Jones Apparel Lowers Outlook, Blames Discounts

Clothing manufacturer Jones Apparel Group Inc. (JNY) slashed its profit-per-share forecasts for fourth-quarter 2004 and for 2005 Friday, citing widespread discounting by its retail customers, sending its shares down as much as 8 percent.

Consumers delayed holiday shopping until very late in the season, which led Jones to sell more apparel to off-price outlets, cutting into margins, Chief Executive Officer Peter Boneparth said in a conference call with analysts.

"Consumer interest clearly in the quarter came extremely late," Boneparth said.

Warm weather hurt boot sales in its Maxwell Shoe (search) business, while consumers relying more on gift cards for presents also hampered sales in the key holiday shopping season, he said. Many gift cards are not exchanged until after the beginning of the year.

"Sales came late in the quarter and at a discount. Retailers canceled orders in season," Prudential Equity Group LLC retail analyst Lizabeth Dunn wrote in a research note. "Jones was left with excess product which was liquidated in the off-price channel."

All of that put pressure on Jones' margins, said Dunn, who cut her 12-month price target on the company's stock to $35 from $38.

The New York-based company now expects to earn between 28 and 30 cents per share in the fourth quarter, down from an earlier forecast of between 40 and 45 cents a share and a decline from the 33 cents posted in the year-earlier quarter.

For the full year 2005, it expects earnings per share of $2.75 to $2.90, down from a previous forecast of between $3.00 and $3.10. That compares to a Reuters Estimates forecast of $3.07.

This forecast includes the projected results of Barneys New York (search), the luxury retailer Jones acquired at the end of 2004, and incremental interest expense associated with a $750 million senior note financing completed in November 2004, Wesley Card, chief operating and financial officer, said in a statement.

The company forecast 2005 total revenues in a range of $5.3 billion to $5.4 billion. That compares to Reuters Estimates for $5.04 billion.

The company still has "significant financial flexibility," Card said, noting that it ended the year with $69 million of short-term borrowings and $331 million of outstanding letters of credit against $1.5 billion in committed bank lines.

Jones shares were down $2.02, or 5.7 percent, at $33.72 on Friday on the New York Stock Exchange. The stock traded as low as $32.75 earlier in the session, its lowest level since November 2003.