Jones Group Inc JNY.N, the apparel company behind such brands as Nine West and Jones New York, lowered its full-year sales forecast on Wednesday, saying it expects shoppers to continue to demand bargains during the holiday season.
The clothes and shoe maker, which also operates its own stores, was able to report a higher third-quarter profit on the strength of increased sales of shoes and jeans to U.S. department store chains including Macy's Inc (M.N) and Nordstrom Inc (JWN.N).
But its own unprofitable U.S. stores continued to struggle as sales there fell 6.7 percent, hurt by what executives called a "promotional" environment that has grown somewhat dependent on price discounts in order to lure shoppers.
"We anticipate that the highly promotional environment will continue into the fourth quarter," Jones Chief Financial Officer John McClain told analysts on a conference call.
For the full year, Jones now expects revenue of between $3.79 billion and $3.82 billion, down from a prior range of $3.8 billion to $3.9 billion.
Shares were down 4.2 percent at $12.52 on Wednesday morning on the New York Stock Exchange.
The company is sprucing up its own U.S. stores, including giving its Nine West chain a new look. One executive said retail sales are showing signs of improvement this quarter.
In the last three years, Jones has been shifting focus to its growing portfolio of high-end brands like Kurt Geiger and Stuart Weitzman shoes, which offer higher profit margins. Buyers of such products are also less sensitive to prices, even in a difficult economy.
Third-quarter revenue slipped 0.7 percent to $1.035 billion, while net income fell to $17.8 million, or 22 cents per share, from $41.2 million or 49 cents per share a year earlier.
But excluding charges related to severance and the writedown of some assets related to store closings and other restructuring costs, as well as some gains and charges related to currency fluctuations and other items, the company earned 57 cents per share. That compared with the average analyst forecast of 32 cents a share, according to Thomson Reuters I/B/E/S.
Sales of shoes and accessories at U.S. department store chains, Jones' biggest division, rose 9.7 percent. Still, Jones said earlier this year that department stores, which account for about half of its revenue, and other retail customers had been more cautious in ordering, given the uncertainty surrounding consumer spending.
That, in turn, has forced Jones to be careful in its inventory planning to protect gross profit margin.
The U.S. wholesale jeans business, which Jones tried unsuccessfully to sell last year, perked up, with an 8.2 percent revenue increase in the quarter.
(Reporting by Phil Wahba in New York; editing by Lisa Von Ahn, Sofina Mirza-Reid and Matthew Lewis)