JONES APPAREL GROUP INC. $4.17 (New York symbol JNY; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 83.4 million; Market cap: $347.8 million; Price-to-sales ratio: 0.1; WSSF Rating: Average) designs clothing, accessories and footwear for men and women. Major brands include Jones New York, Gloria Vanderbilt and Nine West. Department stores account for the bulk of Jones’s sales. The company also operates around 1,000 of its own retail stores and outlets.
Jones continues to cut costs and lower inventories to deal with the slumping economy. It feels these moves will save it $33 million a year.
The company also plans to conserve cash by cutting capital spending by 35.7%, to $45 million in 2009 from $70 million in 2008. As well, it has cut its quarterly dividend by 64.3%, to $0.05 a share from $0.14. The new annual rate of $0.20 yields 4.8%. The lower dividend should save it $30 million a year.
Jones expects to write down goodwill related to previous acquisitions and trademarks by $810 million (after tax). This is an accounting adjustment, and does not affect Jones’s cash balances, which were roughly $335 million, or $4.00 a share, at the end of 2008. The company also has $600 million in untapped credit facilities.
The stock now trades at 4.8 times the $0.76 a share that Jones will probably earn in 2009, excluding unusual items. Jones’s restructuring should also quickly increase its earnings once sales improve.
Jones Apparel Group is a buy.
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