J. Crew is rowing in the fast lane. The retailer is known for
its preppy fashions, including jeans, khakis, and other basic (but
pricey) items sold to young professionals through its catalogs,
websites, and nearly 520 retail and factory stores across the US
under the J. Crew, and Madewell banners. Madewell is a women's-only
collection of hip, casual clothes. Outside of the US, the retailer
also boasts 32 stores across Canada, London, Hong Kong, and Paris.
The American retailer sources about 97% of its merchandise from
factories outside of the US, 60% being sourced from China and Hong
Kong. Founded in 1947, the company made its name as a catalog
retailer. Its first physical store appeared in 1989.
The J. Crew brand (comprising J. Crew Retail and J. Crew
Factory) generates some 85% of total revenue. About 55% of J.
Crew's total sales come from women's apparel sales, while men's and
children's apparel sales generate 25% and over 5% of total sales,
respectively. Accessories brought in the remainder of the
retailer's total sales. J Crew Retail's stores are upscale and
located in high-end regional malls, lifestyle centers, and
J. Crew Factory stores are located primarily in large outlet
malls and sell a specific line of merchandise tailored after
products sold in the previous season at J. Crew retail stores and
The company's fast-growing Madewell line offers women's apparel,
including a new line of suits, that is priced 20% to 30% lower than
J. Crew merchandise. As at August 2016, the company operated 287 J.
Crew retail stores, 108 Madewell stores, and 170 factory stores,
mostly in the US.
New York-based J. Crew boasts some 545 stores in 44 US states
and the District of Columbia, with nearly half of its stores
located across the states of California, New York, Florida, Texas,
Massachusetts, New Jersey, Florida, and Pennsylvania. The US market
accounts for essentially all of the retailer's sales.
Beyond the US, it operates two stores in Paris; 18 stores in
three Canadian provinces (Alberta, British Columbia, and Ontario);
seven stores in London; and four stores in Hong Kong. J. Crew's
e-commerce site is active in 100 countries.
Sales and Marketing
The retailer relies on the J. Crew catalog as the primary
vehicle for marketing and advertising. The catalog, which drives
in-store as well as direct sales, utilizes high-quality photography
and art direction, to burnish the J. Crew brand. The company
typically spends $40-50 million on catalog advertising, the bulk of
its total advertising spend.
Beyond the book, the company relies on online, print, and
outdoor advertising. The retailer also offers a private-label
credit card that accounts for about 15% of its total net sales. The
chain's customers are affluent, college-educated, professional and
style-conscious women and men.
The retailer sources its products either through buying agents
or by purchasing merchandise directly from trading companies and
manufacturers within the US and overseas.
J. Crew credits its on-target fashion sense and lean inventories
for its strong sales growth in recent years. However, the company
recorded two consecutive years of falls in fiscals 2016 and
In fiscal 2017, sales fell 3% to $2.4 billion. Comparable sales
fell 7%, with the losses felt entirely in the J. Crew segment.
Women's apparel (specifically knits, shorts, and dresses) and
accessories were the poorest performers in the year. Falls at J.
Crew were partially offset by 14% revenue growth at Madewell, which
raked in $341.6 million.
The company has incurred several years of net losses. In fiscal
2017, net loss narrowed to $23.5 million from an eye-watering $1.24
billion loss the previous year, incurred due to write-downs on its
physical operations. Cash from operations crept up 2% to $137.8
million due to non-cash adjustments.
J. Crew is under severe pressure as revenue declines, losses
mount, and competition from online retailers increases. CEO Mickey
Drexler departed in 2017 shortly after creative director Jenna
Lyons. The departures are the two most notable in a larger shakeup
as the company looks to slim down and catch a favorable wind.
J. Crew's directors are also having to deal with its staggering
debt load of around $2 billion. They are aiming to push back a $567
debt repayment due in 2019, giving the company time to return to
profitability and stand a chance of avoiding insolvency.
As well as defensive efforts, the company is working to
modernize, having been left being in terms of online, speed to
market, personalization, and convenience. However, capital
expenditure has fallen from $132 million in 2013 to $80 million in
J. Crew discontinued its bridal product line in late 2016.
J. Crew has been aggressively expanding its store network across
the US, adding 34 new retail, factory, and Madewell stores in
fiscal 2016 after opening 50 locations during the prior year.
Indeed, from 2012 through 2016, the retailer grew its total store
base by 43%, from 401 to 575 stores. As part of this expansion, J.
Crew has been introducing more of its Madewell and factory stores
for price-sensitive shoppers as consumers have become more thrifty
in recent years.
In an attempt to boost sales, J. Crew has also been expanding
its direct and retail store businesses internationally. The chain
opened its first two J. Crew stores in Paris in 2015, and now has
seven stores in London and four in Hong Kong.