Friday, June 10, 2011

J.Crew Talks Latest Quarter Results

Yesterday's "J.Crew Announces Latest Quarter Results {Q1 loss}" post quickly announced J.Crew's losses this past quarter.

A big "thanks!" to Jessica who kindly shared the following article from WWD with us (click here to read in its entirety) that gives us a more in-depth explanation:
J. Crew Reports $29.9M Loss
By David Moin with contributions from Evan Clark
June 9, 2011

Fashion misses had J.Crew Group Inc. seeing red in the first quarter, but executives stressed they’ve made corrections in the women’s assortment involving fashion content and inventory levels.

Very simply, we underbought the best goods and categories,” Millard “Mickey” Drexler, J.Crew Group’s chairman and chief executive officer, told WWD. “In more cases than we would have liked, we didn’t have for our customers what we should have had.”

On Thursday, J.Crew posted losses of $29.9 million on revenues of $409.5 million for the first quarter ended April 30. A year earlier, J. Crew registered profits of $44.7 million on revenues of $413.9 million.

Same-store sales dropped 6 percent, versus a 15 percent increase in the year-ago period, and there was a 3 percent decline in comparable revenues, which includes store sales, direct sales and other sources of revenue. The retailer, which had been on a roll for a long time, started to slow midway through last year as it cut a $3 billion deal to be taken private by TPG Capital and Leonard Green & Partners. The transaction was completed March 7. J.Crew releases financial results because of public debt.

“We missed a bit on the fashion novelty end of the business, but we feel very comfortable that has been fixed,” Drexler said. “It’s all about product, as it always is in our business, and frankly every other business.”

Drexler acknowledged not being “well balanced in the agelessness and timelessness of our assortments” and cited a lack of full-length sleeves, too many at three-quarter length, and skirts that were “a little too short.…They’re not anymore,” he assured.

The quarter wasn’t without some upsides. “We continued to strengthen our franchise businesses — cashmere, pencil skirts, blazers, ballet flats — those categories where we have leadership and customers come back to us day in, day out,” Drexler said.

He also cited strength in Crewcuts, accessories and men’s wear, as well as Madewell, where the attitude is getting increasingly bullish. Madewell is opening 13 stores this year, taking the chain to 33 units, in addition to recently launching madewell.com.

In an earlier conference call, James Scully, chief administrative and financial officer, noted: “While we are disappointed in the year-over-year decline in first-quarter earnings, it is worth noting that last year was an historical peak by a significant margin.”

Scully sees “continued weakness” in the top line through the first half of the year. However, “The good news is comparisons get easier in the back half.”

Also, “year-over-year declines in Q2 will not be worse than it was in Q1,” Scully said referring to gross margins, which fell to 44.3 percent of sales from 49 percent on increased markdowns and promotional selling, as well as accounting changes related to the deal taking the company private. Adjusted earnings before interest, taxes, depreciation and amortization, eliminating costs from the transaction, fell 16 percent to $74.7 million from $88.9 million.

“We feel comfortable inventories will come in line with sales as we move through the second quarter and second half of the year,” added Stuart Haselden, treasurer.

Promotional activity in the second quarter “won’t be any worse than Q1.…We’re hoping that it’s better.” Industry analysts noted Thursday that J.Crew isn’t the only retailer hitting headwinds in women’s. Through the industry, there’s been a lack of newness, high inventories, quality being compromised to mitigate inflationary cost increases, rampant discounting of brands online and exorbitant gas prices pinching spending, primarily at the low and midtiers.

Still, despite its recent weakness, women’s will continue to remain the biggest piece of the J.Crew business, according to Libby Wadle, executive vice president, retail, factory outlets and direct. “We still have franchise [women’s] businesses that we are not walking away from.” In addition, the company will emphasize more novelty items, prints and color. “As we get back into those businesses, we feel better positioned,” Wadle said.

