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J Crew targets new heritage vibe to turn around losses and weak sales

jcrew-summer-2015

Put September 14 in your diary if you’re an avid J Crew watcher. That’s the day new collections arrive in-store – with heritage the new key focus – to (hopefully) turn around those losses and weaker sales reported Thursday.

“I am not going to say it’s the be-all, end-all, but I think you will be really pleased with what you see,” CEO Millard Drexler told analysts on a conference call yesterday.

New product will include Jackie cardigans, Regent blazers, washed shirts, denim, cashmere and ballet flats.

Judging by Q2’s results, the changes can’t come fast enough. J Crew posted a $13.6m loss, versus a year-ago profit of $10.8m. Adjusted ebitda was $41m compared to $67.6m a year ago.

Overall, revenues fell 5% to $593.6m and com-store sales fell 11%, compared with an increase of 4% a year ago.

J Crew brand sales fell 10% to $506.5m with comp sales falling 13%. In stark contrast, the Madewell brand bounce continued with sales jumping 22% to $67.9m and comps growing 8%.

Gross margin fell to 34.3% compared to 37.6% a year ago.

Drexler said the results were in line with expectations but the company has “taken a hard look at the business and made changes to drive greater efficiency and profitability”.

He also said there will be less emphasis on its higher-priced J Crew Collection products.

“Entering fall, we feel good about the assortments in stores and online, which reflect more emphasis on the key product categories that our customers love J Crew for. At the same time, our team has taken a hard look at the business and made changes to drive greater efficiency and profitability. We’re focused on our performance in the second half of the year and positioning the business for sustained growth.”

On the later conference call, he said the retailer was focused on product, marketing and customer service, stressing how J Crew is changing “calibration of product, not… direction”.

Drexler said marketing efforts will centre on driving key categories and heritage items through social media, style guides, traditional print and outdoor advertising.

For the fiscal year, J Crew Group is opening 52 stores, including 11 J Crew units, 21 factory outlets, and 20 Madewell stores taking the latter’s total to 105 units.

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