The Jones Group Inc. announced a series of actions designed to improve profitability. The company’s plan will reset its domestic retail business through the
reduction of approximately 170 underperforming stores and will
streamline certain wholesale divisions and the supply chain.

Wesley R. Card, The Jones Group Chief Executive Officer, commented: “We are focused on significantly improving margins in both the retail and wholesale channels and delivering outstanding products.  In early 2013, we marketed a refocused sportswear product offering for fall 2013, which we believe will resonate with our core Jones New York customers.  Given the impact it will have on our associates, our decision to streamline operations was difficult.  However, we believe these actions will position the Company for maximum operating leverage and improved profitability as our businesses recover and grow.”

“We remain focused on our mission to create the leading global fashion company defined by premier brands and driven by exceptional talent, and have achieved success in diversifying our portfolio from a category, geographic and distribution perspective,” Card continued.

Actions to improve profitability include:

  • Closing approximately 170 underperforming domestic retail stores by mid-2014.  This plan is already underway and includes the 50 store closings announced in the fourth quarter of 2012.  Upon completion, The Jones Group expects to operate a smaller and more productive chain of domestic stores, with outlet stores comprising a significantly higher percentage of the overall retail portfolio.
  • Continuing critical assessment of individual store profitability on an ongoing basis, including consideration of converting certain stores to brands that offer the greatest opportunity for revenue growth and profitability.  
  • Optimizing the wholesale channel, with a focus on sportswear, through a more streamlined structure to support a brand-focused organization, including the consolidation of certain production, design and selling divisions, and consolidation of distribution and supply chain facilities.
  • Reducing domestic retail staff by approximately 18% and corporate, support and supply chain staff by approximately 2%, for a total headcount reduction of approximately 8% upon completion. Retail staff reductions and termination notifications began this month and will continue through the first half of 2014.
  • These actions are expected to generate approximately $40 million in annualized pre-tax savings and reduction of operating losses by mid-2014, with the benefit to fiscal 2013 expected to total approximately $11 million.  Savings will be generated through the reduction of the Company’s workforce and other selling, general and administrative expenses to reflect the Company’s smaller domestic retail footprint and more streamlined operations.
  • The Company expects to incur costs of approximately $40 million to $60 million over the next 15 months to achieve the plan. The costs to be incurred relate primarily to severance, store closures and non-cash asset write-downs (approximately $6 million).  

Preliminary First Quarter Results

The Company today also announced that it expects to report 2013 first quarter adjusted earnings per share (“EPS”) of approximately $0.15, compared with 2012 first quarter adjusted EPS of $0.31.  Included in the results will be charges totaling approximately $0.05 per share related to changes in foreign currency exchange, primarily pertaining to the British pound.  The adjusted results exclude charges related to impairments of assets, the impact of severance and other costs related to restructuring activities, certain acquisition-related costs and other costs not considered relevant for period-over-period comparisons (see reconciliation of adjusted earnings in the accompanying schedule).  As reported under generally accepted accounting principles (“GAAP”), the Company expects to report 2013 first quarter EPS of approximately  $0.01, compared with a 2012 first quarter loss per share of $(0.01).
The Company expects to report 2013 first quarter adjusted and GAAP revenues of approximately $1 billion, compared with 2012 first quarter adjusted and GAAP revenues of $936 million.

Card commented: “First quarter revenues were in line with our expectations, with the exception of our sportswear business and retail channel, which remained challenged and highly promotional.  This resulted in a higher than anticipated level of markdowns during the quarter for our wholesale customers, and deeper promotions required in our own retail doors.  Additionally, the unusually cold weather in the first quarter had an impact on sales of seasonal products.  As a result, we expect gross margins for the first quarter of 2013 to be approximately 90 basis points below our estimates.  We also anticipate continued margin pressure in sportswear in the second quarter, as we clear the spring merchandise in anticipation of the new fall product.  We anticipate we will achieve improved performance in fall 2013 with our new and refocused sportswear product offerings.”

Second Quarter and Full Year 2013 Guidance

Inclusive of the strategic actions to improve profitability, the Company estimates that 2013 second quarter and full year adjusted and GAAP revenues will be in the ranges of $820 to $850 million and $3.80 to $3.95 billion and gross margin will be in the ranges of 35.2% to 36.0% and 35.9% to 36.1%.  Selling, general and administrative expenses are estimated to be in the ranges of $290 to $305 million and $1.20 to $1.25 billion, on an adjusted basis, while in the ranges of $300 to $315 million and $1.23 to $1.28 billion, on a GAAP basis.

The company’s internationally recognized brands and licensing agreements (L) include: Nine West, Jones New York, Anne Klein, Kurt Geiger, Rachel Roy (L), Robert Rodriguez, Robbi & Nikki, Stuart Weitzman, Brian Atwood (L), Boutique 9, Easy Spirit, Carvela, Gloria Vanderbilt, l.e.i., Bandolino, Enzo Angiolini, Nine & Co., GLO, Joan & David, Miss KG, Kasper, Energie, Evan-Picone, Le Suit, Mootsies Tootsies, Grane, Erika, Napier, Jessica Simpson (L), Givenchy (L), Judith Jack, Albert Nipon, Pappagallo and Rafe (L).