Jones Group (NYSE:JNY) is a specialty retailer offering footwear, accessories and apparel under various brands such as Nine West, Stuart Weitzman and Kurt Geiger. The retailer operates its retail and wholesale stores across the U.S., Canada and Europe. In its recent results, the retailer reported an overall decline in revenue due to the weak European economy. 
However, by offering a variety of popular brands, Jones Group puts itself in a good position for long-term growth. The retailer is improving its international footprint by planning to further expand in international markets, including the second largest economy of the world China. At the same time, it is consolidating its under-performing domestic retail stores.
Here we discuss some of the factors that are likely to affect Jones Group in the future.
Closure Of Under-Performing Stores In The U.S.
The closure of under-performing stores is a major initiative by the company in the U.S. The trend was highly visible in the past couple of years with Jones closing 142 and 87 stores in 2010 and 2011, respectively.  Until the third quarter of fiscal 2012, the retailer had closed 85 of its stores in the U.S. and it plans to further close 15 stores in the last quarter.  While the closures are aimed at improving store economics, they will also lead to a revenue decline in the domestic retail segment, which contributes about 21% to the company’s value by our estimates.
Increase In International Footprint
In the past few years, Jones Group has significantly 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. The retailer increased its international store count from 37 in 2009 to 315 in 2011. It further plans to add 34 stores in international markets, including China and the Middle East, by mid fiscal 2013. Amid mixed performances by its various divisions, the international retail segment registered revenue growth in the recently concluded quarter. This indicates that the retailer is moving in the right direction. The international retail segment constitutes about 26.6% of the company’s value, according to our estimates.
Dependence On Wholesale Business Affecting The Margins
About 70% of Jones Group’s revenues come from the wholesale segments, which cumulatively contribute about 60% to the company’s value, according to our estimates. Gross margins for the retail segment are considerably higher than that for the wholesale business. Margins for the company’s domestic retail business are nearly 1.5x its domestic wholesale business.
Good Brand Performance Driving Growth
Jones Group offers a variety of brands under its roof and these brands have posted good results for the retailer. For instance, Kurt Geiger and Stuart Weitzman have contributed positively to revenue growth. Moreover, in the last quarter, Brian Atwood and Rachel Roy mitigated the effect of the revenue decline in international wholesale and domestic wholesale sportswear segments. 
Increasing Competition From Private Label Brands
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 has been losing shelf space at department stores to private labels. Since a significant portion of the retailer’s revenue comes from the wholesale segment, this has been a concern for the company.
Our price estimate for Jones Group stands at $14, implying a premium of about 15% to the market price.Notes: