Jones Apparel Group Inc. Reports Operating Results (10-Q)
Jones Apparel Group Inc. has a market cap of $1.98 billion; its shares were traded at around $22.68 with a P/E ratio of 19.9 and P/S ratio of 0.6. The dividend yield of Jones Apparel Group Inc. stocks is 0.9%.JNY is in the portfolios of HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, Richard Pzena of Pzena Investment Management LLC, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC, Bruce Kovner of Caxton Associates, Steven Cohen of SAC Capital Advisors, Jeremy Grantham of GMO LLC.
Highlight of Business Operations: We have decided to close approximately 270 underperforming retail locations by the end of 2010, of which 160 have closed as of April 3, 2010. Total termination benefits and associated employee costs are expected to be $4.7 million for approximately 1,200 employees, including both store employees and administrative support personnel. Of this amount, we recorded $0.1 million and $3.1 million during the first fiscal quarters of 2010 and 2009, respectively. We also recorded $0.7 million and $20.4 million of impairment losses on leasehold improvements and furniture and fixtures located in the stores to be closed during the first quarters of 2010 and 2009, respectively. These costs are reported as selling, general and administrative ("SG&A") expenses in the retail segment.
Retail revenues increased $0.7 million, primarily due to a 7.9% increase in comparable store sales ($9.7 million) resulting from product performance, the closure of underperforming locations and the positive impact of a shift in the Easter holiday, partially offset by operating fewer stores in the current period. 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 10.5% increase in comparable store sales for our footwear stores ($7.6 million) and a 25.6% increase in our comparable e-commerce business ($2.7 million) were partially offset by a 1.4% decrease in comparable store sales for our apparel stores ($0.6 million). We began 2010 with 938 retail locations and had a net decrease of 61 locations to end the period with 877 locations, compared with 1,005 at the end of the prior period.
Wholesale better apparel SG&A expenses decreased $2.2 million, primarily due to $1.2 million in cost savings due to headcount reductions, a $1.1 million reduction in bad debt expense as the result of a customer bankruptcy in the prior period, a $1.0 million reduction in marketing and advertising spending and $2.8 million of other net cost reductions. These decreases were offset by $3.3 million of expenses added as a result of the Moda acquisition and a $0.6 million effect of unfavorable changes in exchange rates between the U.S. and Canadian Dollars.
Wholesale footwear and accessories SG&A expenses decreased $2.4 million, primarily due to a $1.2 million reduction in severance costs in the current period and prior period costs of $1.6 million related to the bankruptcy of our former United Kingdom footwear licensee, $1.5 million of settlements of sales and use tax audits and $1.4 million of loss accruals related to certain leased property. These decreases were offset by a $1.7 million increase in administrative costs, a $1.1 million increase in salaries and benefits and $0.5 million of other net cost increases in the current period.
Retail SG&A expenses decreased $27.9 million, primarily due to a $22.7 million reduction in restructuring and asset impairment charges from the prior period related to the closing of approximately 270 stores through the end of 2010 and an $8.3 million reduction in salaries, occupancy and depreciation expenses due to operating fewer stores in the current period, partially offset by a $1.1 million increase in administrative costs and $2.0 million of other cost increases in the current period.
SG&A expenses for the licensing, other and eliminations segment increased $8.7 million, primarily due to a $5.0 million increase in amortization of equity-based compensation, a $1.2 million increase in professional fees (including $0.6 million related to the acquisition of Moda) and $2.5 million of other cost increases.
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