Jones Q1 Profit Misses Estimate on Margin Pressure

In Reports, What's New, Industry News by Jeff Prine

Sandals from Nine West's spring collection

Sandals from Nine West’s spring collection

New York—The Jones Group Inc. said today that it swung into a first quarter profit but its earnings still missed analysts’ expectations.

For the quarter ended April 6, the apparel and accessories company posted net income of $500,000, or 1 cent a share, compared to a loss of $1.2 million, or 1 cent a share, in the same quarter a year ago. Jones’ first quarter earnings included charges of $17 million related to the planned closing of certain company-owned retail stores, restructuring, acquisitions and other cost-saving initiatives.

Excluding those charges, adjusted per share earnings were 15 cents a share. That, however, was 10 cents lower than the 25 cents a share that analysts’ average estimate expected.

Net revenue increased 7.8% to $1.01 billion ahead of analysts’ consensus for $997.43 million in sales.

Lowers Full Year Sales Forecast

“First quarter revenues were in line with our revised expectations, with the jeanswear business registering the largest improvement in operating results,” said Wesley R. Card, Jones’ chief executive. “For other areas of the business, the cold weather negatively impacted seasonal spring product sales and, accordingly, gross margins for the first quarter were approximately 210 basis points below last year. (narrowing to 34.5% from 36.7%.)”

Card reported that the company’s U.S. wholesale footwear and accessories business registered improved operating results. But the company’s international business, primarily retail, were hurt by economic conditions and cold weather, particularly in Europe.

“We expect continued margin pressure in sportswear in the second quarter, as we clear spring merchandise in anticipation of our new and refocused product offerings for fall,” Card said.

Last week the company announced plans to shutter about 170 underperforming stores by mid-2014 and cutting about 8% of its workforce in an effort to increase profitability.

But Jones, whose portfolio of brands includes Nine West, Stuart Weitzman and Jessica Simpson, also lowered its 2013 sales forecast. The company now expects annual revenue between $3.8 billion to $3.95 billion compared to its earlier forecast for $3.9 billion to $4.1 billion. Analysts’ estimate expects $3.9 billion in sales.

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