Jones Group Q3 Profits Disappoint

Jones GroupNew York—While Jones Group Inc. reported today that its third quarter sales rose 19%, the company, which owns Nine West, Anne Klein, Rachel Roy and Jones New York among others, missed profit expectations.

The company, which recently changed its name from Jones Apparel Group, said its third quarter revenue increase reflected its acquisition of a 55% stake in Stuart Weitzman footwear. However, third quarter profits slid 4.3% to  $29.1 million, or 34 cents per share, down from $30.4 million, or 36 cents per share a year earlier.

Excluding one-item items related to the acquisition of Stuart Weitzman and Robert Rodriguez, Jones earned 54 cents per share, falling short of analysts’ average forecast of 62 cents per share.

Cotton, Freight, Labor Costs Increased

Gross margin narrowed to 33.5% from 35.6%. The company also forecast fourth-quarter margin to be lower than the third quarter level by about 1 percentage point. The company also said it was facing challenges such as increased raw materials costs, higher freight costs and tight factory capacity.

Wes Card, ceo, told Reuters that cotton costs, as well as labor and freight costs, hit earnings and would do so again in the coming months.

“We’ll deal with that with price increases in the next year,” he added. “As we advised at the beginning of the period, raw materials costs, freight costs and tight factory capacity were evident this quarter and challenged gross margins. We were well-prepared for these conditions and I’m pleased with our performance in the face of these challenges.”

Card, however, said he was optimistic about the holiday season as consumers are responding to new fashions. “We expect a significant volume increase in the fourth quarter,” Card said. “People are still spending reasonably strong. There’s some emphasis on value, but the fashion element is critical.”

Jones also forecast full year sales to range between $3.62 billion and $3.67 billion, in line with Wall Street forecasts of $3.65 billion and predicted revenues would rise between 12% and 15% this quarter.

Card told Reuters that department store orders were strong, but noted that retailers are still cautious about building up too much inventory lest they find themselves in the position of heavy discounting like they experienced two years ago.

New License and Handbag Appointments

In other news, Jones entered into an exclusive licensing and distribution agreement with Brian Atwood for B Brian Atwood, a new footwear and accessories line that will be the contemporary counterpart to Brian Atwood’s high-end, luxury shoe business.

The company also announced appointments to its handbags division: Dina Battipaglia as group president and Rafe Totengco as creative director; chief merchandising officers Rodney Hutton (for Anne Klein Brands) and Daniela Bocresion (for Rachel Roy Brands); and the promotions in the footwear and retail divisions of Rick Paterno, group president of footwear and Ron Offir, president Jones Direct Group.

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