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    In December 2001 and August 2002, we entered into two transactions relating to the short sale of $157.9 million and $190.5 million, respectively, of U. S. Treasury securities. These transactions were intended to address interest rate exposure and generate capital gains that could be used to offset previously incurred capital losses.

    As a result of the first transaction, which closed in August 2002, we recorded a short-term capital gain of $4.2 million and related interest income of $0.5 million and interest expense and fees of $4.8 million for the fiscal quarter ended April 6, 2002. The net effect of $0.1 million is included in the statement of operations as interest expense.

    As a result of the second transaction, we recorded a short-term capital gain of $4.6 million and related interest income of $0.4 million and interest expense and fees of $5.5 million for the fiscal quarter ended April 5, 2003. The net effect of $0.5 million is included in the statement of operations as interest expense. We have placed the proceeds from the short sale into an interest-bearing collateral account to provide for our obligation to repurchase the U. S. Treasury securities (which had a market value of $192.6 million at April 5, 2003) on or before May 15, 2003. At April 5, 2003, the net excess of funds in the collateral account over the obligation to repurchase the securities was $0.5 million, which is included in prepaid expenses and other current assets.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

    The following discussion provides information and analysis of our results of operations for the 14 weeks ended April 5, 2003 (hereinafter referred to as the "first fiscal quarter of 2003") and the 14 weeks ended April 6, 2002 (hereinafter referred to as the "first fiscal quarter of 2002"), and our liquidity and capital resources. The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements included elsewhere herein.

    We completed our acquisitions of Gloria Vanderbilt on April 8, 2002 and l.e.i. on August 15, 2002. The results of operations of the acquired companies are included in our operating results from the respective dates of acquisition. Accordingly, the financial position and results of operations presented and discussed herein are not directly comparable between years. Gloria Vanderbilt and l.e.i. operate in the wholesale moderate apparel segment.

    During the first fiscal quarter of 2002, we recorded a $31.2 million charge relating to contractual obligations under employment contracts, primarily for former President Jackwyn Nemerov and former Vice Chairman Irwin Samelman. The charges under these contracts are comprised of pre-tax amounts totaling $11.7 million for contractual salary and bonus obligations and $17.5 million for non-cash compensation expense resulting from contractual vesting of outstanding stock options and restricted stock. Also included is a pre-tax amount of $2.0 million related to certain obligations under the employment agreement that we entered into with Peter Boneparth when we acquired McNaughton in 2001. These obligations were satisfied in March 2002 when Mr. Boneparth was elected President and designated to become our Chief Executive Officer on May 22, 2002.

    We identify operating segments based on, among other things, the way our management organizes the components of our business for purposes of allocating resources and assessing performance. Our operations are comprised of four reportable segments: wholesale better apparel, wholesale moderate apparel, wholesale footwear and accessories, and retail.

    In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets," which changed the accounting for goodwill and other intangible assets from an amortization method to an impairment-only approach. Upon our adoption of SFAS No. 142 on January 1, 2002, we ceased amortizing our trademarks without determinable lives and our goodwill. As prescribed under SFAS No. 142, we had our goodwill and trademarks tested for impairment during the first fiscal quarter of 2002. As a result, the fair market value of these assets (as appraised by an independent third party) was lower than their carrying value as of December 31, 2001. We

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accordingly recorded an after-tax impairment charge of $13.8 million, which is reported as a cumulative effect of change in accounting principle resulting from the adoption of SFAS No. 142.

    The termination or non-renewal of our exclusive licenses to manufacture and market clothing under the Lauren by Ralph Lauren and Polo Jeans Company trademarks in the United States, Canada and elsewhere would have a material adverse effect on us. Our Lauren by Ralph Lauren and Polo Jeans Company businesses represent significant portions of our sales and profits. We sell products bearing those trademarks, as well as the Ralph by Ralph Lauren trademark, under exclusive licenses from affiliates of Polo Ralph Lauren Corporation. Net sales for all products under license from Polo Ralph Lauren amounted to $276.0 million and $297.0 million for the first fiscal quarters of 2003 and 2002, respectively.

