The effort to sell The Jones Group Inc. has hit a stumbling block.

This story first appeared in the November 8, 2013 issue of WWD. Subscribe Today.

G-III Apparel Group Ltd., which had been looking to acquire Jones’ apparel business, has dropped out of the process, according to two sources. The company would have had to take on a substantial debt load to buy Jones, which has a market capitalization of $1.13 billion.

That leaves private equity firm Sycamore Partners, which has been pursuing the footwear side of Jones, in an uncertain position. It is unclear whether Sycamore is able to, or even wants to, make a play for all of Jones, or if there’s another investor who would step into G-III’s place and buy the other portion of the company.

One source said the Jones camp has recently reached out anew to other investors to see if they want to buy the whole firm.

RELATED STORY: Jones Q3 Report Tops Estimates >>

Initially, Sycamore had considered buying the apparel side of the business and was paired with KKR & Co., which wanted the footwear division with its popular Stuart Weitzman and Kurt Geiger brands. But KKR stepped out of the process, prompting Sycamore to take a hard look at the footwear business, performing extensive due diligence.

Sycamore is headed by Stefan L. Kaluzny, who has been building a fashion profile. He acquired a sourcing division that was part of Limited Brands Inc. as well as The Talbots Inc. and Hot Topic Inc. Sycamore also has a stake in Aéropostale Inc.

Jones, once a cornerstone of Seventh Avenue, has struggled lately and many brands in its portfolio have failed to gain traction in the marketplace. The namesake Jones New York line made an unsuccessful move in a more fashion-forward direction, but this year returned to its core knitting. The company has also closed stores in recent years and cut costs to boost profitability.

In the third quarter ended Oct. 5, Jones’ net earnings rose 66.5 percent to $28.3 million. But adjusted earnings per share tallied 48 cents — 6 cents better than analysts anticipated, but below the 57 cents seen a year ago. Sales fell 1.3 percent to $1.01 billion.

Wall Street has been pushing the company to become more profitable.

Activist investor James Mitarotonda, head of Barington Capital Group LP, bought a stake in Jones, advocated for the company to tighten up its operations and ultimately took a seat on the board in May.

The company hired Citi this summer to explore its options and the resulting process drew plenty of interest with bids coming in to buy the whole company or just the footwear or apparel divisions.

Leonard Green & Partners LP, Golden Gate Capital and Iconix Brand Group Inc., were all said to have taken a look at Jones. Sherson Group, a longtime licensee of Jones’ Nine West footwear brand, also hired investment bank Avalon Net Worth to pursue an acquisition of the moderate footwear portfolio.

Executives at Sycamore declined to comment. Jones executives and a representative for G-III could not be reached for comment.

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