(Reuters) - Jones Group Inc JNY.N, the fashion company that owns retail chains Nine West and Jones New York, said it will close about 170 underperforming U.S. stores by mid-2014 and cut its workforce by about 8 percent in a bid to revive profits.
Shares of the company rose 2.7 percent to $13.97 on the New York Stock Exchange after it announced the cuts, which it said would cost it about $40 million to $60 million over the next 15 months.
Jones’ U.S. stores have struggled in the face of aggressive competition. Sales during the all-important holiday season fell about 7 percent.
Earlier this year, activist hedge fund firm Barington Capital Group, run by James Mitarotonda, met with Jones Group management and suggested the company cut expenses and focus on its most successful brands, while possibly selling other brands.
“Barington has been pushing for an in-depth review of the Jones brands and even a culling of some brands,” said Damien Park, managing partner at Hedge Fund Solutions, a research and consulting firm focused on shareholder activism. “That was missing in today’s announcement.”
Barington typically seeks a seat on the boards of many companies in which it invests, Park added.
“Given their past record, it’s highly likely they won’t rest until they get board representation,” he said.
A representative at Barington declined to comment. A Jones Group spokeswoman confirmed that the company met with Barington but declined to comment further.
Jones Group shares are up 23 percent so far this year.
The company estimated first-quarter adjusted earnings of about 15 cents per share, shy of Wall Street expectations for a profit of 25 cents a share. It estimated first-quarter revenue at about $1 billion.
First-quarter gross margins are estimated to fall 90 basis points below the company’s own forecasts as a highly promotional environment and an unusually cold weather hurt sales.
Jones said it will cut U.S. retail staff by about 18 percent and corporate, support and supply chain staff by about 2 percent.
The company said upon completion of the restructuring plan, it expects outlet stores comprising a significantly higher percentage of its overall retail locations.
Jones said it will streamline the wholesale business to focus more on sportswear and also consolidate some distribution and supply chain facilities.
The restructuring is already underway and includes 50 store closures announced in the fourth quarter of 2012, Jones said.
Jones had a total of 594 domestic retail stores at the end of 2012, which include 409 outlet stores. The company had about 6,250 full-time employees and about 5,540 part-time employees as of December 31, according to a regulatory filing.
Reporting by Siddharth Cavale in Bangalore; Editing by Rodney Joyce, Supriya Kurane and David Gregorio