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Original Source: FD (FAIR DISCLOSURE) WIRE
. Efthimios Sotos, Jones Apparel Group Inc., CFO . Peter Boneparth, Jones Apparel Group Inc., President, CEO . Howard Socol, Jones Apparel Group Inc., CEO, Barneys . Jeff Edelman, UBS Securities, Analyst
. Bob Drbul, Lehmna Brothers, Analyst . Liz Dunn, Prudential, Analyst
. Todd Slater, Lazard, Analyst . Virginia Genereux, Merrill Lynch, Analyst . David Glick, Buckingham Research, Analyst
JNY reported that 1Q06 net revenues were $1.22b. 1Q06 GAAP EPS was $0.22. Co. is targeting 2006 adjusted EPS to be equal to or exceeding 2005 adjusted EPS of $2.19.
A. Key Data From Call 1. 1Q06 net revenues = $1.22b. 2. 1Q06 total operating profit = $130.7m. 3. 1Q06 GAAP EPS = $0.22. 4. 1Q06 consolidated operating margin = 10.8%. 5. Inventory at end of 1Q06 = $590m. 6. Cash at end of 1Q06 = $140.2m 7. Total funded debt at end of 1Q06 = $1b. 8. During 1Q06, JNY repurchased 4.2m shares of common stock at an avg. cost of $125.1m. 9. Full year 2006 adjusted EPS target = Equal to or exceeding 2005 adjusted EPS of $2.19.
S1. Overview of Businesses (P.B) 1. 1Q06 Highlights: 1. Adjusted EPS was $0.66 or $0.22 on a GAAP basis vs. $0.73 in 1Q05.
2. JNY performed better-than-anticipated in the Wholesale Better
Apparel business due to higher shipping, better GM, and lower
opex. 3. Barney's New York performed very well during the qtr. exceeding the prior year period sales and operating profit
levels. 4. Gloria Vanderbilt platform remains very leverageable and Co. expects to see increased opportunities for growth here in the balance of the year and beyond. 5. Co. owned footwear and ready-to-wear stores generated comp store sales increases of 0.9%. 6. Barney's reported a comp store sale increase of 6.6% vs. the prior year period. 7. Tangible improvements in cost reductions are being realized in pre-production, supply chain management, customer service, compliance and non-merchandise purchasing. 8. JNY remains comfortable with the stated cost reduction goal of approx. $30m in 2006 and over $100m by end of 2007.
1. These saving will serve to offset the impact from department
store consolidations and expand future operating margin. 9. During 1Q06, JNY repurchased 4.2m shares of common stock at an avg. cost of $125.1m. 10. The Board of Directors also approved a quarterly dividend of $0.12 per share. 2. Wholesale Better Business:
1. In 1Q06, the overall tone of sell-through at retail was
exceptional. 1. All of Co.'s power brands are performing either at or exceeding plans. 2. Particular standouts are the Jones Signature line, Jones Sport, Anne Klein and Nine West apparel.
3. Dress and suit business are performing at retail well above
planned. 1. There certainly is a trend in the dress business. 2. Even though Co. has seen diminished volume over the last couple of years, JNY remains a market share leader. 2. In 1Q06, JNY is seeing the ability to actually replenish goods faster than before.
1. This is positively impacting business at retail and the performance with resale customers. 3. In 1Q06, Co. shipped a lot of goods that would normally be shipped in 2Q. 4. Going into 2007, Co. has set itself up for significant operating margin improvement in this business. 3. Wholesale Moderate Business: 1. Sports Wear: 1. Aside from the Erika business, the moderate sports wear businesses were generally above plan for the qtr.
2. Particular highlight was the Bandolino business. 2. Gloria Vanderbilt: 1. This division as a whole experienced their biggest qtr. in the division's history from both the top and bottom line
perspective. 2. Co. is starting to see a very positive impact on leveraging the overhead structure here. 3. Co. will continue to leverage the overhead structure going forward in terms of purchasing, collaboration on sourcing and design, and so forth. 4. Gloria Vanderbilt brand itself continues to perform well. 1. Caprice as a category got off to a slow start, very weather related, but is coming on nicely now. 2. Scorts and shorts are excellent, and are running very high percentages over plan. 5. Bandolinoblu is doing nicely, trending above plan, and well above lei. 6. GLO continues to perform at a high rate about the introduction of [Greim]. 1. Greim was going to be department store only in the juniors
category. 2. Done under the Gloria Vanderbilt division, the selling has been exceptional. 3. Co. expects a significant rollout in 2H06 and in spring of '07. 3. lei: 1. JNY has restructured this business, and will be under Jack Gross' leadership. 2. Co. is beginning to see the turnaround from an execution and resale performance standpoint. 3. lei's basic business is very good and Co. is going to intensifying this as a percentage of sales. 1. Currently this is running at 25-30%. ] 2. Going forward, this can be about 50% of the business. 4. lei for the qtr. has exceeded or achieved plans in every one of the major retail categories.
5. The challenge and the opportunity are going to be in back-to-school.
4. Energie: 1. This is the highest operating margin business in Co. 2. Energie is going to benefit a bit in 2H06. 3. With Federated some of the private label programs that May Company had previously done will be done by Energie since Co. is effectively the private label arm of Federated in the junior top business.
4. Going into 2Q06, there continues to be tremendous issues surrounding the consolidation …