Jones Group Shares Popped: What You Need to Know
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Jones Group (NYS: JNY) climbed 11% on Tuesday after the clothing and accessories company confirmed that it is in talks about selling its denim division to industry peer Delta Galil Industries.
So what: The move would allow Jones -- whose stock has taken a huge beating over the past year -- to focus on its higher-margin, higher-growth luxury brands. Additionally, management said that it would probably use a big chunk of the sale's proceeds -- estimated at $350-$400 million -- for share buybacks.
Now what: I'd cautiously look into Jones as a possible value pick. High cotton prices have weighed heavily on Jones' margins in recent months, so fully transforming into a less economically sensitive luxury accessories business -- a la Coach (NYS: COH) and Fossil (NAS: FOSL) -- should appeal to more long-term investors. With Jones expecting to either close a deal with Delta Galil or end talks within a month, Fools won't have to wait very long to see what happens.
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At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Coach and Fossil. Motley Fool newsletter services have recommended buying shares of Coach and Fossil. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.