NEW YORK — The government shutdown, soft back-to-school sales and increased inventory levels pressured The Jones Group Inc.’s footwear segment in the third quarter. Still, there were several bright spots.
“Our star performer was Stuart Weitzman. It had a phenomenal quarter,” CEO Wesley Card told Footwear News last Wednesday after the firm announced earnings for the period ended Oct. 5.
In particular, Card cited the label’s swift-selling 5050 boot, which was boosted by marketing efforts surrounding the style’s 20th year. “We’re also enthusiastic about the new campaign [featuring Kate Moss] and the store in Milan [designed by] Zahah Hadid,” he added.
The executive — who declined to discuss increasing buzz about a sale of all or part of the company — also was upbeat about Jones’ Kurt Geiger business, which launched its wholesale brands in Nordstrom doors this fall.
“Kurt Geiger in the U.K. had a nice pickup at the end of the quarter and into October,” Card said. In addition, he praised Jones’ business in the contemporary and moderate categories. “Our own stores and the new products we have been marketing under our own brand labels — KG, Carvela and others — have picked up nicely with the colder weather. Our other brands, [such as] Easy Spirit, Nine West and Anne Klein, all performed reasonably well in a tough promotional environment.”
Looking to the fourth quarter, boots and booties remain popular, which bodes well industrywide, according to Card. “Boots are selling very strong and we feel good about that,” he said. But hurdles for the next three months could include ever-increasing raw material and labor costs in Asia, plus consumer sensitivity to rising prices.
“Consumers are so focused on value that it’s really hard, especially at the mid-tier and better price points, to offer that value and raise prices, particularly in this promotional environment,” Card said. “That, I believe, is the biggest challenge we are facing as an industry.”
That’s partly why the company has been focusing on more upscale labels, the CEO noted.
“With higher-end products, there is more price elasticity and less price resistance,” he said. “Our Stuart Weitzman and Kurt Geiger brands are higher price points, but they are positioned at the opening price point in luxury, so that’s helpful.”
The company posted a 66.5 percent increase in net income for the third quarter, beating Wall Street estimates. “Our revenues came in well, our margins were essentially flat and our [sales, general and administrative] expenses were down significantly,” Card said.
“We focused on expense control, and with the sales and margins coming in line, generated a nice improvement.”
Net income for the period was $28.3 million, or 38 cents a diluted share, compared with $17 million, or 22 cents, a year ago. On an adjusted basis, earnings per share were 48 cents, versus adjusted EPS of 57 cents a year ago. That’s still 6 cents better than the consensus estimate among Wall Street analysts for 42 cents.
Although net sales slipped 1.3 percent to $1.01 billion, versus last year’s $1.25 billion, both Card and Jones Group CFO John McClain were optimistic.
“We are hoping that the consumer is strong and that the holiday season is strong as well,” Card said.