J.Crew is also sticking to its plan to increase retail square footage in the low- to mid-single digits annually over the next three to five years. J.Crew is opening nine stores in 2011, including one Crewcuts and the first J.Crew in Canada in September. The Web site goes live late summer in the U.K. The company is also looking at Asia and other parts of the globe for possible expansion, but is early in the process.

The outlet business is another growth vehicle, with 10 percent annual increases in square footage seen over the next three to five years through store expansions and new stores.
Couldn't agree more with not having enough of the popular inventory. I ordered the Oxford Ballet Flats (Item 36226; $138.00) back in January or February and they were already wait-listed for May. Then I got an email in April stating that my ordered was cancelled. I checked the website and my size was available, but with a new wait-listed date for August. So I decided that I didn't need them that bad and did not re-order my full price purchase.

As for the skirt comment... YES! The skirts are too short! It felt like most of the skirts were 18" or shorter. I don't mind the length for some skirts being short, but give me some knee length skirts (and not just in pencil skirt shapes). As a result, I ended up buying about 10 (yup, 10!) skirts from Anthropologie this Summer (so far).

What are your thoughts on this latest news? Do you think of Mickey Drexler analysis? Any points you found interesting?

58 comments:

  1. I hope by "novelty" they're not referring to the deniim jumpsuit but the velvet Ruby. I want stylish novelties that can't be found elsewhere and can be dressed up or down, not fads that will look ridiculous a year from now.

    J Crew has continued to be my primary source for cardigans, which I wear every day to work and almost always outside of work too. In the entire past year I only bought two cardigans elsewhere, one from Ann Taylor and one from Eddie Bauer. I pray that J Crew continues to produce merino sweaters in addition to cashmere. Merino is a 3- and sometimes 4-season fiber!

    ReplyDelete
  2. And yes, the skirts were too short and still are! Midi is so happening right now, and J Crew has only one skirt that I'm aware of, and it's $400. The designers, or whoever is in charge of deciding which garments will go into production, really missed the boat on this trend.

    ReplyDelete
  3. "In addition, the company will emphasize more novelty items, prints and color."

    "Novelty items" make me think either a Bridget Jones reindeer sweater or cheap throwaway crap that I could buy at F-21 for 1/4 the price.

    But yay, prints and color! JC does the best prints. And longer skirts! As for 3/4 sleeves, I love them, but I know some of the JCAs are getting tired of them.

    ReplyDelete
  4. They need to put out better quality items. We'd pay the price if it equated to quality.

    And bring back cute. No one wants to dress like an amped up version of the Gap or the BR. Psssst, Mickey, flip thru some of your older catalogs for inspiration...

    ReplyDelete
  5. That was so interesting--thanks for posting!

    ReplyDelete
  6. This comment has been removed by the author.

    ReplyDelete
  7. I think by novelty items they are talking about the unique-to-J.Crew items that sell out like the Oxford ballets. Given the rest of the sober comments in the article I don't think they are talking about the trendiest items. Not in this economy.

    No kidding on the skirt lengths. I like minis but I don't need a closet full of them, even at 25 a couple will suffice. Happy to see they plan to continue focus on their timeless pieces because they do them very well. And prints & color - yes J.Crew, you are so strong in producing beautiful colors and prints! They featured the video "About A Print" this spring and then we hardly saw any prints, what was up with that?!

    It's great that they recognize the missteps. Of course that will happen in any business and the important thing is to recognize and correct. I sure hope the quality is addressed, even with higher prices if need be. I am paying to return items so basically throwing money away that I would rather just add to the cost of the item if the quality was improved. Biggest bone of contention for me overall.

    Thanks for sharing the article Jessica and Alexis.

    ReplyDelete
  8. I so felt the lack of novelty t-shirts this season. I've always bought a bunch of dressy t-shirts, but none this year. Plus they have a limited choice in my size when it comes to skirts, dresses and pants/jeans. So my purchases have always been limited to the tops/shoes/accessories. Jewelry line is also underwhelming this year. Hopefully, they will take a note and re-vamp for the fall season.

