Boneparth out at beleaguered Jones Apparel

In the latest sign of unrest among the big apparel makers, the chief executive of Jones Apparel Group Inc. resigned today.

Peter Boneparth left Jones one week after the company received an unsolicited $900 million bid for its Barneys luxury fashion retail chain. It also came a day after competitor Liz Claiborne Inc. said it would cut 600 to 800 jobs and eliminate 16 of its 36 brands to revive its business.

Boneparth's resignation - two years before his contract was to expire - comes at a time when Jones is launching an ambitious strategy to shed $300 million worth of mid-market brands and focus on department stores.

But apparel sales at department stores have fallen continually for years while specialty store sales have risen. This makes some analysts wonder why Jones wants to move away from the retail business.

"I don't see how this company is going to grow from here," said Brad Stephens, an analyst with Morgan Keegan & Co. Inc. "You think the department store channels are going to get any better? Probably not."

Jones shares closed today at $28.07, down 9 cents, on the New York Stock Exchange.

Wesley Card, 59, chief financial officer and chief operating officer at the Bristol-based retailer, immediately replaced Boneparth.

John McClain, 46, who was the chief administrative officer at Avis Budget Group Inc. until a year ago, was named Jones' CFO.

Card's 17-year tenure at the company made him an easy pick for the board, said Gilbert Harrison, chairman of Financo Inc., a New York investment banking firm, which advises the apparel industry.

One of Card's first challenges will be to complete the sale of Barneys. Jones agreed in June to sell the chain to the Dubai equity firm Istithmar for $825 million. But two weeks later, Japanese clothing company Fast Retailing offered Jones $900 million for Barneys, which Jones paid $400 million for three years ago.

If the company breaks its agreement to sell to Istithmar, it will have to pay a fee of $20.6 million, or $22.7 million if it does so after July 22.

It's unclear where the company will go from here. Boneparth had argued that Jones was fundamentally a wholesale company and should embrace department stores.

But Boneparth, who tried to boost the company's value by buying more brands and divesting underperforming companies, was frequently in conflict with the board, analysts said.

"Mr. Boneparth had inherited an undermanaged company for which he was held responsible," said Jeffrey Edelman, an analyst at UBS in a research note filed today. "His restructuring and streamlining strategies which began several years prior are finally beginning to bear fruit, but investors, eager for immediate results, seemed unimpressed by his leadership."

Last year, Jones put itself up for sale, but failed to find a buyer. So it went back to the drawing board, pledging to rid itself of low-profit brands while building up its core wholesale apparel business.

In contrast, Liz Claiborne retreated from the wholesale business this week in announcing plans to open 300 retail stores by 2010.

"Just because something might be working for Liz [Clairborne] doesn't mean that Jones is in the same position," said Holly Guthrie, an analyst who covers specialty retail for Janney Montgomery Scott LLC in Philadelphia.

Kellwood Co., another clothing maker that counts Nautica among its many brands, bought two companies in June as it battles three years of declining profits.

Boneparth, 47, had overseen Jones' 32 brands, which include Anne Klein, Nine West and Gloria Vanderbilt, since May 2002. He will collect $10.8 million cash as part of a severance and bonus pay agreement with Jones.

As department store sales continue a decades-long slide, the apparel industry is repositioning itself.

Shoppers have found fashionable clothes at cheap prices from discounters like Target Corp. and Kohl's Corp. They're also frequenting high-end retailers like Neiman Marcus and Saks Fifth Avenue.

Caught in the middle are mid-market companies such as Jones Apparel, Kellwood and Liz Claiborne, which rely on department stores to sell much of their clothes.

But the clothing market share for department stores has eroded as discounters and specialty stores popped up, said Stephen Hoch, director of the J.H. Baker Retailing Initiative at Wharton School.

Consumer demand for private label, or exclusive brands, is pushing this trend, said Marshal Cohen, chief industry analyst for NPD Group, a New York market research company.

In the last two years, department store apparel sales have fallen 2 percent to $30.8 billion, according to NPD. At the same time, the broader apparel market grew 9.6 percent to $190 billion, led by 12.1 percent growth in specialty stores sales - the channel Liz Claiborne is moving toward.

The department store business continues to consolidate. The latest deal came in 2005 when the nation's two largest chains - Federated Department Stores and May Department Stores - merged forming what is now Macy's Inc. The company has cut its number of stores nationwide from 950 to 850.

Jones is betting apparel sales will recover at department stores. It plans to use the cash from the Barneys sale to build up brands in this segment. It could also use the cash to pay down short-term debt and back buy shares, the company said.

"I think they recognize that this is a big chunk of their business and department stores are going to continue on," the Wharton School's Hoch said.