Jones Groups Stock Gets Boost on Sentiment, Jeanswear Spinoff

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Trefis
JNY: Jones Group logo
JNY
Jones Group
Jones Group

Source: Google Finance

The Jones Group’s (NYSE:JNY) stock gained last week after the news that it is in talks with Israel’s Delta Galil Industries to sell its Jeanswear Division to for an estimated aggregate amount between $350 and $400 million. [1] The response from the market was a positive one, with the stock gaining as much as 11% on the day of announcement of news. Jones Apparel competes with brands like Liz Claiborne (NYSE:LIZ) and Phillips-Van Heusen (NYSE:PVH) as well as department store mainstays such as Polo Ralph Lauren (NYSE:RL) and store-owned private labels.

We discussed this in our note Jones Explores Jeanswear Division Sale Boosting Stock.

The increase in investor’s confidence was based primarily on the impression that Jones is trying to focus entirely on the luxury segment while moving away from the ‘value’ based business such as jeanswear. Jeanswear is the lowest distribution channel of Jones carrying an EBITDA margin in the range of 9-10%.

Relevant Articles
  1. Jones Group’s Earnings: Continued Struggle in Q4 Justifies Acquisition
  2. Sycamore Partners To Buy Jones Group For $15 Per Share
  3. A Review Of Jones Group’s Jeanswear Business’ Slump And Revival
  4. Jones Group’s Results Slip As Apparel Industry In The U.S. Remains Weak
  5. Jones Group Will Rely On International Growth To Offset Domestic Weakness
  6. How Jones Group Is Reviving Its Main Brands – Jones New York & Nine West

Overall we stand positive on the stock as we believe by shifting its focus on luxury brands, Jones will be able to counter the margin headwinds more effectively since luxury brands are more resilient to cost pressures compared to value based brands.

Our price estimate for Jones Group stands at $15.64, implying an upside of nearly 50% to the market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

Notes:
  1. Jones Group announce possible sale of Jeanswear Division, Source: Jones IR, October 11 []