TJX Cos. Inc. and brand management firm Bluestar Alliance are each interested in acquiring the Jones New York brand.
The two made overtures to private equity firm Sycamore Partners last month following the announcement that operations for the brand were being shuttered. On Jan. 29, Sycamore said that it would “pursue strategic alternatives” for the business. Discussions so far are preliminary and in the explorative stage, financial and market sources said.
The JNY brand was acquired by Sycamore when it bought parent company The Jones Group, formerly Jones Apparel Group, last year for $2.2 billion. The business is in wind-down mode. The brand is still being sold at retail, with the wind-down expected to conclude before the end of this year.
Market sources said that Sycamore, when it bought Jones Group, placed an estimated valuation on the brand that was north of the $400 million range. The current asking price is $400 million, according to financial sources. While JNY was a sizable business occupying substantial real estate on the department store sales floor, financial sources said the shutdown of operations drops the valuation to less than $100 million, and likely substantially less than that. That’s because any buyer would be purchasing just the intellectual property assets of the brand.
Sycamore declined comment on the sale of the JNY brand or a timeline for the completion of the winding down process.
Financial sources said TJX has been on the hunt to buy brands since the back half of last year, and an acquisition of a label could be a game changer for the retailer. The acquisitions the company has done — such as its December 2012 purchase of off-price Internet retailer Sierra Trading Post for $200 million — have been retail focused.
Finding exclusives or new brand additions, whether in the form of a license or partnership, has always been an option for retailers as they try to figure out how to differentiate themselves from the competition. This month, Kohl’s department stores is expanding its portfolio of beauty offerings through the inclusion of Bliss, the prestige spa-oriented skin-care and well-being brand.
Buying brands that can become retail exclusives is another way to do that. One investment banker said retailers such as TJX and Kohl’s are “always looking for brands. They would love to own the brand versus licensing it from a third party, but they want to do so only at the right price.”
TJX sells brands that have a department store presence, but at off-price. Following the wind-down process, JNY would no longer have that channel presence and would represent an anomaly for the off-pricer compared with the other brands it sells. That’s not necessarily insurmountable, and TJX could turn it into a recognizable private label brand since many consumers are already familiar with it. For example, Jones New York Sport is one of the lines carried at the TJ Maxx nameplate. Another is Jones New York Signature, as well as Jones New York Collection.
A spokeswoman for TJX declined comment on the company’s acquisition plans.
Walter Loeb, a retail consultant and president of Loeb Associates and former retail analyst, said: “An acquisition of JNY by TJX would make sense. TJX wants to be more like a department store. It’s doing about $29 billion in annual volume, so it’s not so small a company anymore. They want recognizable brands that the customer knows, and JNY is still a brand that is recognized.”
Bluestar was cofounded by Ralph Gindi and Joey Gabbay in 2006. Brands under its umbrella include Nanette Lepore, Catherine Malandrino, Kensie, English Laundry, Kooba, Mac + Jac and Joan Vass. It once owned a stake in Liz Lange Maternity, which was sold in 2012 to Cherokee Inc. It has had success with brands in the moderate distribution channel, but lately has been eyeing firms higher up on the fashion food chain.
An acquisition of JNY by Bluestar would require the firm to find an operating partner. That might not be as difficult as it sounds. While Li & Fung Ltd. was once a name bandied about as a possible acquirer of brands through LF USA, it seems to have moved away from that focus in the U.S. But Li & Fung’s brand operator division in the U.S., Global Brands Group, could take on the role of operating partner under a licensing arrangement.
Executives at Bluestar could not be reached for comment.
Financial sources said that other retailers and brand management firms could also take a look at the asset.
Brand management firms for the most part have been able to take older labels and breathe new life into them. Authentic Brands Group is doing that with Juicy Couture and Sequential Brands Group with Ellen Tracy. Other newcomers, such as Saban Brands Lifestyle Group and Marquee Brands are hoping to work similar magic with their latest acquisitions, Mambo for Saban and Bruno Magli for Marquee.
According to Michael DeVirgilio, president of Marquee, “We will always pursue brands that we can manage with authentic messaging and those to which we believe the consumer connects with emotionally.” He noted that the profile of an acquisition target must have “strong global opportunity, [not] a quick niche play to a domestic consumer while ignoring the international markets from the get-go.”
That global opportunity seems to sum up what a good number of brand management firms are analyzing when they eye a possible acquisition. If JNY isn’t found to be capable of being taken overseas, that would narrow the pool of potential buyers.
But Sycamore might have an even bigger hurdle to overcome in its quest to find a buyer for the JNY brand.
One of its problems is that JNY has been forever positioned as a brand in the career wear category. What were once staples of the working women’s wardrobe — tailored suits and suit separates, blazers and dressy blouses — have been replaced by relaxed styling in the sportswear category that can go from day to dinner and everywhere else in between.
An investment banker said, “If you take this and make it private label, there are things one can take from the archives and use that [as a guide] for some of the product offerings.” But a high-ranking executive at an apparel firm said that even with that option, the JNY brand would have been an easier sell had operations been merely slowed down, instead of completely shuttered.