The sale of brands by Fifth and Pacific has helped the company reward shareholders. Since the January 2012 announcement, shares of Fifth & Pacific Companies Inc (NYSE:FNP) are up over 150%. The sale allowed Fifth & Pacific Companies Inc (NYSE:FNP) to show off its growing brands, expand internationally, and improve its balance sheet. These reasons all represent an opportunity for Jones Group investors, if the company follows a similar path in offloading brands.
Become a licensor
One way The Jones Group Inc. (NYSE:JNY) can transform itself would be a push into brand licensing. Jones could begin to license the use of its brands to certain stores. This would cut inventory costs, and generate higher profit margins and steady income for the company. Iconix Brand Group Inc (NASDAQ:ICON) has seen great success doing this.
Iconix Brand Group Inc (NASDAQ:ICON) owns Candie’s, Bongo, Joe Boxer, Rampage, Mudd, and Zoo York. The company licenses the brands to department stores and retailers under contracts. Most of the contracts are long term and have set dollar minimums paid to Iconix no matter how well the products sell in stores. Iconix takes care of the brand management and some of the marketing, while the licensee is responsible for manufacturing, delivery, and inventory management of the products.
Iconix Brand has had success with this model and is beginning to see its strong portfolio pay off in international markets. Jones Group could have similar success if it started licensing its brands and collecting payments from retailers. The company could then expand internationally through joint ventures, similar to Iconix’ strategy.
Shares of Iconix are up 47% on the year and trade near 52-week highs. Revenue is expected to climb 22% in fiscal 2013, with earnings per share also climbing an expected 32%.
Analysts expect Jones Group to post earnings per share of $0.82 for fiscal 2013, a sharp decline from the $1.24 reported a year ago. Revenue is expected to grow only 0.8% to $3.8 billion. In fiscal 2014, earnings per share are expected to grow to $1.11. Revenue is predicted to hit approximately $3.9 billion, a 1.7% increase. Shares trade at 19 times 2013 expected earnings and 14 times expected fiscal 2014 earnings at the time of writing.
The new focus on millennial shoppers could be a huge positive for The Jones Group Inc. (NYSE:JNY), a company that has struggled to find growth. The company has too many brands, but soon may reward shareholders by selling-off brands and unlocking asset value. At only 14 times next year’s earnings, Jones Group shares look relatively cheap. Take a high flyer on this retail play, or consider investing in Iconix Brand, a company that has found a way to monetize its brands domestically and internationally.
The article This Apparel Company Has Two Ways to Reward Shareholders originally appeared on Fool.com.
Chris Katje has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
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