    We have been in discussions with Polo Ralph Lauren Corporation regarding restructuring various license agreements. The two companies have not agreed on important provisions, including the interpretation of how the current Lauren by Ralph Lauren license relates to the current Ralph by Ralph Lauren license. The Ralph by Ralph Lauren license is scheduled to end on December 31, 2003.  Polo Ralph Lauren Corporation has asserted that the end of the Ralph by Ralph Lauren contract on December 31, 2003 will cause the Lauren by Ralph Lauren license to end on December 31, 2003 instead of December 31, 2006. We believe that this is an improper interpretation and that the expiration of the Ralph by Ralph Lauren license does not cause the Lauren by Ralph Lauren license to end. The discussions between us and Polo Ralph Lauren Corporation could result in restructured licensing arrangements, an end to some or all of their licensing arrangements, or litigation.

    Net sales of Lauren by Ralph Lauren were $165.6 million and net sales of Ralph by Ralph Lauren were $10.1 million for the first fiscal quarter of 2003. If the Lauren by Ralph Lauren license were to end at the end of 2003, there would be a material adverse impact on our results of operations after 2003. However, it would not materially adversely impact our liquidity, and we would continue to have a strong financial position in the event the Lauren by Ralph Lauren license were to end. The expiration of the Ralph by Ralph Lauren license would not be material to us in any respect.

    The dispute between us and Polo Ralph Lauren Corporation does not relate to the Polo Jeans license, and an end to the Lauren by Ralph Lauren and Ralph by Ralph Lauren licenses would not end our longer term Polo Jeans license or otherwise adversely affect the Polo Jeans license in the United States. However, the ongoing discussions between us and Polo Ralph Lauren Corporation could result in changes to the Polo Jeans licensing arrangements.

    On July 31, 2002, we announced that we would begin expensing the fair value of employee stock options granted after December 31, 2002 pursuant to the guidelines contained in SFAS No. 123, "Accounting for Stock-Based Compensation" using the "prospective method" set forth in SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure." Since the expense to be recorded is dependent on both the timing and the number of options to be granted, we cannot estimate the effect on future results of operations at this time. Prior to January 1, 2003, pursuant to a provision in SFAS No. 123 we had elected to continue using the intrinsic-value method of accounting for stock options granted to employees in accordance with Accounting Principles Board Opinion 25, "Accounting for Stock Issued to Employees." Accordingly, compensation cost for stock options had been measured as the excess, if any, of the quoted market price of our stock at the date of the grant over the amount the employee must pay to acquire the stock. Under this approach, we had only recognized compensation expense for stock-based awards to employees for options granted at below-market prices.

CRITICAL ACCOUNTING POLICIES

    Several of our accounting policies involve significant judgements and uncertainties. The policies with the greatest potential effect on our results of operations and financial position include the estimated collectibility of accounts receivable, the recovery value of obsolete or overstocked inventory and the estimated fair values of both our goodwill and intangible assets with indefinite lives. For accounts receivable, we estimate the net collectibility, considering both historical and anticipated trends of trade discounts and co-op advertising deductions taken by our customers, allowances we provide to our retail customers to flow goods through the retail channels, and the possibility of non-collection due to the financial position of our customers. For inventory, we estimate the amount of goods that we will not be able to sell in the normal course of business and write down the value of these goods to the recovery value expected to be realized through off-price channels. If we incorrectly anticipate these trends

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or unexpected events occur, our results of operations could be materially affected. We utilize independent third-party appraisals to estimate the fair values of both our goodwill and our intangible assets with indefinite lives. These appraisals are based on projected cash flows and interest rates; should interest rates or our future cash flows differ significantly from the assumptions used in these projections, material impairment losses could result where the estimated fair values of these assets become less than their carrying amounts.

