Shares of The Jones Group (NYSE: JNY) have been volatile of late as the company has been the rumored target of several potential acquirers. The most notable of these is the retail-focused investment firm Sycamore Partners.  The company has solid brands, like Jones New York and Anne Klein, but it has been hurt by consumers' pursuit of lower price points in their apparel purchases; evidence of this can be seen in the growth of the off-price retail sector. Jones Group has also been affected by strategy shifts at its wholesale partners as well, which are the source of roughly half of its sales.  Keeping this in mind, is there a play here for investors,or should they focus on peers such as Fifth & Pacific Companies (KATE) and Michael Kors Holdings (CPRI -3.82%) instead?

What's the value?
Jones Group spent years cultivating a formidable one-stop design shop for its wholesale partners. The company has a focus on women's sportswear, jeanswear, and footwear categories. However, the company has had difficulty competing for floor space as its wholesale partners increasingly push into proprietary labels, an area that Jones Group also participates in through exclusive outsourcing arrangements like its l.e.i. brand at Wal-Mart. The net result has been the generation of a greater percentage of sales from the off-price retail sector, something that has put consistent downward pressure on Jones Group's merchandise margin.

In the 2013 fiscal year, Jones Group has eked out a top-line gain of 1.8%. This was aided by modest comparable-store sales growth and a strong performance in the jeanswear category.  Its core women's sportswear segment generated weak results, however, as consumers continue to favor competitors' less expensive offerings. This trend has led the company to lower prices on its Jones New York product line during the period. Jones Group has also continued posting losses in its retail segments, despite management's aggressive moves to prune unprofitable stores from its domestic network.

On the upside, management has recognized that consumers are willing to pay up for certain product categories. The most notable of these is accessories and footwear, which led it to pursue acquisitions in the space including its purchases of designers Kurt Geiger and Brian Atwood in 2011 and 2012, respectively. The portfolio additions have allowed Jones Group to introduce new handbag and footwear products, making the accessories segment its largest sales contributor in the current period. The company still has far too many brands, though, leading to an overhead level that consumes virtually all of its gross profit.

Focus, focus, focus
Jones Group should probably take a page from the playbook of Fifth & Pacific(KATE), a competitor that narrowly escaped bankruptcy in 2009 and has used its new lease on life to slim down its operations and improve its financial profile. Fifth & Pacific wisely unloaded its Liz Claiborne assets to retailer J.C. Penney in 2011 for roughly $267.5 million and further downsized itself with the recent sale of its Juicy Couture unit.

The asset sales have allowed the company to primarily focus its limited resources on its fast growing Kate Spade unit, which the company hopes to fully evolve into a lifestyle brand. In that regard, Fifth & Pacific's efforts seem to be bearing fruit, as it has reported a torrid 68.6% top-line gain for its Kate Spade unit in the 2013 fiscal year. While the company continues to post adjusted operating losses, partially due to costs of expanding its product categories and global retail network, its current asset base and brands are likely to lead to solid profitability. Investors have apparently embraced this view by pushing its stock price up sharply.

Fifth & Pacific is following the lead of current accessories kingpin Michael Kors(CPRI -3.82%), a company enjoying very fast sales growth that is no doubt furthered by publicity from its successful initial public offering in late 2011. Michael Kors has wisely tied its mast to the accessories segment, which generated a 9.9% compound annual growth rate from 2005 to 2011 according to a Bain Capital study. The company's singular brand and product focus have resulted in a consistently strong operating margin, which came in at 28.9% in the current period. This has allowed it to embark on an aggressive retail expansion strategy, reducing its reliance on the wholesale channel.

The bottom line
Jones Group's strategic moves have it moving in the right direction, with a smaller domestic retail footprint and a focus on the accessories segment. The company likely creates consumer confusion with its myriad of brands, however, and it can't leverage its marketing expenditures as efficiently as focused competitors like Fifth & Pacific and Michael Kors. As a stand-alone company, Jones Group has some further rightsizing ahead of it. Long-term investors should probably stick with its named competitors.