Jones Group sales, forecast disappoint, shares fall

Jones Group Inc reported disappointing quarterly sales and a lower-than-expected full-year revenue forecast, sending shares of the Jones New York and Nine West brand owner down nearly 9 percent.

Jones Group Inc
Nine West is one of Jones Group's fashion apparel brands

Jones' sales of sportswear and jeans to U.S. chains such as Macy's Inc , and sales at its own U.S. stores fell in its third quarter. The company forecast full-year revenue of only between $3.8 billion and $3.87 billion, and warned investors that retailers were being cautious about placing orders.

Department stores generate half of Jones' sales.

"The biggest contributor to the miss was the domestic wholesale jeanswear segment," Lazard Capital Markets analyst Diana Katz wrote.

Jones is in talks to shed that business as it turns its focus to luxury goods, especially shoes. But it is still reliant on brands that cater to middle-income shoppers worried about their prospects in a tough economy.

Sales of basics and inexpensive items have been weaker, said Chief Executive Wes Card on a conference call.

He declined to provide an update on talks Jones is holding with Israel's Delta Galil Industries Ltd , a maker of private-label clothing, to sell the jeans unit for between $350 million and $400 million.

Jones shares were down $1.06, or 8.8 percent, to $10.92 in late morning trading on the New York Stock Exchange.

LUXURY TO THE RESCUE

Jones' gross margin, which measures the profitability of the goods it sells, rose rising 2.2 percentage points to 35.7 percent. That came largely from Kurt Geiger, the high-end British shoe brand it bought this year and which it will introduce in the United States in 2012.

Stuart Weitzman, a shoe brand it bought last year, is still a small part of Jones' revenue, but the company said its sales rose 7.1 percent during the quarter.

The company also said its Anne Klein brand would return to Nordstrom in the spring after a four-year hiatus.

Jones expects margins to continue improving.

To achieve that goal, Jones is keeping inventory levels lean, which would reduce the need to slash prices if demand slumps. Excluding Geiger, inventory was down 5 percent at the end of the quarter.

Jones reported a 2.2 percent increase in revenue to $1.04 billion, below Wall Street's forecasts of $1.09 billion, according to Thomson Reuters I/B/E/S. Its full-year forecast was also below the $3.97 billion that analysts expected.

Cost cuts and improving margins helped its adjusted earnings per share of 48 cents beat Wall Street's forecast of 45 cents.

By Phil Wahba

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