Jones Apparel Group, Inc. History
Bristol, Pennsylvania 19007
Telephone: (215) 785-4000
Fax: (215) 785-1228
Sales: $4.14 billion (2000)
Stock Exchanges: New York
Ticker Symbol: JNY
NAIC: 31523 Women's and Girls' Cut and Sew Apparel Manufacturing
There are many ways in which Jones Apparel Group is differentiated as an industry leader. One important way is by our extremely efficient and dynamic infrastructure. This infrastructure permits the leveraging of the company's strengths in design, merchandising, sourcing, and distribution to successfully execute aggressive growth initiatives. Ideas from the Jones Apparel Group and merchandising teams are innovative and fresh, incorporating the daily lifestyle of today's consumer as opposed to chasing fashion trends. Those teams interact closely with retail coordinators who work closely with consumers on the retail selling floor. Consumer reaction is reported back and incorporated into styling to constantly develop and improve styling for future seasons. Jones Apparel Group products are known for consistency and quality of fit. This reputation reflects the hard work of our production and quality control teams who work diligently behind the scenes with a network of experiences contractors to ensure adherence to uncompromising production and quality values. Finally, the Jones Apparel Group distribution team executes a seamless delivery of product from our distribution centers covering more than 3 million square feet to the retail selling floor. This collaborative effort ensures the complete satisfaction of our customers. Key Dates:
- Sidney Kimmel founds the Jones Apparel division of Grace & Co.
- Grace & Co. spins off the Jones Apparel division; Kimmel and Gerard Rubin incorporate the Jones Apparel Group.
- Company begins aggressive growth through new brand introductions and high-tech manufacturing.
- Sales top $260 million, but company posts a net loss of $4.6 million.
- Company begins a stringent reorganization to recover from near-bankruptcy.
- Rubin sells his interest in the company to Kimmel.
- Company introduces its popular Rena Rowan line of clothing.
- Jones Apparel purchases the rights to use the Evan-Picone brand name.
- Company introduces its licensed designer label, Lauren by Ralph Lauren; company jettisons its high-end Christian Dior license.
- Jones Apparel purchases the beleaguered Nine West Group.
Jones Apparel Group, Inc. is a leader in the apparel industry. The company designs and markets a broad array of men's, women's, and junior's sportswear as well as moderately priced suits, dresses, and casualwear. Its clothing is sold under its original Jones New York label, as well as the labels Evan-Picone, Rena Rowan, Saville, Todd Oldham, Nine West, Easy Spirit, Enzo Angiolini, Bandolino, and Napier. Licensed brands include Lauren by Ralph Lauren, Ralph by Ralph Lauren, and Polo Jeans Company. The company also markets costume jewelry under the Tommy Hilfiger brand licensed from TH Corporation. Jones Apparel Group was one of the fastest growing companies in the U.S. apparel industry during the late 1980s and early 1990s. Federated Department Stores Inc. and Mays Department Stores Co. are Jones's biggest customers.
Late 1970s: Creating Inexpensive, Designer-Inspired Clothing
Jones Apparel Group was founded by Sidney Kimmel as a division of Grace & Co. in 1975. A 20-year veteran of the women's clothing industry, Kimmel recognized a potentially lucrative void in the marketplace that he could fill by designing and marketing a line of clothing that mimicked extremely expensive designer fashions. Hoping to appeal to the middle-income market of working women, Kimmel decided that his apparel would be high in quality yet affordable.
By the time Kimmel started his Jones venture, he had already proven himself in the women's clothing industry. The son of a Philadelphia taxi driver, Kimmel had dropped out of college in the early 1950s to work in a knitting mill. Hard work and high energy, as well as his knack for developing and bringing to market popular clothing designs, earned Kimmel a top management spot at the mill by the 1960s, and he eventually became president of Villager, Inc., a top designer and manufacturer of women's sportswear.
Eager to build his own apparel line, Kimmel left Villager in 1969 to join W.R. Grace & Co. A diversified conglomerate, Grace & Co. was seeking to branch out into women's clothing and chose Kimmel to head up the new division. Kimmel brought with him his girlfriend, Rena Rowan, who had worked for him at Villager as a knitwear designer. Shortly after moving to Grace & Co., Kimmel and Rowan hit upon their idea of creating inexpensive, designer look-alike clothing.
During this time, however, Grace's management decided their company didn't belong in the fashion business. Seeking a smooth way out of the undertaking, Grace jettisoned its new Jones division in 1975, selling it to Kimmel and Gerard Rubin, a Grace accountant. Kimmel and Rubin were pleased to get the business, along with its liabilities, for a relatively small cash investment. The two partners incorporated Jones Apparel Group, Inc., in Pennsylvania, and their staff soon consisted of Rowan and several other former Grace employees.
