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NEW YORK — “If we were at a football game, I would say we’re in the second half,” said Richard Dickson, president and chief executive officer of branded businesses at The Jones Group Inc., when asked to describe how the turnaround of the sportswear business was progressing.
After several challenging seasons, Jones has reworked the namesake sportswear lines for fall, going back to the strengths and the heritage of the brands, and lowered price points in an effort to win back its customer. It has also launched a new collection for fall called JonesWorks, a style system that simplifies the modern woman’s work wardrobe with key pieces that are “made to mix.”
“Clearly, the stakes are getting higher and the crowds are getting more excited. I look at balancing restless with patience. It’s a big business; it’s a complicated business at a complicated time,” said Dickson, who was interviewed at his spacious offices at 1411 Broadway here.
There’s no question that the Jones New York brands, particularly Jones New York Collection, have been struggling at retail, but Dickson believes the worst is behind them. He admitted the company dialed up too much fashion last year, and the customer rejected what was on the selling floor. All this is happening at a time when the corporation is going through a major transition, putting less emphasis on sportswear and more focus on accessories, footwear and jewelry. Jones sportswear has become a smaller piece of the pie, as accessories and footwear accelerate. In 2012, sportswear accounted for 27 percent of group revenues, versus 31 percent the previous year. Footwear and accessories (led by Nine West) generated 52 percent of the business, versus 48 percent in 2011. Jeanswear, which has been a steady performer at the company, remained at 20 percent of the business. (See related chart.)
RELATED STORY: Jones Tops Estimates, but Posts Net Loss in Quarter >>
Overall, Jones reported 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.
Jones has been buying new businesses to help fuel its growth. The firm 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 shelled out more than $324 million to buy Kurt Geiger and its debts in 2011.
But investors are cautious as the core sportswear remains a drag. Jones’ total market capitalization weighed in at just $926.5 million — well below Fifth & Pacific Cos. Inc.’s $2.49 billion, PVH Corp.’s $7.75 billion or Ralph Lauren Corp.’s $15.28 billion.
According to industry sources, Jones’ sportswear business is being squeezed by such brands 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. Last year, Jones made the line younger and changed the fit, which alienated its traditional customer, said sources. In addition, the fall 2012 line featured a lot of luxe and heavyweight fabrics, as well as furs, which the Jones customer bypassed — and the collection was priced too high.
Dickson conceded the company had sportswear problems but is in the process of fixing them. He explained that Jones New York has been operating in the traditional space of the sportswear segment, which has been challenged. Since he arrived at Jones three years ago, the company has tried to reinvigorate the Jones New York brand and personify it with destination key items. The brand was built on career sportswear and the group has now returned to that concept with an emphasis on suits, easy-care shirts and denim.
“She wants classic; she wants to be perceived as fashionable and not trendy. It’s a sophisticated look she’s after. There has to be the right fit, function and value,” said Dickson of the core Jones customer, who he said is 45-plus. “She’s a mature, educated, American woman. She’s either in her career or has retired. We have Signature, which is polished casual, and Collection, which is more of our career-driven sportswear line.”
Last June, Jones hired George Sharp as executive vice president of design, reporting to Stefani Greenfield, chief creative officer. Sharp was previously creative director and executive vice president of design at St. John Knits. Before that, he was vice president of design at Ellen Tracy. “We got lots of responses from retailers that it [the fall 2013 collection] was a return to the heritage of Jones, but even better. We’re more on brand today, and moving forward into fall, than we have been since I got here,” said Dickson.
Dickson noted that the fashion element of the business, which struggled at retail, “clouded the success of the key core item basics business, which we’ve been pushing over the last couple of years. Now that the dust has settled on the year, we’re dialing things up and down to try and figure out what the right, meaningful initiatives will be that will not only stabilize the brand, but set the brand up for healthy growth in the future.”
The newest initiative is called JonesWorks, which hits stores in August. The collection is a system that offers solutions for career dressing.
“We really introduce styles that work as a core base to her wardrobe, but then can also be updated each month with new fashion elements. It’s really to make it easier for her to shop and to go into the store and update her current wardrobe,” said Meredith Page, senior vice president of sales at Jones. The line features 25 styles, such as pencil skirts, pants, jackets, sheath dresses, knit tops, blouses and easy-care shirts that can be mixed and matched. It is aimed at Jones’ core customers, as well as younger consumers who are looking to buy their first interview suit or work wardrobe.
