The Jones Group Inc.’s move to diversify with new acquisitions and designer launches is paying off.
Not only did the firm’s recent purchase of Kurt Geiger contribute $77 million to group revenue in the third quarter, but it also buoyed gross margin by 170 basis points. The British retailer is now expected to add a total of $215 million to $220 million to full-year revenue, Jones said.
“We are pleased that Kurt Geiger has delivered good performance despite the eurozone economic turmoil,” Richard Dickson, president and CEO of branded businesses, said in a conference call with analysts, adding that plans are under way to open Kurt Geiger stores on Madison Avenue and possibly in Soho in Manhattan by spring ’12.
As far as bringing Jones’ brands across the pond goes, however, company CEO Wes Card said, “We won’t see our products in there until well into next year, though Kurt Geiger is starting to market those actively. [We’re] really laying the groundwork for future potential in international.”
Back at home, Dickson said B Brian Atwood was the No. 1 contemporary shoe launch this year at Saks Fifth Avenue, Bloomingdale’s, Neiman Marcus and Nordstrom. “We’re thrilled with the brand performance. We will concentrate on maintaining strength in the [existing] doors and expand the brand into additional stores for fall ’12,” he said.
Stuart Weitzman, which is majority-owned by Jones, has not slowed either, with year-to-date sales up 12 percent in the U.S. and 14 percent in Europe.
“Diversification is working for the group,” said Janet Kloppenburg, analyst at JJK Research. “Jones has been wise to make acquisitions, including Kurt Geiger, because if challenges continue in the moderate brand [space], they’ll be able to offset that to some extent with their growing international business. The footwear business had better margins in the quarter, too.”
Card told Footwear News the company’s contemporary business has been very strong with retailers, as customers have responded well to new fashions. However, he’s bracing for another promotional holiday season, predicting sales to be up in the low single digits.
“We’re headed into a continued choppy environment in 2012, and our retail customers are planning very cautiously,” Card said. “To deal with this, we continue to focus on execution and emphasizing the basics, buying tightly against demand and minimizing our exposure to excess seasonal goods, productively managing our supply chain and tightly controlling our expense.”
Weighing in on cost-inflation issues, the CEO noted, “Labor rates continue to escalate, but [with] worldwide demand slowing … I don’t think we’re going to feel a level of price increase [like what] we felt in the back half of this year.”
Jones’ third-quarter income was $41 million, or 49 cents a share, up from $29.1 million, or 34 cents, in the same period a year earlier. Excluding restructuring- and acquisition-related costs, earnings fell to 48 cents, from 54 cents. Revenue advanced 2 percent to $1.04 billion.