While there was no mistaking Kimmel's acuity in the fashion trade, his knowledge of finance was limited, as he recalled in the December 21, 1992 issue of Forbes: 'I didn't know how to read a balance sheet.' Even Rubin was unable to steer the fledgling company clear of fiscal distress, and, during its first five years of business, Jones Apparel was burdened by debt and short on cash. Nevertheless, Kimmel pursued an aggressive growth agenda, beginning several new labels and licensing the rights to other clothing lines.
1980s: Jones Gains on its Industry Peers
The company did achieve a relatively high degree of success, particularly during the 1980s. Kimmel found a strong demand for many of his products among women who appreciated style
and quality but didn't have a lot of money to spend on expensive designer wear. The Jones New York line, which featured career sportswear, suits, and dresses, was especially successful; for $100 to $300, women were able to purchase professional and casual wear that looked and felt like name brands selling for twice the price or more. Moreover, Kimmel was able to profit by outsourcing the manufacturing of his clothes to both U.S. and overseas producers. That tactic allowed Jones to focus on designing, marketing, and distributing its products, while at the same time bypassing hefty capital investments in manufacturing facilities.
Jones also gained on its industry peers by implementing the latest productivity-enhancing technology. Indeed, while many U.S. apparel producers succumbed to fierce foreign competition during the decade, Jones thrived. In 1981, for example, Jones became one of the first apparel designers in the United States to start using a computer-aided design (CAD) system and to employ a systems manager, Maureen Behl, in its design department. The new system saved large sums in wasted fabric, because it allowed designers to lay patterns out on a facsimile of the fabric (a process called marking), like pieces of a puzzle, before transferring the design and cutting the actual fabric.
CAD also slashed labor costs related to grading (shrinking a standard-size garment design to make other sizes). 'There's really no comparison,' Behl commented in the September 24, 1993 issue of Philadelphia Business Journal. 'Doing it manually, it could take a day to do the marking and grading for one pattern. Now it takes a few hours.' The improved turnaround time associated with the CAD system allowed Jones Apparel to provide better customer service. On short notice, Jones designers could get a sample of a design to a client within hours, and then quickly alter the computerized pattern to suit the client's needs.
Besides its keen market niche, low-cost manufacturing strategy, and advanced design program, Jones benefited from economic and demographic trends as well during the mid-1980s. Generally healthy business expansion bolstered the demand for professional and casual wear in the United States. More importantly, the number of working women in the nation increased dramatically during the decade. As a result, the demand for suits and career sportswear flourished, and the discretionary income available to women in Jones' key markets increased. Furthermore, diversifying into a range of apparel aimed at a variety of niche markets, the company purchased the rights to other clothing lines, including Gloria Vanderbilt Jeans, and thus enjoyed demand growth for products outside its core Jones New York line. By the mid-1980s, with annual sales of over $250 million, Jones had become the leading supplier of moderately-priced women's apparel, marketing its lines through retail establishments and catalogs throughout North America.
Faltering, Reorganizing, and Recovering in the Late 1980s
Kimmel continued to pursue new markets in an effort to increase sales, despite warnings from company accountants that Jones Apparel was growing too quickly. Moreover, Kimmel also engaged in several business deals that soured. Chief among such mishaps was his purchase of the marketing rights to Murjani's Gloria Vanderbilt. Kimmel neglected to secure any control over manufacturing costs, pricing, inventory, or delivery of the jeans for which Gloria Vanderbilt was famous, thus undermining his savvy marketing initiatives. That deal alone cost Kimmel $20 million by the late 1980s, severely crimping the company's profitability.
Largely as a result of the failed Murjani transaction--but also because of the heavy debt Jones had accrued during its start-up and rampant growth--Jones Apparel was on the verge of bankruptcy by 1987. As cash flow dried up and the cofounders were forced to spend much of their time putting out financial fires, sales and earnings plummeted. Sales topped $260 million in 1986, but Jones posted a distressing net loss of $4.6 million. In 1987, moreover, sales plunged 32 percent, to $177 million, for a net loss of $6 million.
Rather than seizing and liquidating the company, creditors offered Kimmel and Rubin an alternative. Kimmel and Rubin agreed to a strict reorganization plan designed to shore up the Jones balance sheet and restore the flailing company's profitability. To keep control of the operation, Kimmel and Rubin were forced to drop most of the labels Kimmel had licensed during the 1980s as add-ons to its core apparel lines. They also agreed to lay off many of their employees, scrap most of the companies 17 scattered divisions, and liquidate a major warehouse. Finally, both Kimmel and Rubin had to put their personal assets on the line by guaranteeing $8 million in loans made to the company. The aim of the shake-up was to help Jones Apparel Group focus on its most successful product line, Jones New York. The company also retained a few of its more profitable complementary brands, such as Christian Dior.