RESULTS OF OPERATIONS

Fiscal Quarter Ended April 5, 2003 Compared to Fiscal Quarter Ended April 6, 2002

    Statements of Income Stated in Dollars and as a Percentage of Total Revenues

Percentage totals may not add due to rounding.

    Revenues. Total revenues for the first fiscal quarter of 2003 were $1.23 billion compared to $1.13 billion for the first fiscal quarter of 2002, an increase of 9.5%.

    Revenues by segment were as follows:

    Wholesale better apparel revenues declined primarily as the result of planned shipment reductions of our Jones New York career business and a decrease in shipments of our Polo Jeans Company products as a result of the difficult climate across our status denim business.

    Wholesale moderate apparel revenues increased primarily as a result of the product lines obtained as a result of the Gloria Vanderbilt and l.e.i. acquisitions, which accounted for $166.9 million in net sales in the first fiscal quarter of 2003. Increases were also realized in the Nine & Company and Norton McNaughton businesses. These increases were partially offset by decreases in our private label denim businesses reflecting the decision to discontinue programs with certain retailers that did not meet our margin expectations.

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    Wholesale footwear and accessories business was planned conservatively in light of the uncertain retail climate. These planned reductions significantly impacted shipments of our Nine West accessories and Enzo Angiolini footwear product lines.

    Retail revenues decreased primarily due to comparable store sales being down approximately 10% for both footwear and accessories stores and ready to wear outlet stores as compared to the prior period. The decreases were a result of a lack of consumer traffic and the challenging retail environment.

    Gross Profit. The gross profit margin decreased to 39.0% in the first fiscal quarter of 2003 compared to 39.8% in the prior period.

    Wholesale better apparel gross profit margins were 42.8% and 41.0% for the first fiscal quarters of 2003 and 2002, respectively. The increase was a result of lower planned inventory levels that resulted in a higher percentage of sales to regular customers and fewer goods sold through the off-price channel. In addition, improved performance of the Jones New York career product resulted in lower promotional sales.

    Wholesale moderate apparel gross profit margins were 29.5% and 31.9% for the first fiscal quarters of 2003 and 2002, respectively. The decrease was partially attributable to lower gross margins of the acquired Gloria Vanderbilt and l.e.i. businesses. The margin was also impacted by a higher level of promotional sales in the Norton McNaughton, Evan-Picone and Jones Wear businesses necessary to ensure that the level of inventory at our retail customer stores remained consistent with our plans.

    Wholesale footwear and accessories gross profit margins were 36.6% and 32.1% for the first fiscal quarters of 2003 and 2002, respectively. The margin increase was principally driven by our inventory liquidation plan in 2002 in our costume jewelry business and a new emphasis on maintaining lower inventory levels, which resulted in lower sales through the off-price channel. Footwear margins increased as a result of more favorable sourcing costs and reduced air freight distribution costs.

    Retail gross profit margins were 50.1% and 52.5% for the first fiscal quarters of 2003 and 2002, respectively. The decrease was primarily the result of a higher level of promotional activity to increase selling in an effort to keep inventory levels consistent with our plans.

    Selling, General and Administrative Expenses. Selling, general and administrative expenses of $272.4 million in the first fiscal quarter of 2003 represented a decrease of $24.3 million from the $296.7 million reported for the first fiscal quarter of 2002. Gloria Vanderbilt and l.e.i. added a total of $16.0 million in the wholesale moderate apparel segment to the first fiscal quarter of 2003 while the prior period reflected $31.2 million of executive compensation costs in the other and eliminations segment. The offsetting decline represents tighter cost controls across the wholesale businesses and leveraging the corporate infrastructure across the organization, eliminating duplicative expenses in our new acquisitions.

    Operating Income. The resulting operating income for the first fiscal quarter of 2003 of $209.0 million increased 37.8%, or $57.3 million, from the $151.7 million for the first fiscal quarter of 2002 due to the factors described above.

