* Q1 EPS $0.47 vs Street view $0.34
* On pace to close additional 110 stores in 2010
* Sees 2010 sales $3.4 bln-$3.54 bln vs $3.4 bln view
* Shares up 1.5 percent in afternoon trading (Adds analyst comment, updates share activity)
By Phil Wahba
NEW YORK, April 28 Jones Apparel Group Inc JNY.N reported higher-than-expected quarterly earnings on Wednesday as lean inventory levels bolstered gross margins and its jeans sold well.
Better-than-expected sales and an improving consumer mood prompted the company to raise its full-year revenue forecast.
The clothing, shoes and accessories company, whose portfolio includes Nine West, Jones New York and Anne Klein, said first-quarter net income was $39.2 million, or 45 cents per share, compared with $300,000, or nil per share, a year earlier.
Net sales edged 0.3 percent lower to $876.1 million, despite the company's closing 63 stores during the quarter, as consumer spending recovered.
Excluding items, Jones Apparel earned 47 cents per share. Analysts on average had expected earnings of 34 cents per share on sales of $866.1 million, according to Thomson Reuters I/B/E/S.
Consumers are buying on pent-up demand, Chief Executive Wes Card told Reuters in an interview. "They're starting to open their wallets carefully," he said.
Jones expects 2010 sales between $3.4 billion and $3.54 billion, compared with analysts' expectations of $3.4 billion. In February, it forecast sales of $3.3 billion to $3.48 billion.
Card singled out jeans and women's footwear as leading the charge, including the Gloria Vanderbilt line of denim and casual clothing.
"Gloria Vanderbilt was one of the drivers, along with l.e.i. doing better than we expected. The strength in Gloria Vanderbilt really showed up in the margins," Card said.
Jones, which also owns Enzo Angiolini and Easy Spirit, reported that its gross margin rates had risen 3.9 percentage points during the quarter to 36.8 percent, with inventory levels down 25 percent at the end of the first quarter.
Card said that gross margin rates were at their highest level since 2004.
On a conference call with analysts later, Card said Jones' jeans line with entertainer Jessica Simpson, to be launched this summer, should generate sales of $20 million in the second half of the year.
The company's wholesale business, which makes up more than 80 percent of sales, supplies retailers ranging from Neiman Marcus Group [NMRCUS.UL] and Nordstrom Inc (JWN.N) to Wal-Mart Stores Inc (WMT.N) and Sears Holdings Corp's (SHLD.O) KMart.
Card said that Jones benefited from the strong rebound in sales in March at such retailers as Kohl's Corp (KSS.N) and JC Penney Co Inc (JCP.N), which sell the Vanderbilt line.
He also said Nine West shoes have enjoyed strong sales at Nordstrom since their launch there this winter.
Jones Apparel, based in New York, said it is on track to close an additional 110 unprofitable stores by the end of 2010, a move analysts said will help results. It operated 877 locations at the end of the quarter.
"It's going to make portfolio stores they have that much more productive -- and it gives them the opportunity to open stores, should they choose to, in locations that will offer better performance," said independent retail analyst Jennifer Black.
Shares were up 34 cents, or 1.5 percent, to $23.02 in afternoon trading on the New York Stock Exchange. (Reporting by Phil Wahba; additional reporting by Martinne Geller; Editing by Gerald E. McCormick and Robert MacMillan)