Jones reported a small profit as it wrapped up its reorganization in 1988, and, the following year, the company began to focus heavily on promoting and streamlining its Jones New York line. Weary from Jones' financial woes, Rubin bailed out of the concern in 1989, selling his ownership interest to Kimmel. Unfortunately for Rubin, his departure marked the start of revenue and profit growth at Jones that would continue into the mid-1990s. Indeed, as the United States sank into a recession, demand for Jones New York apparel escalated. Many buyers abandoned expensive designer labels in favor of Jones' more practical attire; the Jones version of the Giorgio Armani suit, for example, sold for only $240, or about $1,200 less than the Armani.
Kimmel augmented Jones' improved market appeal during the late 1980s with increased advertising and a new emphasis on cost control. Furthermore, he began to stress financial stability, working to pare the company's debt load and tighten its customer credit policies. As demand surged and operating costs fell, Jones Apparel posted a 25 percent sales gain in 1989, to $212 million, as net income soared to nearly $13 million. In 1990, moreover, income approached $30 million from revenues of $290 million. That year, to further reduce the company's liabilities, Kimmel took Jones Apparel Group public. By early 1993, the company's debt had been almost entirely eliminated, and Kimmel still personally owned about 45 percent of the corporation.
Early 1990s: Expansion into Complementary Markets
Kimmel's financial recovery in the early 1990s was regarded in the business community as miraculous. Having faced the prospect of losing his company and much of his personal fortune, Kimmel and his company rebounded, earning $185 million in cash during the 1991 stock offerings and reporting a net worth of nearly three-quarters of a billion dollars in the early 1990s. Expansion at Jones Apparel continued unabated, moreover, as Kimmel boosted Jones New York sales and extended the company's reach into complementary markets. Importantly, in 1991, Jones introduced its Rena Rowan for Saville line. Designed by and named after the woman who had driven the design success of the Jones New York line since 1970, the Rena Rowan line was priced slightly lower than the Jones New York apparel line. By 1993, Rena Rowan clothing was accounting for about 15 percent of Jones' total receipts and was expected to lead sales growth into the mid-1990s.
In addition to making a bid for the lower-priced casual sportswear and dress market with the Rena Rowan line, Jones Apparel also expanded the Jones New York line, seeking to take advantage of four major niche markets: career sportswear, casual sportswear, suits, and dresses. Its Jones New York Sport line, created to penetrate the market for knit weekend and leisure sportswear, was bringing in about 20 percent of Jones Apparel revenue by 1993 and was expected to contribute much more in the future. Other additions to the Jones New York line included: Jones & Co., which offered 'career casual' clothing to augment the Sport group; Jones New York Dress, which featured more casual business attire; and Jones New York Suits, a line of higher-priced career apparel. Jones also purchased the rights to use the Evan-Picone brand name in 1993 for $10.5 million in cash. This move illustrated its intent to break into the market for women's rainwear, coats, footwear, intimate apparel, hosiery, handbags, and other accessories.
The company's prudent growth strategy continued to pay off in 1991 and 1992. Sales rose to $334 million in 1991 and then to $436 million one year later. Net income, moreover, rose more than 50 percent between 1990 and 1992 to over $41 million. Jones Apparel's solid profit growth reflected its huge profit margins, which, at about ten percent, were double the industry average. Income gains were also the result of Kimmel's cultivation of diverse distribution channels. For example, Jones began aggressively selling its merchandise through factory outlet stores in the early 1990s, opening more than 100 stores in outlet malls throughout the United States. By 1993, sales from the high-margin outlets had surpassed $55 million. Although department stores still made up more than 60 percent of company sales in the early 1990s, Jones had beefed up its distribution channels to encompass more than 8,000 locations in North America, including its direct mail catalog centers.
Late 1990s: Sustained Growth and Acquisitions
Going into the mid-1990s, Jones Apparel sustained its impressive growth rate. Sales increased 24 percent in 1993 to $541 million, from which nearly $50 million in net income was gleaned. Importantly, the company's core market niches were expanding steadily, while its major competitors were losing ground. Part of Jones Apparel's success came from taking advantage of the trend in the late 1990s toward more casual wear at work and home. Jones updated its Evan-Picone lines, and by 1996 had launched Jones Sport, Jones & Co., Jones New York Country, Jones Studio, and Jones Jeans. In 1995, its sales of casual wear nearly doubled to amount to about 65 percent of its total sales of $776 million.
