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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.

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.
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