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Investment Overview for Jones Group (NYSE:JNY)
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Below are key drivers of Jones Group's value that present opportunities for upside or downside to the current Trefis price estimate for Jones Group:
- Daily Revenue per Domestic Retail Store:
Daily revenue per domestic retail store has consistently increased from $1,811 in 2009 to $2,448 in 2012. The increase was primarily due to the closing of under-performing locations. Going forward, we expect the figure to improve further and reach $3,008 by the end of the Trefis forecast period.
If revenue per store increases to $3,880 by the end of the Trefis forecast period, there could be a 10% upside to the Trefis estimate. On the other hand, if it decreases to $2,110, there could be a 10% downside to the Trefis estimate.
- Domestic Apparel Wholesale Revenues:
Domestic apparel wholesale revenues declined to $782 million in 2012 primarily due to decreased revenues in Jones New York-related product lines and the discontinuance of its Jones New York Suit product line as well as decreased shipments of Kasper and Le Suit product lines. Going forward we expect the figure to gradually reduce and remain flat thereafter, reaching $670 million by the end of the Trefis forecast period.
If revenues increase to $800 million by the end of the Trefis forecast period driven by improved performance of Jones New York, there could be a 5% upside to the Trefis estimate. On the other hand, if it decreases to $570 million due to lower shipments of Jones New York, there could be a 5% downside to the Trefis estimate.
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Jones Group (NYSE:JNY) is a multi-brand company that designs and markets women's and children's apparel, footwear, accessories, fragrances, and jewelry. These products are sold through third-party specialty retail stores and department stores, in addition to the company's own 987 US and international retail stores. The company’s primary brand was initially Jones New York, but over time it has acquired and established over 30 brands, including Nine West, Anne Klein, Stuart Weitzman, Kurt Geiger and Easy Spirit. JNY's brands cover a range of styles: sportswear, activewear, casual apparel, fashion, and formal attire. A full list of JNY's brands can be seen here.${header:sourcesofvalue}
International retail business generates the most value for Jones Group, followed by domestic retail business and footwear and accessories wholesale business because of the following reasons:
High Margins in Retail Sales
Gross margins for the Retail segment are considerably higher than the wholesale business. Margins in the company's domestic retail business are nearly 1.5x Jones' domestic wholesale margins.
Increase in International Footprint
In the past few years, Jones group has significant grown its international retail and wholesale footprint. Jones' acquisition of brands such as Kurt Geiger and its introduction of brands such as Stuart Weitzman to the European market have been the primary drivers.
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Closure of Under-performing Stores in the US
Closure of under-performing stores is a major initiative of the company in the US. The trend was highly visible in the past couple of years with Jones closing 87 and 103 stores in 2011 and 2012, respectively. For 2013, we expect the company to close another 50 stores.
Increasing Competition from Private Labels
In recent years, private labels have accounted for an increasing share of sales at department stores. This has hurt branded manufacturers such as Jones Group which have been losing shelf space at department stores to private labels.
Promising Results from Emerging Brands
Jones Group's emerging brands Stuart Weitzman and Kurt Geiger have registered considerable growth since their acquisition. As these brands are quite popular and have premium pricing, they are expected to generate a significant portion of the retailers revenues in the future. For fiscal 2012, emerging brands accounted for 18% of Jones' revenues. Whereas, they made up only 14% a year ago.
Efforts To Revive Jones New York
Jones New York is the second most important brand for the retailer in terms of revenues after Nine West. The brand has struggled over the past year due to weaker than expected response to its fashion, the brand’s exit from J.C. Penny and lack of competitive pricing. However, some individual product segments have performed well.
Jones Group is rebalancing its merchandise mix to increase the proportion of its performing products. Additionally, rather than stuffing its store with fashion products, Jones group is looking to focus on specific fashion products. The company’s management stated that keeping Jones New York’s prices competitive will be one of the key strategies for the brand’s growth.
How Does Trefis Modelling Work?
How do we get the historical numbers for this chart?
Trefis has a team of in-house Analysts who gather historical data from company filings and other verifiable sources. When historicals are available, we explain how we got them at the bottom of the Trefis analysis section below.
Who came up with the Trefis forecast for future years?
The Trefis team of in-house Analysts considers a variety of factors when projecting any forecast. The rationale for our projections is explained in the Trefis analysis section below.
How does my dragging the trendline on the chart impact the stock price?
- We use forecasts for business drivers to calculate forecasted Revenues and Profits for each division of the company.
- We then use forecasted Profits in a Discounted Cash Flow (DCF) model to obtain the Price Estimate for the company.
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