Jones Apparel Group expects to take a US$322.2m non-cash after-tax charge for goodwill and trademark impairment in two of its moderate businesses, which will lead it to report losses for both the fourth quarter and full year of 2006.

The vast majority of the charge - $290.8m - will be for goodwill impairment related to the 2001 acquisition of McNaughton Apparel Group and the 2002 purchase of RSV Sport, makers of l.e.i. jeans. The remainder relates to trademark impairment, principally of the Norton McNaughton brand.

As a result of the charges, Jones now expects net losses for the fourth quarter and full year of $2.48 and $1.27 per share, respectively. Excluding the impairment amounts and other charges, adjusted earnings per share are expected to be 51 cents for the fourth quarter and $2.25 for the full year.

"Many of our moderate brands are performing very well," said Peter Boneparth, Jones' chief executive officer.

"However, declining revenues and profitability with respect to Norton McNaughton, l.e.i. and certain of our other moderate price-point brands, along with changes in business strategy with respect to the Norton McNaughton brand, necessitate the recognition of a goodwill and trademark impairment."

He pointed out that, as previously announced, Jones is "closing unproductive manufacturing facilities and repositioning the brands for 2007."

Boneparth was CEO of McNaughton when it was sold to Jones six years ago. He initially managed the mid-market brands before succeeding Sidney Kimmel as CEO of Jones.

Boneparth has engineered a number of acquisitions as head of Jones, including Barneys in 2004, but has reportedly been considering either a sale or break-up of its assets since abandoning plans for an outright sale last year.

Jones expects to report fourth-quarter results on 14 February.
By Arnold J Karr.