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.
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“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