Jones Apparel

(JNY)

did much better than Wall Street expected in the first quarter and boosted its outlook for the rest of the year.

For the quarter ended April 6, Jones, which sells apparel under such names as Nine West and Ralph Lauren, posted net income of $70.7 million, or 53 cents a share, compared with $96.4 million, or 75 cents a share, a year earlier.

Excluding previously announced charges, the New York-based company reported first-quarter earnings of 77 cents a share -- 12 cents better than the consensus estimate of 65 cents a share, according to Thomson Financial/First Call. Just four weeks ago, the company

boosted guidance for the quarter, which it then exceeded as the consumer sector continues to outpace the expectations of many retail executives and analysts.

While two nuggets of data this week -- consumer confidence dipped slightly in April and

Wal-Mart

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reported slightly disappointing weekly sales -- provide a counter to the rosy picture of the consumer economy, Jones Apparel's report suggests retail spending remains strong.

"The resiliency of the economy and the performance of our products in the retail channel, including our own retail stores, generally exceeded our initial expectations," said Sidney Kimmel, Jones' chairman, in a statement.

The company, which does over $4 billion in sales a year through wholesale and retail channels, said it now expects earnings of $2.65 for 2002, compared with a consensus estimate of $2.54 per share. For 2003 it expects earnings of $2.95 per share, up from the current consensus of $2.90. It forecast a long-term earnings growth rate of 15% annually.

Some analysts say this guidance is overly cautious, and that the company could easily beat it should the demand grow for career-oriented clothing, which some are banking on for the second half of the year. Much of Jones' strength this year has come from footwear and jeans, with dressier attire suffering.

"It was really quite a bevy of strength, offset by a tough career environment," says Todd Slater, who covers the company for Lazard Freres and is expecting a rebound in career clothing in the second half. "They're unusually cautious given the strength of the first quarter. I don't think they're projecting some big turn in career to hit their numbers." (He has a buy rating on the stock, and his firm has had a banking relationship with the company.)

The stock was up lately 61 cents at $39.11. Shares are now up about 19% on the year, but still lower than their 52-week high of $47.43. At around 13 times next year's estimated earnings, the stock is trading at a discount to its 15% growth rate.