Pledging a profitable Jones The new CEO said that the firm would make money by '08 and that most of its sportswear division would be sold.

Posted: August 02, 2007

Jones Apparel Group Inc.'s new president and chief executive officer promised yesterday to return the company to profitability by 2008 by selling most of its sportswear division and fixing retail problems left by his predecessor.

Wesley Card's pledge in an earnings conference call came as the Bristol company reported a loss of $47.1 million, or 44 cents a share, for the second quarter. It reduced its forecast of profit for this year to a range of $1.28 to $1.34 a share from the $1.95 to $2.05 it had forecast three months ago.

After the announcements, Jones' shares fell 12.4 percent to a seven-year low of $21.86.

"There is no for-sale sign over the company," Card said, deflecting speculation that the company would put itself back on the market after unsuccessfully trying to sell itself last year.

Jones' chairman and cofounder, Sidney Kimmel, is an active philanthropist in Philadelphia. The Kimmel Center for the Performing Arts is named after him.

Jones has struggled for three years to reposition itself in a changing industry. Its profits fell in 2004 and 2005, and it posted a $144 million loss last year. High-end brands and trendy discount retailers have cut deeply into mid-market apparel companies such as Jones and competitors Liz Claiborne Inc. and Kellwood Co., which markets the Nautica brand.

Jones has said it believes its center of gravity is in selling its goods through department stores, a strategy spearheaded by former chief executive Peter Boneparth. However, department store sales have been declining for decades. Boneparth resigned three weeks ago.

Jones will still use department stores, but it will invest heavily in its core labels, such as Jones New York and Anne Klein clothing, and Nine West shoes. It plans to sell $700 million in underperforming brands this year.

Jones also said yesterday that it had agreed to sell its luxury fashion retailer, Barneys New York, to Fast Retailing Co. Ltd., of Japan, for $900 million. Jones agreed in June to sell it to a Dubai equity firm, Istithmar PJSC, for $825 million.

If Istithmar does not make a counteroffer in three days, Jones will pay it a fee of $22.7 million for breaking the agreement. Jones bought Barneys in 2004 for $400 million.

In an unusually candid public dialogue during the conference call, Card said he would change the "conflicting initiatives" that had plagued the retail side of business.

For example, he said, raising prices while reducing promotional events to boost profit ultimately hurt Jones.

Card said Jones already had started to bring price levels down to maximize sales and reduce inventory.

Contact staff writer Joseph Galante at 215-854-5194 or jgalante@phillynews.com.

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