JONES APPAREL GROUP INC. $19 (New York symbol JNY; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 83.4 million; Market cap: $1.6 billion; WSSF Rating: Average) designs clothing, accessories and footwear under several brands, including Jones New York, Gloria Vanderbilt and Nine West.

The company is starting to see some of the benefits of its restructuring plan, which included phasing out some of its unprofitable clothing lines. This has let Jones cut its annual costs by $100 million. The company is also benefiting from a new deal to supply clothing for teens to Wal-Mart.

In the second quarter ended July 5, 2008, earnings before one-time items fell 6.6% to $16.9 million from $18.1 million a year earlier. However, per-share earnings grew 17.6%, to $0.20 from $0.17, on fewer shares outstanding. Sales fell 8.2%, to $829.4 million from $903.9 million. Same-store sales at the company’s retail clothing outlets were flat, but grew 5.8% at its footwear stores.

Jones recently acquired 50% of the Rachel Roy line of luxury women’s wear for an undisclosed sum. Launched in 2005, the brand is available in about 60 upscale stores in the U.S. and 40 overseas. Jones feels it can expand sales with better distribution to its customers, and a lower-priced line.

The company has also acquired a 10% stake in GRI Group Ltd. for $20 million. GRI distributes a wide variety of apparel products in 12 Asian countries, including several of Jones’s top brands. The purchase should help Jones expand its sales in Asia.

Jones now holds cash of $322.2 million ($3.86 a share), so it can comfortably afford these investments. Long-term debt of $775.9 million is a manageable 55% of its market cap.

The company should earn $1.22 a share in 2008, and the stock trades at 15.6 times that estimate. The $0.56 dividend yields 2.9%.

Jones Apparel Group is a buy.