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NEW YORK — Higher margins, inventory reductions and cost cutting helped Jones Apparel Group Inc. best analyst expectations for the second quarter, but the economy continued to batter the company’s wholesale footwear and accessories sales, which dropped 15 percent during the period.
Still, analysts remained bullish on Jones’ ability to navigate the retail landscape and were optimistic that the firm’s forecasted full-year sales growth of $3.3 billion to $3.35 billion would prove to be conservative.
“It’s impressive that [Jones’] success is very broad-based, and it’s translating into results across all divisions,” said Todd Slater, an analyst with Lazard Capital Markets.
Slater raised his full-year earnings-per-share projection to 90 cents from 60 cents, and his target price to $17 from $14. “They’ve been doing a good job of under-promising and over-delivering,” he said.
As for its footwear and accessories business, the company expects growth of $900 million to $920 million for the year.
Wesley Card, president and CEO of Jones Apparel, told Footwear News after last week’s earnings call that the company “feels good about the footwear business. The segment was down for the quarter, but it’s really because of [weakness in] costume jewelry and the international piece of the business. The core U.S. business was good.”
Card pointed to positive early reads on new initiatives, such as Nine West’s launch of its Vintage America collection, which will eventually roll out to 900 wholesale stores and represent 20 percent of the brand’s assortment.
In addition, Jones has seen strength overall in the Nine West division, as well as its newly launched Easy Spirit athletic business and the value-priced Bandolino brand.
Also during the second quarter, the company escalated its store closure plan and will now exit 240 retail doors by the end of the year, versus a previously forecasted 225. Executives reiterated a strategy for decamping from mall retail and instead increasing outlet stores. By the end of 2010, the company said, outlet stores will make up 70 percent of Jones’ retail portfolio.
The company’s multibrand Shoe Woo concept is the exception, with four to five stores to be open by the end of 2009. “Our feeling is that women much prefer looking at a variety of shoes in a single location, similar to a shoe department,” Card said. “It’s a concept we have high hopes for. If it continues to outperform, we have a potential new chain on our hands.”
Jones last week reported a 24 percent boost in second-quarter earnings to $13.1 million, or 15 cents a diluted share, while revenues declined 3 percent to $803.9 million.
Excluding charges related to a debt buyback and other items, the company’s adjusted earnings rose to 29 cents a share from 20 cents a year ago, well above the 7 cents analysts were expecting.
Wholesale footwear and accessories revenues totaled $196 million, versus $231 million last year.
The company expects its third-quarter sales to decrease by 11 percent to 14 percent, and fourth-quarter sales to drop a lesser 6 percent to 9 percent.
Jones expects top-line sales to continue to be affected by conservative wholesale orders from retailers in the back half of the year. “When they can clearly see they’re losing sales, they’ll start to reorder into the things that are working,” said Card. “There will be [a change] at some point. We just have to be patient.”