* Q3 EPS 46 cents ex-items tops Street view of 27 cents
* Sales fall 11 pct to $855.7 mln, below Street view
* Sees improved industry margins for the holidays
* Shares down nearly 6 pct (Adds analysts' comments, 4th qtr outlook)
NEW YORK, Oct 28 (Reuters) - Jones Apparel Group Inc JNY.N reported lower-than-expected quarterly revenue on Wednesday, hurt by the closure of dozens of stores and falling sales at those that remain open, and its shares dropped nearly 6 percent.
The owner of the Nine West and Jones New York brands also tightened its 2009 revenue forecast and said it was cautiously optimistic the upcoming holiday shopping season would enhance financial results across the industry.
Jones now expects revenue of $3.31 billion to $3.34 billion this year, compared with a prior forecast for $3.30 billion to $3.35 billion. It expects same-store sales in the fourth quarter to range from down 2.5 percent to up 2.5 percent.
Chief Executive Wesley Card said he was confident margins would improve industrywide during the key holiday season as consumers seem to be buying without the need for steep markdowns that ravaged profits last year.
"We're cautiously optimistic about trends in the fourth quarter, but we have to see how the consumer reacts," Card said in an interview. "So far they've been buying against less markdowns. So it's encouraging, but it's still relatively volatile."
Jones, whose brands also include Enzo Angiolini and Anne Klein, said it has closed 69 locations and remains on track to eliminate 265 more by the end of 2010. That is up from its prior plan to close about 240 stores.
Morgan Stanley analyst Chi Lee said he thinks Jones will beat Wall Street's current profit estimates next year, since it should benefit from opportunities to restock store shelves that have been kept light, the exit of the Liz Claiborne LIZ.N brand from stores such as Macy's Inc (M.N) and margin improvements in the retail business.
Lee reiterated his "overweight" rating on the shares.
REVENUE MISSES ON SALES DECLINES
Net income in the third quarter was $30.4 million, or 36 cents per share, up from $27.3 million, or 33 cents per share, a year earlier.
Excluding one-time items, the company earned 46 cents per share, handily topping analysts' average estimate of 27 cents, according to Thomson Reuters I/B/E/S.
Revenue fell 11 percent to $855.7 million, below Wall Street expectations of $867.3 million.
The company said sales at its retail stores open at least a year were down, as anticipated, consistent with the overall retail environment, which has suffered as consumers rein in their discretionary spending.
Jones' overall same-store sales fell about 3 percent, hurt by an 11 percent decline at its mall-based shoe stores, which include Nine West and Easy Spirit. Its outlet stores saw a 1 percent decline.
The company said its inventories were down 24 percent from the prior year.
It expects cost savings from store closures to lift results by $4 million in 2009, $16 million in 2010 and $22 million in 2011, up slightly from its earlier forecast.
Doug Conn, a credit analyst with Hexagon Securities, said he was encouraged that the company's debt level has been coming down, in a trend he expects to continue if the company can deliver on its expectations.
Jones shares were down 5.8 percent at $16.67 in afternoon trade on the New York Stock Exchange. The Standard & Poor's 500 Index .SPX was off 1 percent. (Reporting by Martinne Geller; Editing by Derek Caney, Maureen Bavdek, Tim Dobbyn)