napier napier balance napier 2004 ANNUAL REPORT

napier napier balance napier 2004 ANNUAL REPORT

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letterfrom the C.E.O. Dear Jones Apparel Shareholder: 2004 was a year of considerable challenges in the marketplace, particularly in the second half of the year when we fell short of some of the financial targets that we had forecast. Even with these disappointments, we generated record net revenues of $4.65 billion resulting in net income of $302 million and operating cash flow of $462 million. This is directly attributable to the strength of our brands, the quality of our people, and our culture of strict discipline over expenses and working capital management. We have a long history of identifying opportunities within the marketplace, then moving swiftly to create product for the ever-changing needs of the consumer. Our attentiveness to the demands and aspirations of our consumer is never-ending and is integrated in our brand-building processes. By performing market research, gathering valuable data, and speaking to target consumers in advance, we believe we maximize the potential performance of any new opportunity. The overall vision driving our success is to be essentially a bulletproof company, to provide products across multiple distribution channels for multiple consumers. -Peter Boneparth in Women s Wear Daily, November 11, 2004 In 2004, our highly anticipated Jones New York Signature line arrived on retail floors. This lifestyle brand was designed to target a consumer that we felt was neglected in the marketplace, and Jones New York Signature was created with a sense of uniqueness which allowed that consumer to make her very own personal statement. Jones New York Signature was very well received, with wholesale net sales approaching $200 million. This was a tremendous accomplishment and involved the hard work of nearly every discipline within our company. More importantly, it was another good example of the vast consumer-oriented capabilities that, combined, define our company. ssories designer contemporary denim moderate boomer junior retail lifestyle caree We have also positioned Bandolino, a storied footwear brand with a strong heritage, into a fashionable lifestyle concept which includes apparel, handbags, costume jewelry and also freestanding retail stores. Although this initiative began in 2003, it gained considerable momentum in 2004 and now provides the consumer with great product at a reasonable price across many different categories. Jones New York Signature and Bandolino are simply two examples of our balanced portfolio of businesses. We see additional long-term opportunities for growth in each of our business segments, and we will remain focused on them. To complement these initiatives in our core business, we like to enhance our future growth opportunities by making strategic acquisitions. We acquired Maxwell Shoe Company last year, thereby leveraging our footwear infrastructure and providing us with future opportunities to expand in the mid-tier, children s and bridge categories. Well-known brands such as Joan & David, Circa Joan & David, Mootsies Tootsies and Sam & Libby were added to our portfolio. This acquisition also included the AK Anne Klein footwear business, which we were licensing to Maxwell Shoe. We now produce apparel, handbags and footwear under the AK Anne Klein brand within the Jones Apparel Group umbrella. Similar to AK Anne Klein, we believe some of the other acquired Maxwell brands have additional potential within our core competencies, including apparel, handbags and even

Sidney Kimmel Founder, Jones Apparel Group, Inc. Chairman and Director international expansion. As you can imagine, leveraging our in-house capabilities helps to fuel future growth. Wesley R. Card Chief Operating and Financial Officer We further diversified the demographic and economic profiles of the range of our target consumers late in 2004, by acquiring the Barneys New York specialty retail business. The luxury consumer who frequents Barneys has proven to be resilient in the face of many macroeconomic uncertainties. We are confident that the excellence of the Barneys management team and its culture of Taste, Luxury and Humor can allow Barneys to become a billion dollar enterprise over the next several years. Our approach to achieving this growth will be well planned and highly disciplined. With so many highly recognizable consumer brands in our portfolio and our core competencies in apparel, footwear, denim, handbags, costume jewelry, retail, and now luxury, we feel uniquely positioned within our industry. We complement our brands and core competencies with a flexible infrastructure that allows us to meet the demanding needs of our customer. Advanced systems, multiple points of distribution, a world-wide sourcing network and a strong operational skill set together form the foundation for us to be successful. For more than 30 years, we have prided ourselves on operational excellence this remains true today and will continue into the future. Rhonda J. Brown President and Chief Executive Officer of Footwear, Accessories, and Retail Group As I regularly meet with investors and shareholders, I am often asked, Where will Jones go from here? While on the surface, this may appear to be a very broad based and general question, the answer is actually quite simple and consistent with our many actions in 2004. Jones Apparel Group will go wherever the consumer takes us. This is particularly true as we position our multi-brand, multi-channel business model for future growth. shoes designer contemporary denim moderate boomer junior retail lifestyle career sh Jones Apparel Group has evolved into a premier branded consumer products company because of the tireless dedication and unwavering commitment of our people. They seek opportunities and welcome challenges with the goal of making Jones Apparel Group the standout in our industry. To our more than 17,000 worldwide associates, I say thank you. And together, we say thank you to our many customers, suppliers and investors, whose loyalty and support are deeply appreciated. Sincerely, Peter Boneparth President and Chief Executive Officer and Director Peter Boneparth

