) revenues have been declining for quite some time now and
investors will be interested to know if Q4 fiscal 2012 can
turnaround this trend. The decline can be primarily attributed to
the retailer's store consolidation in the U.S., reduced shipments
to department stores and a tough economic environment in
Europe. While these aspects are likely to weigh on Jones Group's Q4
results, promising performances of brands such
Kurt Geiger, Stuart Weitzman, Brian Atwood, Rachel Roy
etc. can mitigate the impact somewhat. The strong performance of
will be particularly reflected in international retail segment's
While Jones Group's Q4 financial results may get some support
when being compared against a weak holiday season from last year,
the U.S. store consolidation and reduced shipments will play the
major role in determining them.
See our complete analysis for Jones Group
The U.S. Store Consolidation And Weakness In Europe Will
Weigh On Results
Jones Group's domestic retail revenues have been sliding since
2009, due to the retailer's U.S. store consolidation. As a part of
this strategy, Jones Group has closed down several of its
underperforming stores to improve its store productivity. The
retailer started the fiscal 2012 with 672 domestic retail stores
and ended Q3 with 587 stores. Jones Group is planning to further
close down 15 stores by the end of fiscal 2012. Hence, we
expect the revenue decline to continue in this quarter as well.
According to our estimates, the domestic retail segment constitutes
about 23% of the company's value.
Revenues from Jones Group's international wholesale business
have declined in all the three quarters of fiscal 2012. This can be
attributed to weakness in the European economy. We expect the same
trend to continue in the fourth quarter as well. We estimate the
international wholesale business to contribute a little less than
10% to the retailer's value.
Reduced Shipments May Impact Revenues
Jones Group's revenues registered year-over-year declines of
2.6%, 3.7% and 1% respectively in the first three quarters of
fiscal 2012. Apart from the aforementioned reasons, these
declines can also be attributed to the reduced shipments of brands
Gloria Vanderbilt, Erika
, as J.C. Penny dropped these brands from its stores. Jones Group
reduced the shipments of
due to its low performance and of
due to a challenging environment in modern junior tops
business. Furthermore, it also lowered the shipments of
Jones New York
product lines to its underperforming stores. This impacted Jones
Group's domestic wholesale jeanswear and domestic wholesale
sportswear segments, which collectively account for about 23% of
the retailer's value.
Fiscal 2012 Will Be A Turnaround For International Retail
Although Jones Group's international retail revenues have
increased (due to expansion), its daily revenue per retail store
has been coming down since 2009. The figure reduced from $2,803 in
2009 to $2,219 in 2011, primarily due to greater sales from the
discount stores compared to the full priced stores. However, things
changed in fiscal 2012, and the retailer's acquisition of
has contributed to growth since both these brands are popular and
have higher price points compared to the retailer's other brands.
Over the first three quarters of fiscal 2012, the international
retail segment generated around $260 million in revenues compared
to just $150 million during the same period a year ago. Although,
the slow European economy might have a slight
dampening effect, the growth in international business is
likely to remain healthy.
The international retail business is the most valuable segment
for Jones Group and constitutes roughly 30% of its value according
to our estimates.
Strong Brand Performance Will Help The Results
Even though Jones Group's revenues remain under pressure, there
exist some positive factors that might help. Most of the retailer's
individual brands have performed well. For instance in Q3 fiscal
contributed $2 million sales to offset weak international wholesale
product line had a similar impact on domestic wholesale sportswear
boosted domestic jeanswear wholesale's revenues. We expect these
brands to perform well in this quarter as well, and also play a
role in Jones Group's future growth.
Our price estimate for Jones Group stands at $14
, implying a premium of about 20% to the market price.
How a Company's Products Impact its Stock Price at