Two years ago, I had a great in-store experience at a Lucky Brand Jeans outlet, and thought that it would be great to look the stock up when I got home. Then I got a pretzel from Aunt Annie's, and forgot all about stocks -- love me some honey mustard. Since that day, things have changed for Lucky. At the time, the company that owned it was called Liz Claiborne, but that company rebranded itself last year and became Fifth and Pacific (KATE). In addition to Lucky, the company owns Juicy Couture and Kate Spade.

Aside from its brand stores, Fifth and Pacific also creates exclusive lines for JCPenny (JCPN.Q) and Kohl's (KSS 3.11%). Without a doubt, Fifth and Pacific is in a transition. Investors considering this company need to know that a lot has changed in the past year, and a lot is going to continue to change over the next few years. Here are the details, and my recommendation to buy, sell, or hold.

Where we've come from
The massive restructuring that this company has seen in the past years means that it's more important than usual to understand the corporate history. Fifth and Pacific was Liz Claiborne until it decided to sell off that brand to focus on its other lines. The Liz brand was purchased by JCPenny, and Fifth and Pacific agreed to develop exclusive pieces for the brand starting in 2014, and running through at least 2020 . That sale gave the company a little influx of cash, which it used to charge up the rest of the business, which is what investors are now considering.

The switch from Liz to Fifth and Pacific hit the market in May 2012, when the stock was trading at about $13.

Where the company is focusing now
Kate Spade is the driving force behind Fifth and Pacific's engine, and the company is throwing a ton of fuel on the flames. Last quarter, Kate Spade increased comparable sales by 22%, and revenue by 35% . The company wants to get even more out of the brand, so it increased its store count by 19% over the quarter, now operating 93 Kate Spade stores . Along with the main brand, the company is starting to develop its Kate Spade Saturday line, which is aimed at women in their late twenties and early thirties who like the look of Kate Spade, but may not have the funds to go all in.

Lucky -- the brand that got me interested in Fifth and Pacific -- has also shown strong performance, with comparable sales up 5% over the last quarter. While that's not the same crazy growth that Kate Spade saw, it's spread out over a much larger store base -- Lucky operates more than 210 locations. But that hasn't translated into strong sales. The brand generated an operating loss last quarter, despite an 11% increase in revenue . In fact, the only portion of the business to turn an operating profit was Kate Spade, which leads us nicely into the challenges that Fifth and Pacific are facing.

The challenges
First of all, the company is an operational nightmare. Last year, it made a valiant effort to reduce costs by moving from a company-owned distribution model to a scalable third-party model. But there were unforeseen problems with logistics and software and, ultimately, Fifth and Pacific had to move merchandise back into its older system while it fixed other kinks. That wasted time and money, and didn't get the company any closer to having a handle on its costs . The program is still in the cards, and a new announcement should be coming out this month on its progress.

Second, in addition to the weak operations at Lucky, Juicy Couture is weighing the whole thing down. Not only did that brand produce an operational loss last quarter, it also posted flat comparable sales, and a 5.5% decline in revenue . That weakness led to a 20% corporate headcount reduction, and a CEO-level focus on merchandising and planning. That seemed to make a little difference in the beginning of 2012, but then fell apart in the second half. Management has continued to try and find a solution to the falling sales, but nothing seems to be sticking yet, especially here in the U.S .

The verdict
I still love the Lucky brand, and I think that it provides an excellent in-store experience. Kate Spade is a clear winner, and the more Fifth and Pacific can lean on that line, the better things are going to be. But Juicy Couture is a hot mess, and it's clear that there needs to be a lot of work behind the scenes. While I have high hopes for this company, I wouldn't put any new capital into it until management can demonstrate its ability to get operations clicking over smoothly. Fifth and Pacific is a hold, even at its currently low-ish P/E.