Jones Apparel Reaps Benefit of Cost Cuts

NEW YORK ( TheStreet) -- Jones Apparel Group ( JNY)is showing just what cost cuts can do. The apparel maker posted a 20% jump in second-quarter earnings following store closures and job cuts.

Investors applauded these efforts, sending shares up 3% to$12.28 in afternoon trading.

During the quarter the company, which owns Nine West and Ann Klein stores, earned $12.6 million, or 15 cents a share, compared with $10.5 million, or 12 cents, in the year-ago period.

Excluding charges, Jones Apparel earned 29 cents, far surpassing analysts' expectations of 7 cents.

Revenue rose 3% to $803.9 million from $829.4 million, lifted by the company's wholesale jeanswear division, which rose 28.5%. But revenue fell at most of the other segments.

The company's wholesale jeans business received a boost from an exclusive deal to sell its l.e.i. line at Wal-Mart Stores ( WMT).

Jones is also testing a new retail footwear chain called ShoeWoo.

In April the company said it would close 225 stores, and in January announced 185 job cuts, both efforts to pare down costs. Jones said it now plans to close 240 stores over the next two years, up from its previous estimate of 225.
Retailers Retrench

The company expects these initiatives will result in a gain of $4 million in 2009, $15 million in 2010 and $21 million in 2011.

While going forward Jones remains cautious, one analyst says its poised to

"We think that Jones is very well positioned to capitalize on an improving economic situation, with inventory levels now aligned with demand, cost cutting initiatives taking hold, and store closings taking place," analyst Jennifer Black, of the firm bearing her name, wrote in a note.

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