Net Rises at Jones But Warning Sends Shares Down 10%

Jones Apparel Group had good news about second-quarter results and the prospects for its Signature line, but it reduced guidance for the year.

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.

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.
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