Jones Apparel can't stop slide
Even as its gainful sale of Barneys New York nears completion, its stock keeps falling.
Shares of Jones Apparel Group Inc. fell to a nine-year low yesterday even though the Bristol company will receive $117 million more for selling its luxury-fashion business than it expected.
Rather than focusing on the bidding for Barneys New York, which ended yesterday, investors remained concerned about whether Jones Apparel could succeed in the competitive retail market and reverse three years of declining profits.
"The deal has nothing to do with the fundamentals," said Brad Stephens, an analyst with Morgan Keegan & Co. Inc., of New York.
Fast Retailing Co. Ltd., of Japan, announced yesterday that it would not raise its $950 million bid for Barneys. A rival bidder, the Dubai equity firm Istithmar PJSC, increased its offer Wednesday to $942.3 million. Jones Apparel accepted that offer.
Istithmar opened the bidding in June at $825 million and raised its offer twice to fend off Fast Retailing. Jones bought Barneys three years ago for $400 million.
If Jones breaks its agreement with Istithmar, it would pay it a fee of $34.7 million. That makes Istithmar's latest offer worth more than Fast Retailing's. The Japanese company had until 5 p.m. yesterday to increase its offer, but Jones said it did not do so. The company said the sale to Istithmar is expected to close by the end of September.
Jones is expected to use part of the cash from the sale of Barneys to buy back shares, which closed yesterday on the New York Stock Exchange at $18.17, down $1.71. The company said it would also invest in its core brands, such as Nine West, Anne Klein and Gloria Vanderbilt.
This means, analysts said, Jones will boost its advertising and marketing efforts - areas in which department stores, in general, have failed. Department stores, where Jones Apparel lines are carried, have struggled for the last few years to sell clothes, they said.
"They can't outsource brand development to Macy's or someone else," said Stephen Hoch, director of the Wharton School J.H. Baker Retailing Initiative. "They recognize they've basically got to be their own retailer."
The company's stock has been sliding all year and is now at its lowest since October 1998.