Jones Group looks to cut costs, plans 170 store closures

Jones Group

The Jones Group has revealed a strategic plan to generate approximately $40 million a year in savings through closing approximately 170 retail stores, reducing headcount and optimizing its wholesale channel.

The company said that it is “committed to improving its direct-to-consumer business, achieving operational excellence and enhancing profitability through strong cost discipline and careful inventory planning.”

This will see the company close around 170 stores by mid 2014. It said the plan is already under way, and includes the 50 store closures undertaken in the fourth quarter. The company said that once it completes the moves, it expects to operate a smaller and more productive chain of domestic stores, with outlet stores comprising a significantly higher proportion of the overall portfolio.

It is planning to optimize the wholesale channel, with a focus on sportswear, “through a more streamlined structure to support a brand-focused organization, including the consolidation of certain production, design and selling divisions, and consolidation of distribution and supply chain facilities.”

It will also reduce the number of retail staff by approximately 18% and corporate, support and supply chain staff by approximately 2%, reducing overall headcount by 8% upon completion. The company said that retail staff reductions and termination notifications began this month and will continue through the first half of 2014.

It expects the benefits of these moves to be approximately $11 million in 2013, and to reach $40 million in annualized pre-tax savings and reduction of operating losses by mid 2014. It expects to incur costs of 40-60 million in costs over the next 15 months to achieve the plan.

“We are focused on significantly improving margins in both the retail and wholesale channels and delivering outstanding products, said CEO Wesley Card.

“In early 2013, we marketed a refocused sportswear product offering for fall 2013, which we believe will resonate with our core Jones New York customers. Given the impact it will have on our associates, our decision to streamline operations was difficult. However, we believe these actions will position the company for maximum operating leverage and improved profitability as our businesses recover and grow.”

It also said that it expects first quarter revenue of $1 billion, compared to $936 million in the first quarter of last year.

“First quarter revenues were in line with our expectations, with the exception of our sportswear business and retail channel, which remained challenged and highly promotional,” added Card.

“This resulted in a higher than anticipated level of markdowns during the quarter for our wholesale customers, and deeper promotions required in our own retail doors.  Additionally, the unusually cold weather in the first quarter had an impact on sales of seasonal products. As a result, we expect gross margins for the first quarter of 2013 to be approximately 90 basis points below our estimates. We also anticipate continued margin pressure in sportswear in the second quarter, as we clear the spring merchandise in anticipation of the new fall product. We anticipate we will achieve improved performance in fall 2013 with our new and refocused sportswear product offerings.”

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