By  on October 29, 2007

Now that New York & Company Inc. has exited its JasmineSola concept, the specialty retailer can get back to business as Wall Street applauds the move and analysts size up the company's market position.

The firm's decision to liquidate the 23-store chain has sent shares up 7.4 percent since the announcement was made on Oct. 18.

After investing more than $60 million in JasmineSola since acquiring the brand in 2005, the company is only left with a black eye, said Eric Beder, retail analyst at Brean Murray Carret & Co.

JasmineSola was negatively impacting full-year earnings by at least 13 cents to 15 cents a share, Mark Montagna, retail analyst at CL King & Assoc., said in a research note when he initiated coverage on the company in September.

For the year-to-date period company shares are down 51 percent, from $13.15 on Jan. 3 to close at $6.39 on Oct. 25.

"Since going public on Oct. 7, 2004, New York & Company has been the worst performing specialty apparel retailer of 31 relevant specialty apparel retailers," Montagna said in the note.

Fashion misses and inventory shortages have caused both their stock and sales to suffer.

The women's apparel retailer can now focus on improving its core concept through store remodels, closing underperforming locations, shrinking square footage and cleaning up inventory.

"I think they have a lot of margin opportunity in getting the New York & Company merchandise right, which would produce immediate growth," Montagna said.

While the elimination of JasmineSola could be a benefit to the company, it might also stunt its growth.

With more than 550 stores, Beder said New York & Co. has almost reached saturation.

"JasmineSola could have been a growth vehicle for the company. There are few premium denim stores, and premium denim has high price points and good returns," Beder said. "But the concept was not executed properly."

Beder said JasmineSola should have been sold off instead of liquidated, having been profitable for 35 years as a private company in Boston before being acquired by New York & Co."They need something to get investors excited. It is tough to make the case that New York & Company stores are still growth vehicles," he continued.

But Montagna said the retailer still has a long way to go before reaching saturation.

The company is seeking to expand their store base to about 900 doors.

Montagna said these stores would be most profitable in strip and outlet centers.

"They can really grow in the 'Target centers' and be a fashion player and prestige label. There is less opportunity for them in the malls, where rent and maintenance fees are increasing," he said. "New York & Company does not have enough pricing power with their brand name to really compete in the malls, like American Eagle or Abercrombie & Fitch."

To continue reading this article...

To Read the Full Article

Tap into our Global Network

Of Industry Leaders and Designers

load comments
blog comments powered by Disqus