    Net Interest Expense. Net interest expense was $14.1 million in the first fiscal quarter of 2003 compared to $16.0 million in 2002. This was primarily a result of both lower interest rates and lower average borrowings compared to the prior period.

    Provision for Income Taxes. The effective income tax rate was 37.7% for both the first fiscal quarters of 2003 and 2002.

    Net Income and Earnings Per Share. Net income was $121.8 million in the first fiscal quarter of 2003, an increase of $51.1 million from the net income of $70.7 million earned in 2001. Diluted earnings per share for the first fiscal quarter of 2003 was $0.90 compared to $0.53 for the prior period, on an equivalent number of shares outstanding.

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LIQUIDITY AND CAPITAL RESOURCES

    Our principal capital requirements have been to fund acquisitions, working capital needs, capital expenditures and repurchases of our common stock on the open market. We have historically relied on internally generated funds, trade credit, bank borrowings and the issuance of notes to finance our operations and expansion. As of April 5, 2003, total cash and cash equivalents were $95.1 million, a decrease of $188.2 million from the $283.3 million reported as of December 31, 2002.

    Operating activities used $167.8 million in the first fiscal quarter of 2003 and provided $57.2 million in the first fiscal quarter of 2002. The change was primarily due to higher accounts receivable levels, the result of a greater level of shipments occurring near the end of the quarter than in the prior period.

    Investing activities provided $12.3 million in the first fiscal quarter of 2003 and used $14.2 million in the first fiscal quarter of 2002. The change was primarily due to the proceeds from the sale and leaseback of our Virginia warehouse facility.

    Financing activities used $33.1 million in the first fiscal quarter of 2003, primarily to repurchase $27.7 million of our common stock. As of April 5, 2003, a total of $582.7 million had been expended under announced programs to acquire up to $650.0 million of such shares. We may make additional share repurchases in the future depending on, among other things, market conditions and our financial condition. Financing activities provided $23.8 million in the first fiscal quarter of 2002, primarily the result of $26.0 million in proceeds from the exercise of employee stock options.

    During the first fiscal quarter of 2003, we entered into a sale-leaseback agreement for our Virginia warehouse facility. This facility was sold for $25.9 million and leased back under a 20-year lease agreement, which has been recorded as a capital lease. The resulting net gain of $7.9 million has been deferred and is being amortized over the term of the lease agreement. In connection with this transaction, we repaid $7.4 million of long-term debt related to the Virginia warehouse facility.

    At April 5, 2003, we had credit agreements with several lending institutions to borrow an aggregate principal amount of up to $1.55 billion under Senior Credit Facilities. These facilities, of which the entire amount is available for letters of credit or cash borrowings, provide for an $850.0 million 364-Day Revolving Credit Facility and a $700.0 million Five-Year Revolving Credit Facility. At April 5, 2003, $172.2 million was outstanding under the 364-Day Revolving Credit Facility (comprised solely of outstanding letters of credit), and no amounts were outstanding under our Five-Year Revolving Credit Facility. Borrowings under the Senior Credit Facilities may also be used for working capital and other general corporate purposes, including permitted acquisitions and stock repurchases. The Senior Credit Facilities are unsecured and require us to satisfy both a coverage ratio of earnings before interest, taxes, depreciation, amortization and rent to interest expense plus rents and a net worth maintenance covenant, as well as other restrictions, including (subject to exceptions) limitations on our ability to incur additional indebtedness, prepay subordinated indebtedness, make acquisitions, enter into mergers and pay dividends.

    In addition to these committed facilities, we have an unsecured uncommitted line of credit for the purpose of issuing letters of credit and bankers' acceptances for McNaughton. As of April 5, 2003, $130.6 million was outstanding under this line of credit.

    At April 5, 2003, we also had a C$25.0 million unsecured line of credit in Canada, under which no amounts were outstanding.

