range of $2.25 to $2.50 on revenues of $4 billion.

For the six months, income jumped 40.6 percent to $192.9 million, or $1.44 a diluted share, from $137.2 million, or $1.02, last year. Total revenues were up 5.5 percent to $2.21 billion from $2.10 billion.

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