“It’s investment dressing for this customer,” added Sharp. JonesWorks focuses on neutrals such as gray, navy, black, camel and bright red, as well as herringbones, glen plaids and pinstripes. Each of the styles is named, and the hangtags will make suggestions such as “We love this Meredith jacket with this Lucy pencil skirt.” Most of the line is made of polyester viscose, and everything has stretch. Pants, for example, range from narrow ankle-length pants to full wide styles, with several in between. Skirts run the gamut from pencil to boot to below the knee. “For the price point, you can get a great looking suit for around $200,” said Sharp. He said the basic pieces can be mixed with more of the fashion and novelty pieces in Jones New York Collection.
JonesWorks will be sold in stores such as Macy’s, Bloomingdale’s, Dillard’s and Belk and will hang near Jones New York Collection, said Page. Jackets retail for between $129 and $139, skirts are between $69 and $79, pants are between $89 and $99, cardigans are between $79 and $89 and core shells and knit tops go from $29 to $59, said Page. The collection is sized 2 to 16; knits are extra small through extra large, and there are also petites and women’s sizes.
The impetus for the collection came from Greenfield, who reviewed the various brands in the portfolio and what they stood for, and realized one of the keys to Jones was the idea of a woman going from “day to date.” She had a series of meetings with Dickson and Trey Laird, chief executive and creative officer of Laird + Partners, the ad agency, and they came up with JonesWorks. The concept’s motto is “Simplify your life, amplify your wardrobe.” The line will have a marketing campaign behind it, which is currently in development.
Changing a company’s course is never easy, and this past year has seen its share of turmoil, with many long-time Jones executives exiting their roles. More than a dozen high-level executives have left the company, many assuming new roles at firms such as Michael Kors, Kate Spade, Chico’s, Ann Taylor, Kenneth Cole Productions Inc., Nygård International and Highline United Holdings Ltd.
When asked why there has been so much turnover, Dickson responded: “It’s a combination of things. Truth be told, in any transformation of this magnitude, there’s a new chapter beginning. There’s an infusion of talent and recognition. The people who got us here with exceptional skill sets, passion and talent, are maybe not set up for the next chapter of success for us. There are other people who have been here for years who are integrating very well with the transformative vision we have and operating fabulously with a renewed spirit.”
Some industry sources attribute the turnover rate to Greenfield, who joined in November 2011. “She has complete reign and turned the whole place over,” said one source. Others questioned whether Jones’s corporate environment is the right fit for the creative-minded Greenfield, who joined from Scoop, the contemporary fashion chain she cofounded. Sources said she’s not as involved in design as she previously was when she began at Jones.
Dickson said Greenfield “has a great eye for merchandising. She adds creative insight, merchant insight and innovation.”
“We have a strategic road map we’ve been following. In order to achieve what we want to achieve, we’ve infused talent into the organization that represents creativity,” said Dickson. Asked whether Greenfield has operating responsibility, Dickson said, “She serves in the creative function specifically on design, merchandising, marketing and creative services. She has reporting structure and lends her eye as she operates across the company.”
Dickson said the company is a very different place than when he joined. Three-and-a-half years ago, the entire business was based on core brands and labels. Today, 20 percent is done in its investment in designer brands, such as Stuart Weitzman, Kurt Geiger, Rachel Roy, Robert Rodriguez and Brian Atwood. “This is a very different profile and a very different mix of personalities,” said Dickson. “We’re much more diversified and much less reliant on one brand or another. We’re diversified in classification, we extended significant growth in footwear, handbags and the jewelry space. Where we do see the world of fashion and business related by category is more inclined to be in the accessory, footwear, handbag and jewelry space. If you look at where we’ve directed our efforts and investments, it does correspond with that space.”
It also extends to the leadership. In October, the company hired Kathy Nedorostek as group president of global footwear and accessories. Most recently she had been president of North America wholesale and global licensing at Coach Inc. The company also brought in Greg Clark as chief marketing officer and Scott Bowman as group president of global retail and international development. International growth is a key priority at the company, where international penetration, thanks to its 2011 acquisition of Kurt Geiger, accounted for 20 percent of 2012 revenues, up from 17 percent in 2011, and 10 percent in 2010.
Stores appear optimistic that Jones is making progress with its sportswear collections.
Kathryn Bufano, president and chief marketing officer of Belk Inc., said, “The Jones fall line is very strong with tremendous color that appeals to our modern Southern customer. We see improvement in the Jones New York Signature line and like the new direction in Signature with emphasis on key items. The denim launch has been very strong.”