    In December 2001 and August 2002, we entered into transactions relating to the short sale of $157.9 million and $190.5 million, respectively, of U. S. Treasury securities. These transactions were intended to address interest rate exposure and generate capital gains that could be used to offset previously incurred capital losses. See "Short Term Bond Transactions" in Notes to Consolidated Financial Statements. We may enter into similar transactions in the future if we determine that market conditions are appropriate for generating the desired results from the transactions.

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    We have two joint ventures with HCL Technologies Limited to provide us with computer consulting, programming and associated support services. On August 31, 2004, we are obligated to contribute approximately $1.0 million of additional capital to the joint ventures in the form of cash or assets. We have committed to purchase $30.5 million in services from these joint venture companies through June 30, 2007.

    We also have a joint venture with Sutton Developments Pty. Ltd. ("Sutton") to operate retail locations in Australia. We have unconditionally guaranteed up to $7.0 million of borrowings under the joint venture's uncommitted credit facility and up to $0.4 million of presettlement risk associated with foreign exchange transactions. Sutton is required to reimburse us for 50% of any payments made under these guarantees. At December 31, 2002, the outstanding balance subject to these guarantees was approximately $1.0 million.

    The terms of the acquisition agreement for Victoria require us to pay the former Victoria shareholders additional consideration of $3.00 for each $1.00 of Victoria's earnings before interest and taxes (as defined in the securities purchase agreement) for each of the 12-month periods ending June 30, 2001 through 2003 that exceeds certain targeted levels. Any future additional consideration is to be paid 50% in cash and 50% in our common stock, the value of which will be determined by the prices at which our common stock trades in a defined period preceding delivery in each year. No payments were required for the 12-month period ended June 30, 2002.

    The terms of the acquisition agreement for Judith Jack require us to pay the seller additional cash consideration of $2.00 for each $1.00 of Judith Jack's earnings before interest and taxes (as defined in the asset purchase agreement) that exceeds certain targeted levels for each of the years ending December 31, 2001, 2002 and 2003. No payments were required for the 12-month period ended December 31, 2002.

    On April 8, 2002, we completed the acquisition of Gloria Vanderbilt. The aggregate purchase price was approximately $100.9 million, which included payments to the selling shareholders of $80.9 million in cash and the issuance of approximately 0.6 million shares of our common stock. We also assumed approximately $43.7 million of Gloria Vanderbilt's funded debt and accrued interest, which we subsequently refinanced. The terms of the acquisition agreement for Gloria Vanderbilt require us to pay the former Gloria Vanderbilt shareholders additional consideration of $4.50 for each $1.00 of Gloria Vanderbilt's earnings before interest and taxes (as defined in the stock purchase agreement) that exceeds certain targeted levels for the 12 months following the completion of the acquisition. Any additional consideration (the amount of which cannot exceed $54.0 million) is to be paid either in cash or a combination of cash and our common stock, the value of which will be determined by the prices at which our common stock trades in a defined period preceding delivery.

    On August 15, 2002, we completed the acquisition of l.e.i. The aggregate purchase price was approximately $309.7 million, which included payments to the selling shareholders of $272.5 million in cash and the issuance of approximately 1.0 million shares of our common stock. We also assumed approximately $84.0 million of l.e.i.'s funded debt and accrued interest, $83.2 million of which we subsequently refinanced. The selling shareholders and certain employees of l.e.i. will be entitled to receive future payments of up to $70.0 million in the form of cash and/or common stock if certain earnings targets are achieved during the three years following the closing of the transaction.