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financial highlights Jones Apparel Group, Inc. & Subsidiaries all amounts in millions except per share and employee data 2004 2003 2002 total revenues $4,650 $4,375 $4,341 gross profit $1,705 $1,637 $1,684 gross margin 36.7% 37.4% 38.8% operating income $528 $580 $591 operating margin 11.4% 13.3% 13.6% net income $302 $329 $319 diluted earnings per share $2.39 $2.48 $2.36 working capital $612 $827 $891 total assets $4,551 $4,188 $3,853 stockholders equity $2,654 $2,538 $2,304 book value per share $21.72 $20.11 $17.94 dividends per share $0.36 $0.16 employees 17,260 17,095 15,950 $5.0 $500 $5.0 $4.0 $400 $4.0 $3.0 $300 $3.0 $2.0 $200 $2.0 $1.0 $100 $1.0 2002 2003 2004 (in billions) TOTAL REVENUES 2002 2003 2004 (in millions) NET INCOME 2002 2003 2004 stockholders equity total assets (in billions) TOTAL ASSETS & STOCKHOLDERS EQUITY

Directors & Executive Officers Peter Boneparth President and Chief Executive Officer and Director Sidney Kimmel Chairman and Director Wesley R. Card Chief Operating and Financial Officer Rhonda J. Brown President and Chief Executive Officer of Footwear, Accessories and Retail Group Ira M. Dansky Executive Vice President, Secretary and General Counsel Anita Britt Executive Vice President of Finance Patrick M. Farrell Senior Vice President and Corporate Controller Howard Gittis* Director, Vice Chairman, and Chief Administrative Officer, MacAndrews & Forbes Holdings Inc. Geraldine Stutz Director, Principal Partner, GSG Group Anthony F. Scarpa* Director, Retired Senior Vice President/Division Executive, JPMorgan Chase Bank Matthew H. Kamens Director, Attorney Michael L. Tarnopol Director, Senior Managing Director, Chairman of the Investment Banking Division and Vice Chairman, Bear, Stearns and Co. Inc. J. Robert Kerrey Director, President of New School University Ann N. Reese* Director, Executive Director of the Center for Adoption Policy * member of Audit Committee member of Compensation Committee member of Nominating/Corporate Governance Committee Stockholder Information Investor Inquiries Investors and other parties with questions, including requests for the Company s Annual Report on Form 10-K/A (Amendment No. 1) for the year ended December 31, 2004 (available without charge), should direct questions in writing to: Wesley R. Card, Chief Operating and Financial Officer, Jones Apparel Group, Inc., 250 Rittenhouse Circle, Bristol, Pennsylvania 19007. Transfer Agent and Registrar The Bank of New York Shareholder Relations Department - 11E P.O. Box 11258, Church Street Station New York, New York 10286 1-800-524-4458 e-mail: Shareowners@bankofny.com website: www.stockbny.com Independent Auditors BDO Seidman, LLP 330 Madison Avenue New York, New York 10017 212-885-8000 Corporate Offices 250 Rittenhouse Circle Bristol, Pennsylvania 19007 215-785-4000 1411 Broadway New York, New York 10018 212-642-3860