Brendan Hoffman, president and ceo of Bon-Ton Stores Inc., added, “I think they’re making great progress. We have great faith in Wes [Card, chairman and ceo of Jones], Richard and Stefani and the team there. Obviously, we have a huge business with them across all categories. They’ve been great partners. I definitely liked what I saw for fall, which continues to build on some of the progress they made for spring. We need them to be successful.”
Hoffman praised the JonesWorks collection. “We’re having great success with those sort of separates in other places,” he said. On the apparel side, he noted, “We’re all hoping for better things this year. Certainly, they have their jeans business, which continues to be very successful for us, and obviously shoes and accessories, but by their own admission, they’re hoping for bigger and better things out of their core sportswear business this year.”
Hoffman said Bon-Ton does a big business with Jones Sport (the weekend wear line), and carries Jones New York Collection, which is priced higher, in only a few doors. As for their lowering price points in the fall, Hoffman said, “It will make them more competitive with the other brands on the floor.”
“They’ve been putting a lot of work into it,” added Hoffman. “Stefani Greenfield’s done a great job and gotten to know the brands and what the customer wants. They’ve used her expertise. We have complete faith in them and are counting on them to be a big part of our future success.”
Jeff Gennette, Macy’s chief merchandising officer, said, “We at Macy’s continue to enjoy a very strong partnership with the team at Jones, and we are working in collaboration on initiatives within all of the brands. Given the general softness in the ready-to-wear business over the past couple of years, we see opportunity to strengthen these Jones brands this fall and in 2014 as the customer refreshes her closet and seeks newness in silhouettes, colors and fabrication. Jones is a strong company with terrific resources to innovate in response to customer preferences. Meanwhile, Rachel Rachel Roy, which is exclusive to Macy’s, continues to evolve as a core Impulse brand for our older Millennial customer. We launched Rachel shoes and handbags last fall, and the brand is front-and-center on our rapidly developing Impulse floor,” added Gennette
Looking ahead, Dickson thinks the new sportswear pricing strategy will give the company extra volume potential. “Frankly, that opening price and that first markdown is where the business is built. If you price too high, the wait time for that first markdown costs us all turn and time. We’ve adjusted that to be more price competitive,” said Dickson.
At a Bank of America Merrill Lynch Consumer & Retail Conference, Card said, “Frankly, we were competitively way overpriced versus the competition. We had jackets in the $200 to $240 range and some of the key competitors were getting down to the $140 to $160 type range.” Jones has also changed the mix of the line to 60 percent basic and 40 percent fashion.
Turning to Anne Klein, Dickson said the sportswear is a relatively small category, but some of the other 14 Anne Klein categories, such as footwear, are big and growing. However, he sees potential for the sportswear under Jeff Mahshie, head of design. “Retail reactions have been great. We’re being careful. He’s unearthing the real DNA of Anne and translating it for today.”
Discussing emerging and other company brands, Dickson said:
• Rachel Roy continues to be a growth opportunity. “We’re expanding categories with that. We have lots of plans that include categories like home, and other plans for the designer collection, which continues to perform,” said Dickson.
• Brian Atwood recently opened a flagship on Madison Avenue. Eventually, they’d like to add an apparel collection.
• Robert Rodriguez, he said, is a “phenomenally talented designer and is continuing to quietly grow in better distribution.” He said they’re expanding the Rodriguez brand outside the U.S.
• The company has made a big investment in Stuart Weitzman and is opening stores both domestically and internationally. It has also increased its advertising and digital media spend, and has hired Kate Moss as the face of the brand in an ad campaign produced by David Lipman. “It’s one of the prized brands in the portfolio. It’s one of the most profitable brands. We have a three-year strategy for Stuart Weitzman, which includes some category extensions. We’ve launched handbags in our own stores,” said Dickson. Apparel may be a possibility down the road.
• Kurt Geiger, which gives them a European foothold, has opened stores at three locations in the U.S.: Bleecker Street in New York; South Coast Plaza in Costa Mesa, Calif., and Stockton Street in San Francisco. The stores carry only Kurt Geiger (Kurt Geiger London, Miss KG and Carvela). The footwear retails between $150 and $400. Men’s accounts for 30 percent of the business. Right now there’s no wholesale business in the U.S., but that’s imminent.
• Nine West is the single largest brand in the company and has a new digital marketing strategy, Channel 9, he said, which features programming that covers various aspects of footwear.