Jones Trims Fat to Get Back on Track

NEW YORK — A year of hard work lies ahead for The Jones Group Inc. as it continues to plan business conservatively and streamline operations to cut costs.

At the same time, the New York-based firm remains upbeat on footwear and accessories, even though first-quarter performance was mixed across wholesale and retail.

“Domestic wholesale footwear and accessories showed improved operating results in the quarter,” Jones CEO Wesley Card said last Wednesday on a conference call with analysts and investors. “Retail sales were not quite at the pace of last year [as they were] challenged by the cold weather, and sandals and other spring fashions just didn’t open up.”

Card added that cold weather and the weakness in economic conditions in Europe put a drag on the international wholesale and retail segments of the business.

Richard Dickson, president and CEO of Jones’ branded businesses, touched on bright spots across the shoe portfolio, which include designer brands.

“We remain highly encouraged by the growth trajectory of Stuart Weitzman and its global potential to become a megabrand in the Jones Group portfolio,” he said, adding that the label’s sales increased double digits versus a year ago.

Meanwhile, the focus on B Brian Atwood this year is to optimize the brand’s performance at various distribution points. Card said, “[We’re] pulling back in some cases where the brand has underperformed and are adding important new channels such as, where performance has been positive this spring.”

First-quarter sales for the Kurt Geiger division grew double digits, despite continuing softness in the European economy, said Dickson. Jones’ own footwear brands are selling well in the Kurt Geiger stores, with sales up 83 percent versus a year ago. Near-term expansion plans for Kurt Geiger in the States include at least six stores, and high-margin promotional outlets are set to launch in the second half of this year.

Strategies for Nine West, the group’s largest brand by percentage of total revenue, keep evolving, according to Dickson. “E-commerce continues as an emerging strength and focus for innovation on our brands,” he said. “We’re leveraging the success of Channel 9 to drive commerce as a pioneer in integrated shoppable video.”

Meanwhile, there will be some store closures. Jones plans to close 170 stores, reduce its retail staff by about 18 percent and trim corporate, support and supply chain staff by roughly 2 percent to improve profitability by about $40 million.

Analyst Jennifer Black, CEO of Jennifer Black & Associates, said, “In the short term, the biggest opportunities lie in the growth of the Stuart Weitzman brand, Kurt Geiger and the Jones New York improvement. It would be prudent for Jones to evaluate its underperforming brands and sell some that do not fit the long-term vision for the company. The decision to accelerate the closure of underperforming stores … and reduce expenses is a step in the right direction.”

For the quarter ended April 6, Jones was hit by hefty markdowns and one-time charges. Net income attributable to the firm was $500,000, or 1 cent a share, compared with a year-ago loss of $1.2 million, or 1 cent. Total revenue advanced 7.9 percent to $1.01 billion, from $936 million.

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