In the money: Cold weather and spring fashion cools Jones Group
The Jones Group has admitted that the cold weather during the second quarter had a "very negative" impact on the company's performance, and that it also faced challenges in its sportswear division.
Company CEO Wesley Card said that while carry-over sales of cold weather products such as boots were very strong, new spring items such as fashion apparel and footwear were weaker.
Speaking to analysts this week, Card said: "Domestic wholesale footwear and accessories also showed improved operating results in the quarter, although retail sales were not quite at the pace of last year.
"Retail performance in all of the footwear businesses were challenged by the cold weather. Sandals and other spring fashions just didn't open up until we are now getting into the warmer weather, and didn't perform as they did in the first quarter of 2012 which, if you remember, was a very warm period."
Internationally, cold weather also affected the company's performance, as did the continued macroeconomic weakness in Europe.
However, the domestic wholesale sportswear unit continued to be the "most challenged segment," said Card, noting that while the results are reflective of a "difficult product category in general" at retail, "our spring fashion products did not resonate with our targeted consumer".
"The Jones New York product line fashion quotient was dialled-up too aggressively and that's going to carry through second quarter. For this coming second half, we made major structural and design changes in the line," added Card.
The comments came as the company returned to a first quarter net profit, recording US$500,000 net income over the quarter ended 6 April, compared with a $1.2m loss in the same period of the prior year. Revenue increased 8% to $1bn from $936m.
Wholesale sportswear turnaround
Domestic wholesale sportswear saw revenue decline to $217m from $234m in the prior year, with sales down primarily in the Jones and Anne Klein brands. Operating margin in this division also fell sharply, down to 6.3% from 11.6% last year.
The company is working hard to turnaround the division. Richard Dickson, chief executive officer and president of branded businesses, said it is looking to diversify its portfolio, including creating and marketing reliable, go-to products for Jones New York.
"These destination items including Easy Care, denim, and Platinum suitings have become an important and growing component of the brand. In the first quarter, those items were 20% of Jones New York Sportswear retail sales versus 9% only a year ago."
However, he admitted that the group had pushed the fashion element too far last year.
"With dramatic improvements to our design capability in place, we sought to improve the performance of the fashion component of the brand by dialling up style and it didn't work, but we learned from it.
"We learned that fashion only goes so far in this segment right now and that value is fundamental to the brand's target consumer.
"We learned that Jones New York is valued for functional fashion and great fit. And most importantly, we have gained valuable understanding of the fact that Jones New York's equities as classic, American career wear offered greater potential than we had imagined, as a foundation for innovation and growth. Particularly among the brand's current loyal consumer base, women 45 and older, who want to look fashionable."
The company has since carried out extensive customer research and product testing, which has led it to overhaul the brand's pricing strategy to emphasise competitiveness and value.
"We developed our second-half collection, shipping this summer, side-by-side with research. It includes a reboot of what made the brand great, a system of career dressing at the right price, targeted to build our strength and share at the heart of the $79bn sportswear market, and it will launch this fall," said Dickson.
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