Jones Puts L.E.I. Fate in Wal-Mart's Hands

NEW YORK — Jones Apparel Group's efforts to revitalize L.E.I. have included changes in management and operations and a major overhaul of the brand's image, all of which have been unable to stem nearly five years of declining sales.

Now in a move drawing praise from Wall Street and skepticism from the industry, Jones is casting what's left of L.E.I.'s fortunes exclusively with Wal-Mart, the world's largest retailer.

Jones revealed it's decision to move L.E.I. into Wal-Mart for the back-to-school season in conjunction with its release of year-end financial results on Feb. 13. Narrower losses for the quarter, coupled with the L.E.I. news, helped push the vendor's shares up 7.2 percent to close at $17.15 a share for the day. On Wednesday, Jones' shares closed at $14.99.

"We are enthusiastic about expanding our existing relationship with Wal-Mart and bringing this dynamic junior lifestyle brand to a broader audience," Wesley Card, Jones' president and chief executive officer, said at the time.

The brand's dynamism, however, has been on the wane since being acquired by Jones. The company acquired L.E.I. — which stands for life, energy and intelligence — in 2002 in a deal worth $385 million. L.E.I. had established itself as a dominant junior brand, and at that time, was generating sales of $248 million. The brand's primary competitors were Mudd and Paris Blues.

Jones initially allowed the brand to operate as an independent division with its own staff and sales force, a decision that management later acknowledged was a mistake. Sales began to slide as a result of operational inefficiencies that were complicated by increased competition. The task of turning around the brand fell to Jack Gross when he became ceo of Jones' denim and junior segments in January 2006. Gross brought L.E.I. more formally into Jones' operations, but a difficult juniors retail environment continued to hamper sales.

Jones made a full-fledged effort to right the ship for the 2007 b-t-s season, overhauling the brand with new packaging, labeling, advertising and a strategy to increase the brand's Internet presence. To reconnect with the 13- to 17-year-old target audience, the brand veered away from a mature image and adopted a more playful, tongue-in-cheek attitude that included caricatures of girls with star shapes on their faces and American flag-like tongues sticking out.