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The Jones Group draws new plan to improve profitability
24
Apr '13
The Jones Group Inc. announced a series of actions designed to improve profitability. The Jones Group is committed to improving its direct-to-consumer business, achieving operational excellence and enhancing profitability through strong cost discipline and careful inventory planning.  Accordingly, 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). 

The Jones Group Inc.

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