Original Source: FD (FAIR DISCLOSURE) WIRE
. Thimio Sotos, Jones Apparel Group Inc., CFO . Peter Boneparth, Jones Apparel Group Inc., President and CEO . Howard Socol, Jones Apparel Group Inc., CEO, Barneys New York . Jeffrey Edelman, UBS, Analyst . Bob Drbul, Lehman Brothers, Analyst . Todd Slater, Lazard, Analyst . Margaret Mager, Goldman Sachs, Analyst . Virginia Syer-Genereux, Merrill Lynch, Analyst . Brad Stephens, Morgan Keegan, Analyst . Elizabeth Montgomery, Cowen and Company, Analyst . Omar Saad, Credit Suisse, Analyst . Jennifer Black, Jennifer Black Associates, Anaylst
Management discussed 4Q06 & 2006 results, reporting 4Q06 operating profit and GAAP loss per share of $94.3m and $2.51 respectively on net revenues of $1.21b. Guidance was for 2007 adjusted EPS of $2.41, or 10% over 2006 adjusted base of $2.19, and for 1H07 adjusted EPS 10% below 2H07.
A. Key Data From Call 1. 4Q06 net reveues = $1.21b. 2. 4Q06 operating profit = $94.3m. 3. 4Q06 GAAP loss per share = $2.51. 4. 2006 inventory = $636.3m at year-end. 5. 2006 total funded debt = $892.7m at year-end.
6. 2006 cash on hand = $71.5m at year-end. 7. 4Q06 shares repurchased = 2.8m shares for $94.3m, or avg. $33.43. 8. 2006 shares repurchased = 9.8m shares for $306.2m, or avg. $31.28. 9. 2007 adjusted EPS guidance = $2.41, or 10% over 2006 adjusted base of $2.19.
10. 1H07 adjusted EPS guidance = 10% below 2H07.
S1. 4Q06 & 2006 Performance (P.B.) 1. Highlights: 1. Adjusted EPS were $0.53. 1. $0.02 higher than press release two weeks ago. 1. Year-end reconciliation and lower-than-anticipated opex.
2. Overall 4Q macro story is that all trends co. has been talking
about throughout year continue to demonstrate improvement.
3. Reversal of trend is footwear retail business. 4. Good progress made in 2006. 1. Extremely well positioned going into 2007. 2. Better Apparel: 1. Overall sales performance at retail was good in 4Q. 1. All major accounts showed sales increases at retail level. 2. Finished year with Federated doing more Better Apparel
business, with approx. 90 fewer doors than year before. 1. Merchandise has been right throughout year against higher turn requirements and lower square footage. 2. Increased sales with them across all brands in Better areas. 2. Independent business was quite good.
1. Bon-Ton [did well], Nordstrom was up, Dillard's. 2. Anne Klein bridge business, Sachs business quite healthy 2H of year and into 4Q. 3. Demonstrated margin improvement for retail partners.
1. On average, retail margins for period are up about 2 points
off of same period last year for them, while co. also improved approx. 2 points for itself. 4. Seeing increased receipts and better margins for co. and retail partners - a winning formula going in to 2007 and beyond. 3. Brands: 1. Jones Collection up 6% in receipts and up 9% in sales. 2. Signature was up in 4Q.
3. AK, Bridge business was up, and AK Anne Klein, which was the
better piece of Anne Klein and Nine West accordingly. 4. All businesses showed positive increases in receipts and sales
for 4Q. 5. Moderate business, from sportswear perspective, margin
performance has increased over last year. 1. Ended on plan with major retailers with excellent performance by Jones Wear for JC Penney's, Evan-Picone for department store business, and Rena Rowan at Sears. 6. New strategy for Nine & Company (executed in fall season) showing substantial sales improvement. 1. Anticipating very strong spring selling season with Kohl's. 7. Regarding restructuring, in fall and 4Q, reduced air freight from 27% last year to 6% this year. 1. Also completed process improvement to move technical pattern making to factories. 1. Goal of 70% by year-end was achieved. 2. Deliveries in stores now are a function of that process, delivered on time and executed perfectly. 3. Co. will get faster as it works on model of turn time and cycle time reduction. 4. Categories Performing Well: 1. Sportswear driven largely by sweaters. 1. Cashmere business outstanding, outperforming competition by branded basis and private label. 2. 4Q more gift-driven than ever, carrying over into January with
gift card phenomenon. 3. Core pant, core [EBB] programs driving business in 4Q. 1. She continued to buy for herself gifts with gift card. 1. Color is starting to pay off - a factor in 4Q.
