Jones Group (NYSE:JNY) has struggled to sustain its growth in the U.S. during the last couple of years. The revenues from its domestic retail and wholesale businesses have declined due to lower sales of Jones New York and a poor product performance of the retail channel.  However, things have been better on the international front where the company’s performance improved substantially in 2012, with the acquisition of Stuart Weitzman and Kurt Geiger. 
Going forward, Jones Group will continue to leverage the popularity to these emerging brands to grow its international business. The company has also launched them in the U.S. market where they are expected to perform well. Additionally, it is making efforts to revive its Jones New York brand, which has been facing low demand. Besides these, Jones Group’s growth will find support from its biggest brand Nine West, which saw double-digit increase in the recently concluded quarter despite its huge size.
Emerging Brands Will Continue To Drive International Retail Business
Jones Group’s emerging brands Stuart Weitzman and Kurt Geiger have registered considerable growth since their acquisition. Revenues from these brands grew by about 30% in fiscal 2012, and accounted for 18% of Jones Group’s overall revenues.  Although their growth was slow in Q1 fiscal 2013 due to the combined impact of weak economy and prolonged cold in Europe, they are likely to overcome this temporary weakness.
The company acquired Stuart Weitzman, a high-end footwear brand in 2010.  With high attention to detail and the use of unique materials, Stuart Weitzman has created a strong position for itself in the luxury footwear market over the past 26 years. With its healthy brand image, the launch of an international Stuart Weitzman website, and expansion in India, Canada and China, we expect the brand’s growth to continue in the future. 
Kurt Geiger is one of the most popular luxury footwear brands in Europe selling more than 10 pairs of shoes every minute in the U.K.  It sells more shoes than any other footwear retailer in the region. Kurt Geiger started out as a footwear brand, but it expanded its product portfolio to bags and accessories in 2011.  Recently, the brand celebrated its 50th anniversary and is celebrating the event with a limited edition collection scheduled to launch later this year.  Jones Group acquired Kurt Geiger in 2011, which helped its daily revenue per international store increase by almost 40% in 2012.  Since the brand has done well even amid the weak economic environment in Europe, we expect it to carry on with its promising performance.
Launch Of Emerging Brand Stores In The U.S.
Encouraged by Stuart Weitzman’s and Kurt Geiger’s popularity in Europe, Jones Group introduced these brands in the U.S.  The company also acquired the luxury shoe brand Brian Atwood for $5.5 million in 2012.  Since the foundation of his company in 2001, Brian Atwood has emerged as a celebrated designer for impressive footwear.  Last year, Brian Atwood brand contributed about $3.7 million to Jones Group’s revenues, and the retailer plans to develop it on a global scale and expand its product portfolio. 
Jones Group stated that it will look at specific ways to increase the profitability of each individual store, which will mainly include conversion and shuffling of brands offered there. This way the retailer will keep only those brands at its stores that resonate well with local customers and offer maximum potential for revenue growth.  On this front, Jones Group can follow a strategy that appears to be working well in international markets. The retailer is adding other brands to its Kurt Geiger stores in Europe to increase their sales.  This worked well in Q1 fiscal 2013, sales of other brands at Kurt Geiger stores surged by almost 83%.
Revamping Jones New York
During 2011 and 2012, revenues from Jones Group’s domestic wholesale sportswear business declined substantially mainly due to lower shipments of Jones New York brand (20% of the revenues).  The brand has been struggling for a while due to a weaker-than-expected response to its fashion styles, its exit from J.C. Penny and the lack of competitive pricing. A weak response to its fashion continued in Q1 fiscal 2013, even as the retailer aggressively invested in it. 
However, there have been some underlying signs indicating that Jones New York is headed in the right direction. Some of the brand’s product segments such as Easy Care, Platinum suitings and Signature denims performed well throughout fiscal 2012.  In response to this, Jones Group started making efforts to increase their proportion in its merchandise mix. In Q1 fiscal 2013, these products contributed about 20% to the brand’s revenues, up from 9% in the same quarter last year. Jones Group is also reworking on the brand’s design and pricing, to better appeal to its loyal customer base of 45+ year old women. The company’s management has stated that keeping Jones New York’s prices competitive will be one of the key strategies for the brand’s growth. 
Nine West Shows Encouraging Signs
Nine West is the biggest brand for Jones Group in terms of sales volume, contributing over 20% of its overall revenues.  In 2012, the brand’s revenues declined slightly due to lower shipments to Asia and Dubai (a step taken to reduce the inventory levels).  However, it registered double-digit growth in Q1 fiscal 2013, driven by higher sales from casual wear and handbags, increased full priced sales and growth in e-commerce business.  Going forward, the company plans to continue to invest in its e-commerce business to spur the brand’s growth.
Nine West’s channel 9, a digital channel on YouTube for shoe lovers, continues to get significant customer attention.  At the end of the first quarter, this channel had over 6 million network views, and the company is looking to leverage this fan following to grow its sales.  It is adding shoppable videos to this channel as well as its Facebook page wherein the viewers can click on the videos to buy products.  Apart from its own e-commerce channel, the brand has also seen robust growth through Zappos, Piperlime and Macys.com, which indicates its popularity. 
Our price estimate for Jones Group stands at $ 13.35, which is slightly below the market price.Notes:
- Jones Group’s SEC filings [↩] [↩] [↩] [↩] [↩]
- Jones Group’s Earnings Presentations [↩] [↩]
- Jones Group Takes Stake in Stuart Weitzman, The Wall Street Journal, May 6 2010 [↩]
- Jones Group’s Q4 fiscal 2012 earnings transcript, Feb 13 2012 [↩] [↩]
- Kurt Geiger – A Shining Example Of A Sole Trader, The Independent, Jan 23 2011 [↩]
- Meet The Kurt Geiger Rock ‘N’ Roll Sweethearts, Vogue, Jul 4 2013 [↩] [↩]
- Jones Group Buys Kurt Geiger For $352 Million, The Wall Street Journal, Jun 2 2011 [↩]
- Jones Group’s Q1 fiscal 2013 earnings transcript, May 1 2013 [↩] [↩] [↩] [↩] [↩] [↩]
- Jones Group Acquiring Brian Atwood Designs, Bloomberg Businessweek, Jun 4 2012 [↩]
- The Jones Group To Acquire Brian Atwood Designs, PR Newswire, Jun 4 2012 [↩]
- The Jones Group Inc. Announces Strategic Plan To Improve Profitability, Jones Group Inc., Apr 24 2013 [↩]
- Jones Group’s Q1 fiscal 2013 earnings transcript, May 1 2013 [↩]
- Jones Group’s Q4 fiscal 2012 earnings transcript, Feb 13 2012 [↩]
- Channel 9, YouTube [↩]