In 1996, Jones Apparel, which posted sales of $1.02 billion that year, introduced its licensed designer label, Lauren by Ralph Lauren. The line proved remarkably successful--so much so that Jones jettisoned its high-end Christian Dior license to concentrate on more moderately priced clothes. During this period, Jones Apparel also expanded into corollary arenas. A partnership with Madison Maidens resulted in Jones New York Intimates, which debuted a line of sleepwear, robes, loungewear, bras and panties in early 1995. Jones New York Neckwear for men followed in 1996.
Major department stores continued to serve as the primary outlet for Jones Apparel merchandise, accounting for about 75 percent of company. However, in 1996, it opened a flagship Jones New York store in Montreal. Two years later, targeting an older customer than competitors Polo, Hilfiger, or Nautica, Jones Apparel introduced its first menswear line, hiring Joe Heiss, founder of the J.J. Farmer sportswear brand, as president of the division. The company also purchased Sun Apparel Inc., sportswear designer and manufacturer of the Polo label, licensed from Ralph Lauren for $217 million. Sun purchased the worldwide rights to the Todd Oldham trademark in 1999 in a move to develop a stronger presence in the junior market.
In 1999, Jones Apparel purchased the Nine West Group, a leading maker of women's shoes, for $1.4 billion. The deal did not please Jones Apparel shareholders; Nine West had been in financial straits following slumping sales and an SEC investigation into its accounting practices, and had cut two-thirds of its work force since 1997. Moreover, Nine West shareholders maintained that the company would not fit well into the Jones Apparel structure and that better offers may have been ignored. Jones Apparel's share price fell following announcement of the Nine West acquisition, but Jones moved quickly to make Nine West profitable again. It immediately shuttered Nine West's Kentucky and Indiana plants, eliminating slightly more than 500 workers, and closed a plant in the Dominican Republic that had employed more than 1,000. The company also began plans to shut down nearly 250 unprofitable Nine West stores.
In 2000, Jones acquired Victoria & Co. for $90 million, a company whose brands represented 20 to 45 percent of the market share in retail fashion jewelry. Kimmel, in an August 2000 Women's Wear Daily Accessories Supplement article voiced the company's optimism about the purchase, saying that it provided 'a new dimension to our corporate strategy of offering ... complete head-to-toe dressing with trusted brand names.' In a separate agreement with Polo Ralph Lauren, Jones became the direct supplier the Lauren and Ralph lines in Europe, Israel and the Middle East.
As the company celebrated its 30th anniversary, designer Rena Rowan retired from active service, and Jones celebrated record revenues of $4.14 billion. According to Kimmel, in a February 2001 press release, Jones Apparel's core competencies in apparel, footwear, accessories and costume jewelry provided 'the foundation to build complete lifestyle brands serving a wide berth of consumers in a wide range of income levels and shopping destination preferences.'
Principal Subsidiaries: Camisas de Juarez, S.A. de C.V.; Jones Holding Company; Jones Investment Co., Inc.; Melru Corporation; Sun Apparel Inc.; Nine West Group, Inc.; Victoria & Co.
Principal Competitors: Bernard Chaus Inc.; Ellen Tracy, Inc.; St. Johns Knits International Inc.; Liz Claiborne, Inc.
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- Breskin, Ira, 'Jones Apparel Still Expanding But Retains That Classic Look,' Investor's Business Daily, February 14, 1997, p. B14.
- Card, Wesley R., 'Jones Apparel Group, Inc. Reports Record Sales and Earnings for 1992,' PR Newswire, February 10, 1993.
- Davis, Jessica, 'At Textile, Students Learn Computerized Design,' Philadelphia Business Journal, September 24, 1993, p. 1.
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- Longley, Alice Beebe, Company Analysis: Jones Apparel, New York: Donaldson, Lufkin & Jenrette, May 11, 1994.
- Jones, John A., 'Jones Apparel Group Fits Casual, Designer-Label Trends,' Investor's Business Daily, March 27, 1996, p. B12.
- Moukheiber, Zina, 'Close Call,' Forbes, December 21, 1992, p. 194.
- Much, Marilyn, 'At Jones Apparel, Material Gains Are By Design,' Investor's Business Daily, September 11, 1992, p. 3.
- Newman, Jill, 'Victoria's Secret: What's in Store for Victoria & Co. Under the Umbrella of Jones Apparel Group?,' Women's Wear Daily, August 2000, p. 8.
- Pachuta, Michael J., 'Jones Apparel Gets a New Look with Acquisition of Nine West,' Investor's Business Daily, July 1, 1999, p. A19.
- Peterson, Melody, 'The Markets: As Jones Apparel and Nine West Plan Nuptials, Some Investors Already Want an Annulment,' New York Times, March 12, 1999, p. C6.
Source: International Directory of Company Histories, Vol. 39. St. James Press, 2001.comments powered by Disqus