4. Dresses - across all sportswear and in dress business were a
particularly strong category in 4Q and into January. 1. Seen stock to sales increases in any dress business. 5. Basic Jones Suiting doing quite well - EBB program - an indicator that suits may be making comeback. 1. Largely diminished competition.
6. Blouses continued trending well in 4Q, looking to be important
into spring. 7. Dress business was spectacular. 1. Process improvements and speed to market have allowed co. to chase receipts in season in a way co. has not been able to do before.
8. Early spring selling on prints, color and [sheet] dresses
driving sales, with excellence performance to plan [and LY]
across these brands. 1. Fast-tracked (indiscernible). 1. Dress trend is through this year and likely beyond. 9. Suit business, ended year with substantially improved gross profit performance.
1. Disciplined buying and reduced air freight. 2. Margin performance at retail was right on plan with exceptional performance in Le Suit and Kasper. 3. Initial spring selling quite positive today. 10. Many of those same trends applying through the moderate
businesses as well. 11. Better and moderate sports business wear, good accomplishments. 1. Brands well positioned.
2. Room for improvement in process improvement. 5. Denim:
1. Outstanding year and 4Q. 2. Gloria Vanderbilt continues to resonate at high level with customer. 3. Sales, rated Number 1 or Number 2 in every major retailer in which co. sells that product, which should continue. 4. Pleased with performance of l.e.i. basics in 4Q, where co. was Number 1 basic performance at national chain stores. 1. Darker side seemed to bode well for 2007 back-to-school relaunch. 2. Rebranding has met with positive response from retail community. 5. Fashion more difficult in whole junior market. 1. To the extent basics become a more important part of that business, will bode well for sales and margin performance. 6. Gloria Vanderbilt, development of [V program] (which will now have major ownership to Vanderbilt casual line, which will have major presentation with retail partners for spring) did very well in 4Q. 1. Excited and replenishment piece of that business going in to 2007. 7. GLO girl was up vs. last year and [grain] girl was outstanding. 1. Grain business starting to grow with other accounts. 2. Expects some very nice increases in 2007. 8. Jack's overall performance in this area, regardless of brand, has been sensational. 1. Nothing suggests that will change in 2007. 2. His performance gets masked by weakness had in moderate sportswear. 6. Footwear & Accessories:
1. Nine West group, much better than last year at this time.
1. Good wholesale footwear performance. 2. Net revenues for 4Q increased 9% over last year. 1. Sequential quarters over increases on top line in this business. 1. Net revenues for Nine West, AK Anne Klein, Circa Joan & David increased over last year. 3. Enzo and Bandolino businesses dropped from LY, businesses themselves are in good shape. 7. Bandolino: 1. Bandolino business was a heavy May company resource. 1. Federated has started to change footwear business in May company stores, experienced initial drop. 1. But comp performance for fall was up at Macy's East almost double-digit and at Macy's West, co.'s two biggest accounts. 2. Feels very good about Bandolino business going forward. 8. Enzo:
1. Enzo business was down to LY. 1. Very good bright spots. 1. Several styles had enormous success at key retailers. 2. Using higher quality from Italy resonating with consumer and at retail.
2. 4Q, shipped first Anne Klein New York product. 9. Dress Category:
1. Dress category and specifically in Nine West, AK and athletic
piece of Easy Spirit performed exceptionally well during
quarter. 1. Continuation of trend seen throughout year.
2. Appointed Fred Allard as creative director for Nine West brand
for footwear and accessories. 1. Newly created position in which Fred oversees vision for entire Nine West branded of products and company-owned footwear handbag and jewelry divisions. 2. Already seeing benefit of consistency and presentation of this flagship brand. 1. Reaction has been terrific. 2. Looks forward to increased penetration in 2007. 10. International: 1. Business performing at very high level, posting double-digit increase in net revenues …