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Jones Apparel Group Inc. Reports Operating Results (10-Q)

July 30, 2010 | About:
Gordon Pape

10qk

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Jones Apparel Group Inc. (JNY) filed Quarterly Report for the period ended 2010-07-03.

Jones Apparel Group Inc. has a market cap of $1.5 billion; its shares were traded at around $17.23 with a P/E ratio of 12.9 and P/S ratio of 0.4. The dividend yield of Jones Apparel Group Inc. stocks is 1.2%.JNY is in the portfolios of HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, Richard Pzena of Pzena Investment Management LLC, David Dreman of Dreman Value Management, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors, Jeremy Grantham of GMO LLC.

Highlight of Business Operations:

Retail revenues decreased $6.3 million, primarily due to the closure of underperforming locations. We began the current quarter with 877 retail locations, had a net decrease of 41 locations during the quarter and added 44 locations as a result of the SWH acquisition to end the period with 880 locations, compared with 980 at the end of the prior period. Comparable store sales increased 0.3% ($0.5 million) primarily due to sales increases at our Canadian locations. Comparable stores are those that have been open for a full year, are not scheduled to close in the current period and are not scheduled for an expansion or downsize by more than 25% or relocation to a different street or mall. A 27.6% increase in our comparable e-commerce business ($3.2 million) was offset by a 2.2% decrease in comparable store sales for our footwear stores ($2.2 million) and a 0.9% decrease in comparable store sales for our apparel stores ($0.5 million). The decrease in revenues was partially offset by $4.1 million related to the acquired Stuart Weitzman stores and a $1.4 million favorable effect of changes in exchange rates between the U.S. and Canadian Dollars.

Wholesale better apparel SG&A expenses increased $8.6 million, primarily due to $6.8 million of expenses added as a result of the Moda acquisition, which includes a $4.3 million fair value adjustment of the related acquisition consideration payable, a $1.9 million increase in salaries and benefits, a $0.9 million increase in advertising spending and $0.2 million of other net cost increases. These increases were offset by a $1.2 million favorable effect of changes in exchange rates between the U.S. and Canadian Dollars.

Wholesale jeanswear SG&A expenses increased $0.3 million. We recorded $2.8 million of charges related to the closure of our Texas warehouse in the current period. A $1.2 million reduction in advertising spending and a $2.5 million reduction in distribution costs were partially offset by $1.2 million of other net cost increases.

Wholesale footwear and accessories SG&A expenses increased $6.7 million, primarily due to a $4.7 million increase as a result of the SWH acquisition, a $1.4 million increase in advertising spending, a $1.3 million increase in distribution costs, a $1.2 million increase in administrative costs, a $1.1 million increase in salaries and benefits and $1.4 million of other net cost increases. These increases were partially offset by a $1.8 million reduction in restructuring costs in the current period and $2.6 million of costs in the prior period related to the bankruptcy of our former United Kingdom footwear licensee.

Retail SG&A expenses decreased $2.6 million, due to cost reductions of $3.9 million for occupancy, $3.0 million for salaries and benefits and $0.3 million of other costs related primarily to operating fewer locations during the current period, partially offset by a $0.8 million increase in administrative costs and a $0.8 million increase in marketing costs. The stores acquired in the SWH acquisition also added $3.0 million to the current period.

Net Interest Expense. Net interest expense decreased $5.5 million, primarily the result of a $7.9 million write-off of deferred financing fees related to the termination of our prior revolving credit facility in the prior period and a $1.1 million reduction in interest in the current period as the result of the repurchase of our 4.250% Senior Notes due 2009 in May 2009. These decreases were partially offset by $2.2 million of additional interest expense recorded in the current period related to our interest rate swaps and cap, $1.0 million higher amortization of deferred financing fees related to our revolving credit facility and $0.3 of other net interest reductions.

Read the The complete Report

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