The Jones Group Inc. has hired investment bank Citi to explore its options — a move that could lead to the breakup of one of fashion’s largest brand portfolios.
Shares of the company, which operates roughly 35 brands, shot up as much as 16.1 percent Monday on word that it was testing the waters. The process could result in the outright sale of the firm.
“Like most companies, The Jones Group has ongoing relationships with a wide range of advisers,” said a spokeswoman for the firm. “As a matter of practice the company does not share the specifics of these relationships.” A Citi spokesman declined to comment.
One source familiar with the process said Jones had received interest from several would-be players looking for an acquisition and engaged Citi to field those calls and to examine its broader alternatives. The company is seen as a natural fit for a private equity company wanting to trim back some operations and resell others.
Shares of Jones closed up 7.6 percent to $15.75, leaving it with a market capitalization of $1.16 billion. Including debt, that left the firm with current valuation of $2.05 billion, giving it an enterprise value of 10.2 times its earnings before interest, taxes, depreciation and amortization for the past year. In a buyout situation, multiples over 10 times EBITDA are considered rich for the fashion industry and generally reserved for strong brands with a clear growth trajectory.
A decade ago, Jones was a cornerstone of Seventh Avenue, catering to department stores alongside the former Liz Claiborne Inc. and Kellwood Co. But while Claiborne spun off its namesake and zeroed in on Kate Spade and Kellwood was taken private, bringing its Vince unit to the fore, Jones has largely held onto the same corporate structure.
“Department stores have moved more upscale and contemporary, and Jones didn’t move with them,” said analyst Janet Kloppenburg, of JJK Research. “That’s really what hurt them. And you saw VF [Corp.] and PVH [Corp.] buy more contemporary brands that not only could satisfy the department stores, but also had great global growth opportunity.”
Jones has tried to up its fashion quotient and its exposure to the higher-end consumer in recent years, buying Stuart Weitzman, Kurt Geiger and Brian Atwood, but the net effect hasn’t been enough to lift the overall business.
“Unfortunately, except for Stuart Weitzman, those investments [in emerging brands] to date have not been able to propel the top line,” Kloppenburg said. “Many of them are just too small to move the needle and…the Jones New York apparel brand has experienced top-line erosion. We have to look at the individual pieces [of the company now] and see if their individual values are greater than today’s market cap.”
Kloppenburg described Weitzman as the “crown jewel” and Nine West as a “very viable” moderate footwear business, while noting L.E.I. and Gloria Vanderbilt have proven they can maintain market share.
As for the Jones New York business, she said there were opportunities to modernize its current department store distribution or to make the brand exclusive to one retailer.
Jones’ namesake sportswear business underperformed at retail over the past few years as the company was hit by internal turmoil.
Executives admitted that they had dialed up Jones New York’s fashion quotient too much last year as the business suffered branding and product issues. In an attempt to make the line younger, the fit was changed and luxe and heavyweight fabrics were added, as were furs.
The customer rejected the new positioning and Jones began to rework its namesake sportswear lines for this coming fall, going back to the heritage of the business. Price points have been lowered in an attempt to win back the traditional customer. The company also launched a new collection for fall called Jones Works, a style system with key pieces that mix together, as well as QMack, a new brand centered around 13 key items for the Millennial customer at Macy’s, beginning with 150 doors.
As Jones attempted to reinvigorate its struggling sportswear lines, it has also increased its focus on accessories, footwear and jewelry. Consequently, Jones sportswear has become a smaller piece of the pie. Sportswear accounted for 27 percent of group revenues last year, versus 31 percent in 2011. Led by Nine West, footwear and accessories generated 52 percent of the overall business, versus 48 percent in 2011. Jeanswear held steady at 20 percent of the business.
Overall, Jones had a net loss of $56.1 million on revenues of $3.8 billion in 2012. Of that, the Jones New York brand accounted for 16.9 percent, or $643 million, of total revenues, down from 19.1 percent, or $725 million, in the previous year.
On the other hand, the company has also been spending in its search for growth.
Jones paid an initial $180 million for a 55 percent stake in Stuart Weitzman in 2010, and bought the rest of the company for an undisclosed sum at the end of last year. It also spent more than $324 million to buy Kurt Geiger and its debts in 2011.
Industry sources believe that Jones’ traditional sportswear business is being squeezed by brands such as Lauren Ralph Lauren, Michael Michael Kors, Calvin Klein and Vince Camuto, as well as private label, on the better-price selling floor of department stores.
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews
“Stranger Things” is getting a new cast member for season 2. Meet @sadiesink_, the 15-year-old who will be joining the Netflix series for its new season. You may recognize her from “The Glass Castle” with Brie Larson and Woody Harrelson, but the Texas native’s next role goes in an entirely different direction. She describes her character, Max, as “a rough and tumble skater girl [who] becomes friends with the boys at school.” The second season debuts on October 27. (📷: @jgreenery) #wwdeye
Amid the Harvey Weinstein controversy, there’s another sector that’s being put under the spotlight for sexual abuse: the modeling industry. While rumors about abuse and sexual harassment of female and male models — and the photographers, agents and others who perpetrated it — have circulated within the fashion world for years, model @cameronrussell started posting stories from models on Instagram last week about abusive situations they’ve encountered — from sexual harassment and molestation to attempted rape. Over 75 have weighed in so far. Read more on WWD.com. Link in bio. #wwdnews
To celebrate its 16th anniversary, @dylanscandybar tapped designers and celebrities to create mosaics out of candy. The mosaics will be auctioned off to support the philanthropic cause of each participant’s choice. Pictured here is the mural created by @aliceandolivia's Stacey Bendet. For a first look at some of the other artwork being unveiled tonight, go to WWD.com. #wwdeye
The annual Veuve Clicquot Polo Classic in Pacific Palisades this weekend drew Kate Hudson, Tracee Ellis Ross, Laura Dern and more. See pictures of the star-studded event on WWD.com. (📷: @chelsealaurenla) #wwdeye
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye
"Nowadays when life is not so happy with everything going on in the world, I think people come to me for a little bit of whimsy and color and fun." - Designer Rebecca De Ravenel on her cult-favorite jewelry line. (📸 : @vsteves) #wwd40
“Everyone is talking about how the retail industry is struggling, but I think it’s an incredible time because brands who are doing something different and innovative are setting themselves up for the future,” said @adamgoldston, who founded the luxury athletic brand @apl with his brother @ryangoldsten. The Goldston’s are part of WWD’s 40 under 40: a group of industry notables. See the rest of the list on WWD.com. (📷: @vsteves) #wwd40
@eyeswoon blogger Athena Calderone debuted her first-ever cookbook, “Cook Beautiful,” which is heavily centered on the presentation and visual expression of food. Pictured here are her miso glazed carrots from the book. Get the recipe on WWD.com. (📷: @johnny_miller_) #wwdeye