USA -- Jones Apparel Group Inc reported results for the first quarter ended April 4, 2009. Revenues for the first quarter of 2009 were $891 million, as compared with $975 million for the first quarter of 2008. The decrease in revenues of 8.6% was reflective of overall economic conditions that are affecting retail sales and was realized across all of the Company's segments except wholesale jeanswear, which reported increased revenues of 3.4% compared with the prior year.

The Company reported adjusted earnings per share ("EPS") of $0.28 for the first quarter of 2009, as compared with adjusted earnings per share of $0.37 in the same period last year. These results exclude the non-cash impairment of assets related to the planned closure of certain Company-owned retail stores, the related impact of severance and other expenses related to this strategic restructuring, and certain other charges (see reconciliation of adjusted earnings to reported earnings in the accompanying schedule).

As reported under generally accepted accounting principles ("GAAP"), the Company reported earnings per share of $0.00 for the first quarter of 2009, as compared with earnings per share of $0.23 for the same period last year. The 2009 first quarter results include, among other items, non-cash retail store asset impairment charge of approximately $21 million ($14 million after tax) related to Company operated stores within the retail segment and a charge of $14 million ($9 million after tax) related to other cost savings initiatives.

Wesley R. Card, Jones Apparel Group President and Chief Executive Officer, stated: "Given the overall economic environment, we were satisfied with our first quarter results, which reflect the actions we have taken to control expenses and manage our capital. Our wholesale jeanswear segment performed well; however, our other wholesale businesses were impacted by reduced orders and higher markdown support in the continuing promotional environment. Our own chain of retail stores was impacted by the slowing retail sales trend and promotional environment and registered a 10.6% decrease in comparable store sales during the quarter."

Retail Improvement Strategy and Cost-Reduction Initiatives
The Company reevaluated its Company operated retail store strategy given economic conditions and trends, and has adopted a plan to right-size the retail portfolio, with the goal of enhancing segment profitability and improving return on invested capital. As part of this strategy, the Company plans to exit approximately 225 locations throughout 2009 and 2010 and will also continue to test and evaluate new concepts, such as ShoeWoo.

As a matter of course, the Company continually evaluates its portfolio of stores, and now is an opportune time to take action as this plan can be adopted with the use of minimal cash expenditures. The Company anticipates expense savings and the elimination of unprofitable store locations to improve results by $3 million in 2009, $14 million in 2010 and $20 million in 2011. These actions will also reduce future capital expenditures relating to such locations.

In addition to the retail improvement strategy, the Company implemented additional cost savings actions during the first quarter to further align the Company's cost structure with anticipated demand levels and to preserve financial flexibility. The cost savings initiatives underway, which are in addition to those implemented in 2008, largely include personnel reductions, and are expected to result in annual savings of approximately $20 million. Such actions began during the first quarter and the Company expects that full year 2009 will benefit by approximately $13 million ($9 million after tax).
 
Mr. Card continued: "While overall results are still reflective of low consumer confidence and spending levels, we believe that there is enhanced value to be realized in our businesses through continued prudent cost management and creative marketing and branding. The time is also right to implement our comprehensive strategy to return our retail segment to profitability, as we have many leases expiring in the next two years."

John T. McClain, Jones Apparel Group Chief Financial Officer, commented, "We continue to manage costs and have identified $20 million in annual savings in 2009, which is in addition to the $33 million in annual SG&A savings we implemented at the end of 2008 and the $17 million of cost increases we avoided by freezing salaries and wages."

Cash used by operations during the quarter was $139 million, compared with cash used by operations of $66 million in the prior year. The year-over-year change in cash used is primarily due to changes in working capital flows, the receipt of a $23 million tax refund in the prior year and lower operating earnings. Working capital flows were impacted by the timing of cash disbursements and less seasonal inventory decreases due to an inventory increase to support the Company's l.e.i. business. The Company continues to have no amounts drawn under its $600 million of committed revolving credit facilities.

The following notable events have recently occurred:
• announced the launch of Rachel Rachel Roy, a contemporary line, including sportswear, footwear and accessories, which will debut in August 2009;
• began selling New Balance for Nine West at select Nine West and New Balance stores, on-line at www.ninewest.com and internationally;
• launched an e-commerce site for our Anne Klein brand at anneklein.com;
• introduced Nine Loves, a Nine West rewards program, at our retail stores and on ninewest.com;
• announced an improvement strategy to return Company-owned retail stores to profitability; and
• near completion of new multi-year senior secured credit facility and debt tender offer to enhance financial flexibility.

As announced on April 1, 2009, the Company is pursuing a new senior secured credit facility for up to $650 million, which will replace its existing $600 million credit facility that expires in May 2010. The new three-year facility will provide the Company with significantly greater flexibility, while providing term certainty to weather the current difficult economic environment. The Company concurrently undertook a debt tender solicitation for its $250 million of notes due November 2009. Approximately $240 million of notes will be tendered in connection with the offering. The Company will primarily use cash on hand to fund this debt retirement.

Mr. McClain continued: "Our financial position remains strong. We ended the quarter with $194 million of cash, approximately the same as last year, and our revolver continues to be undrawn. We anticipate that we will close on our new credit facilities and debt tender within the next week. With the closing of these transactions, we will reduce our outstanding debt by over $240 million and extend the tenor of our bank facilities to April 2012. The new agreement reduces financial covenants and provides ample liquidity for our operations. We are very pleased to be completing these transactions during such an uncertain time in the capital markets."

Mr. Card concluded: "Consistent with past actions, we are taking the necessary steps towards operational excellence, including aggressive inventory management, optimizing our distribution channels and updating our technology infrastructure. We remain cautious in our outlook for 2009, and as the year progresses, our focus will be on financial stability, maintaining our market share and positioning the Company for the ultimate recovery." 

Jones Apparel Group Inc