    We believe that funds generated by operations, proceeds from the issuance of notes, the Senior Credit Facilities and the McNaughton and Canadian lines of credit will provide the financial resources sufficient to meet our foreseeable working capital, capital expenditure and stock repurchase requirements, fund our contractual obligations and contingent liabilities and commitments, and meet any ongoing obligations to the former Victoria and Gloria Vanderbilt shareholders, the seller of Judith Jack, and the selling shareholders and certain employees of l.e.i.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

    The market risk inherent in our financial instruments represents the potential loss in fair value, earnings or cash flows arising from adverse changes in interest rates or foreign currency exchange rates. We manage this exposure through regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. Our policy allows the use of derivative financial instruments for identifiable

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market risk exposures, including interest rate and foreign currency fluctuations. We do not enter into derivative financial contracts for trading or other speculative purposes.

    The primary interest rate exposures on floating rate financing arrangements are with respect to United States and Canadian short-term interest rates. We had approximately $1.6 billion in variable rate facilities at April 5, 2003.

    At April 5, 2003, we had outstanding foreign exchange contracts to purchase a total of 12.5 million U.S. dollars and 66.5 million Mexican pesos through July 2003. We believe that these financial instruments should not subject us to undue risk due to foreign exchange movements because gains and losses on these contracts should offset losses and gains on the assets, liabilities, and transactions being hedged. We are exposed to credit-related losses if the counterparty to the financial instruments fails to perform its obligations. However, we do not expect the counterparty, which presently has high credit ratings, to fail to meet its obligations.

    For further information see "Derivatives" in the Notes to Consolidated Financial Statements.

Item 4. Controls and Procedures

    Within the 90 days prior to the date of this report, we carried out an evaluation, under the supervision and with the participation of our President and Chief Executive Officer and our Chief Operating and Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon this evaluation, our President and Chief Executive Officer and our Chief Operating and Financial Officer concluded that both our disclosure controls and procedures and our internal controls and procedures are effective in timely alerting them to material information required to be included in our periodic SEC filings and that information required to be disclosed by us in these periodic filings is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that our internal controls are effective to provide reasonable assurance that our financial statements are fairly presented in conformity with generally accepted accounting principles.

    There have been no significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to the date we carried out this evaluation.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

    We have been named as a defendant in various actions and proceedings arising from our ordinary business activities. Although the amount of any liability that could arise with respect to these actions cannot be accurately predicted, in our opinion, any such liability will not have a material adverse financial effect on us.

Item 5. Other information

Statement Regarding Forward-looking Disclosure

    This Report includes, and incorporates by reference, "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements regarding our expected financial position, business and financing plans are forward-looking statements. The words "believes," "expects," "plans," "intends," "anticipates" and similar expressions identify forward-looking statements. Forward-looking statements also include representations of our expectations or beliefs concerning future events that involve risks and uncertainties, including those associated with the effect of national and regional economic conditions, lowered levels of consumer spending resulting from a general economic downturn or generally reduced shopping activity caused by public safety concerns, the performance of our products within the prevailing retail environment, customer acceptance of both new designs and newly-introduced product lines, financial difficulties encountered by customers, the effects of vigorous competition in the markets in which we operate, the integration

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of the organizations and operations of any acquired businesses into our existing organization and operations, the termination or non-renewal of the licenses with Polo Ralph Lauren Corporation, our foreign operations and manufacturing, changes in the costs of raw materials, labor and advertising, and our ability to secure and protect trademarks and other intellectual property rights. All statements other than statements of historical facts included in this Report, including, without limitation, the statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations," are forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, such expectations may prove to be incorrect. Important factors that could cause actual results to differ materially from our expectations ("Cautionary Statements") are disclosed in this Report in conjunction with the forward-looking statements. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the Cautionary Statements.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

    See Exhibit Index..

(b) Reports on Form 8-K

    During the fiscal quarter ended April 5, 2003, we filed the following Current Reports on Form 8-K with the SEC.

SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

JONES APPAREL GROUP, INC.
(Registrant)

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CERTIFICATION

I, Peter Boneparth, President and Chief Executive Officer, certify that:

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CERTIFICATION

I, Wesley R. Card, Chief Operating and Financial Officer, certify that:

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EXHIBIT INDEX

____________
* Filed herewith.

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