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The Jones Group's (NYSE:JNY) 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 Kurt Geiger and Stuart Weitzman will be particularly reflected in international retail segment’s results.

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 such as Gloria Vanderbilt, Erika and easy spirit, as J.C. Penny dropped these brands from its stores. Jones Group reduced the shipments of Grane due to its low performance and of Energie due to a challenging environment in modern junior tops business. Furthermore, it also lowered the shipments of Jones New York and Anne Klein 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 Business

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 Kurt Geiger and Stuart Weitzman 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 2012, Brian Atwood contributed $2 million sales to offset weak international wholesale results. Rachel Roy product line had a similar impact on domestic wholesale sportswear results. Meanwhile, Gloria Vanderbilt and Nine West 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.

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Source: Jones Group Earnings: U.S. Stores Consolidation And International Retail Growth In Focus