Jones Apparel Group Inc. (JNY) has been aggressively cutting inventories as it adjusts to the new economic reality in the retail sector. The company has been posting huge earnings surprises, beating for 4 consecutive quarters by an average of 146.2%. Jones Apparel has a forward P/E of 14.98.
Company Description
Jones Apparel designs and manufactures apparel, footwear and accessories. It operates a chain of retail stores and e-commerce websites. Its brands include Jones New York, Nine West, Anne Klein, Gloria Vanderbilt, Easy Spirit, Joan & David, Sam & Libby, Napier and Judith Jack, among others.
Jones Apparel also has license agreements for several of its trademarks on items the company does not manufacture.
Jones Apparel Posted Another Big Beat in the Third Quarter
On Oct 28, Jones Apparel reported its third quarter results and easily surprised on the Zacks Consensus Estimate by 70.37%. It was the third big beat in a row, having surprised in the first and second quarters by 180% and 314.3%, respectively.
Earnings per share were 46 cents compared to the Zacks Consensus of 27 cents. This was also a 12 cent increase from the year ago period.
The key to success in the quarter was controlling inventories as revenues declined 11%. Inventories dropped 24% year over year.
Comparable store sales in the retail segment were lower which was expected given the difficult economic environment.
Jones Apparel has also been closing stores in order to adjust to the new retail reality. Through the third quarter, the company closed 69 locations and expects to exit 265 locations through the remainder of 2009 and 2010.
On the positive side, the company is beginning to see signs of improvement in the vertical retail business.
Zacks Consensus Estimates Rise
Analysts liked what they heard in October as fourth quarter and full year estimates rose in the last 30 days. The fourth quarter Zacks Consensus climbed 1 cent to 11 cents.
Analysts now expect 26.28% earnings growth in 2009. The 2009 Zacks Consensus Estimate rose 3 cents to $1.11 per share in the last 30 days with 1 out of 8 analysts raising during that time.
Estimates also increased for 2010 in the last month to $1.27 from $1.24 per share.
Value Fundamentals
Jones Apparel Group is a Zacks #1 Rank (strong buy) stock. It is trading with a price-to-book ratio of 1.16. The company also rewards shareholders with a dividend yielding 1.20%.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.
