Tag: Madewell

A new J Crew brand is under development as the US fashion house seeks to broaden its appeal to younger female shoppers.

In an interview, J Crew CEO Jim Brett says the company sees itself as having more than two brands.

“In fact, we’ll be announcing one new brand this year. It is aimed at women, and it’s younger than any of our existing brands.”

While he declined to reveal any further details of the new J Crew brand, commentators say the move will help it broaden its audience away from the staple “preppy” style it is currently associated with. It is part of a broader strategy to lift lacklustre sales.

The new J Crew brand would be its third, the second being denim-driven Madewell, targeting millennial women with what described as “more of a tomboy style”.

Its core brand is being relaunched with broader range of sizes and improved styling.

Brett says the strategies are already paying off, evidenced by two consecutive quarters of same-store sales growth. But he cautions new brands must target new customer demographics.

“It’s very important to maintain distinction between the brands,” he said. “It wouldn’t do the portfolio any good to cannibalise itself.”

US listed fashion retailer J Crew’s woes are worsening, with the company’s namesake brand dragging the business towards a significant loss.

As a result the company will shutter another 39 stores in the final quarter, taking the total closed for the year to 50.

In the latest quarter, J Crew group-wide comparable sales slid 9 per cent to $566.7 million, a figure made worse by poor figures for the same quarter last year, when sales were down 8 per cent.

The flagship brand’s sales slumped 12 per cent, following a 9 per cent decline in the same quarter last year.

A 22 per cent increase in sales by Madewell, largely down to an expanded store network, failed to stem the damage. J Crew lost $17.6 million in the quarter, compared with $7.9 million last year.

In the nine months year-to-date, the company has accumulated losses of $126.1 million compared with operating income of $34 million in the same period last year, but it says most of that figure is the result of non-cash impairments and restructuring costs.

Jim Brett, who took over as CEO from founder Mickey Drexler earlier this year, put a brave face on the figures, promising to “reinvigorate the J Crew brand to reflect the America of today and to continue to drive strong momentum in the Madewell brand”.

However, complicating any recovery plan is a massive $2 billion debt the company is in the process of restructuring.

“The numbers for the year so far are painful,” observed Retail Dive writer Ben Unglesbee.

In closing what can only be described as a torrid year for the company, J Crew has posted a weak, but improved, set of fourth quarter figures.

Total sales rose by 1 per cent, boosted by strong sales gains of 26 per cent at Madewell. While this compares favorably to the 5.5 per cent decline of last quarter, this is but a small bright spot surrounded by a sea of relatively gloomy numbers.

Total comparable sales fell by 4 per cent off the back of a 3 per cent decline in the prior year. Here the gains made at Madewell were more than wiped out by the continued decline of the core J Crew brand where comparable sales fell by 5 per cent and total sales by 3 per cent.

The company remains firmly in the red with a US$7.03 million loss recorded during the quarter – although, to be fair, this is a marked improvement on the $30.6 million loss recorded last year. Notably, however, losses for the full fiscal year now stand at a staggering $1.2 billion – something that leaves the company, and its balance sheet, in a very weak position.

While there are many reasons to be negative, the results at least bring some respite in as much as they suggest that J Crew is at last starting to stem the tide of decline – especially so given that the shallower falls occurred during a quarter when overall demand was notably weak. Even so, the group still faces a herculean task in turning around its fortunes.

Thanks to changes made by management across the year, many of J Crew’s full line stores are now looking much more disciplined in terms of merchandising and display. However, products are still priced above what many consumers are willing to pay – especially for relatively simple garments that have nice detailing but little else in terms of fashion credentials.

The issue of price is underlined by the fact that while J Crew’s mainstream stores suffer, J Crew Factory stores are fairly popular with more shoppers willing to buy its products at a reduced price. This isn’t the position that the company would like to be in, but it is one that reflects the fact that there is much more work to do in terms of refining the brand image and the product offer so that it can attract the premium J Crew wants to charge.

That people are unwilling to pay full price means that discounting at mainstream stores and via the mainstream website is also frequent. While this is a necessary evil to clear down inventory, J Crew is building a reputation as a retailer from which customers should never buy at full price – something that is hampering its ability to rebuild its brand and price integrity.

In our view, what J Crew needs is a fresh take – and this is something it is hoping will be delivered by the spring collection, the first designed by its creative director Somsack Sikhmounmuong. Even if this is a hit it will be just the first of many steps that J Crew needs to take to rebuild itself into a successful lifestyle brand.

The market is more competitive and crowded than ever and J Crew needs to do much more to stand out.