Sales for Q1 exceed expectations - Jones CEO

29 Apr '10

4 min read

Jones Apparel Group Inc reported results for the first quarter ended April 3, 2010. Revenues for the first quarter of 2010 exceeded expectations and were $887 million, as compared with $891 million for the first quarter of 2009. Gross profit margin increased 390 basis points to 36.8%, reflecting continued careful inventory management.

The Company reported adjusted earnings per share ("EPS") of $0.47 for the first quarter of 2010, as compared with adjusted earnings per share of $0.28 in the same period last year. Results for both periods exclude the impact of severance and other expenses related to the planned closure of certain Company-operated retail stores, and certain other charges (see reconciliation of adjusted earnings to reported earnings in the accompanying schedule).

As reported under generally accepted accounting principles ("GAAP"), the Company reported net income of $0.45 per share for the first quarter of 2010, as compared with net income of $0.00 per share for the same period last year. The 2010 first quarter results include, among other items, costs and charges of approximately $3 million ($2 million after tax) related to the acquisition of Robert Rodriguez and other restructuring and strategic review costs. In the prior year quarter, results included, among other items, non-cash retail store asset impairment charges of approximately $21 million ($14 million after tax) related to the closure of Company-operated stores and charges of $14 million ($9 million after tax) related to other cost savings initiatives.

Wesley R. Card, Jones Apparel Group Chief Executive Officer, stated: "We are very pleased with the results we achieved in the first quarter and the positioning and performance of our core brands. Sales for the first quarter exceeded expectations and operating margins increased in all segments compared with the prior year's quarter. Jeanswear margins were exceptionally strong, which is reflective of the group's execution and aggressive inventory management. Better Apparel and Footwear and Accessories were also strong performers, driven by higher gross margins. Our vertical retail operations results are much improved. We closed 63 retail locations this quarter and ended the quarter with 877 locations and are on track to close an additional 110 unprofitable locations by the end of 2010."

The following notable events have recently occurred:

• completed the acquisition of the Robert Rodriguez Collection, a designer, marketer and wholesaler of women's contemporary eveningwear and sportswear;
• launched an e-commerce site for ShoeWoo, our multi-brand retail shoe concept at website; and
• renewed license agreement with Luxottica for Anne Klein New York eyewear.

Cash used by operations during the quarter was $86 million, compared with cash used by operations of $139 million in the prior year. The year-over-year improvement in cash used by operations of $53 million is primarily due to higher operating earnings and slightly lower working capital requirements. The Company continues to have no amounts drawn under its $650 million of committed revolving credit facilities.

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