    ReplyDelete
  9. I hope novelty doesn't mean $100 tweezers. I also hope they get solidify their J Crew identity. To me that's a blend of the past and the newer look they're moving toward. However, some of the new stuff is a mess. I think a lot of the very strappy shoes, cropped blazer (I.e. Commodore) and other pieces are something I'd expect to see at Madewell. I've never been in a Madewell store, but from what I've seen online there's a lot of crossover w/J Crew. I think a lot of pieces that J Crew recently had might have fared better at over there. I'm looking forward to more unique prints and the continuation of gorgeous colors. Please, J Crew, please.

    ReplyDelete
  10. In addition to less 3/4 sleeves (they seem to foreshorten my arms), I am really hoping that one of those 13 new Madewell stores is in Chicago! If we were deemed worthy of getting a Topshop, then I think we're worthy of a Madewell, dang it. I don't like waiting a week for jeans to come, only to find out they don't fit and I have to wait another 2 weeks for an exchange to make its way back to me.

    ReplyDelete
  11. Christy said...

    They need to put out better quality items. We'd pay the price if it equated to quality.

    This.

    I've bought four Thomas Mason shirts. Love the fit and the detail. JC feels like they are chasing the F21 market which makes me sad. I've been exploring designer via sales from Neiman, Saks, NetaPorter, Nordstrom and ShopBop the past two weeks. The quality and style is what brought me to JC and lack of quality is what's chasing me away.

    They are excited by the results from the Mens side and they should be. The quality and style seems to be consistent and when I see the Men's section, I'm a bit jealous because it looks great.

    ReplyDelete
  12. Ugh, yes, the skirts! Yesterday I made my first Anthro clothing purchase in several years, the Goldfield Skirt. It's lovely, and comfy, and cute, and long. LOVE. And... only $30. (If anyone has been eyeing it, SIZE UP!!!)

    I normally don't even go into Anthro because it's too expensive but with the extra 25% off I couldn't resist. They have so many adorable decent length skirts that aren't just pencil skirts. Wish I was loaded so I could buy them all!!!

    If J.Crew starts to make some knee length-ish a-line skirts that are cute, I will buy them. If they are printed, I will RUN to buy them. Sigh.

    ReplyDelete
  13. I keep buying and returning--I've kept maybe four things this season, and tried at least five or six times that. And it does seem like the (few) things they are getting "right" are selling out completely.

    AppGal said something about being more of a fall/winter person at JCrew, and I am probably the same. Still, that doesn't keep me from being disappointed. I'm hoping next spring and summer are better for me.

    ReplyDelete
  14. I really appreciated this comment, "Drexler acknowledged not being 'well balanced in the agelessness and timelessness of our assortments.'" A lot of things really are too trendy and not ageless or timeless. . .hello super mini skirts!!

    I'm glad they seem to have recognized this and will make the right changes going forward . .I hope! Fingers crossed that they don't continue to do their "cost savings efforts" by cutting quality and give us back the stuff that lasts years and years!

    ReplyDelete
  15. Also . . I don't know if any of you have ever shopped ASOS before, but they have some really cute midi skirts right now at decent prices. I just got an adorable lace neon midi in the mail yesterday. LOVE!!

    Best part is ASOS offers free shipping and free returns! Just be a little careful on the UK sizing. (For example I wear a 0 at JCrew, but I have to buy what they call a US4 at ASOS.)

    ReplyDelete
  16. I agree with Gigi that much of the summer J Crew garments were more appropriate for Madewell. The duplication seems counterproductive.

    ReplyDelete
  17. absolutely agree on the skirt issue. anything that wasn't a pencil skirt was not even a consideration for this 40+ year old.

    ReplyDelete
  18. Oh yes please to ending the infatuation with hooker skirts. I've been so disappointed by so many skirts at j.crew over the past couple of years. This seems like it should have been a long-overdue conclusion. .... I think having to show a little humility will be good for those in charge. Some of my favorite items in my closet are from J.Crew, but there isn't anything that isn't at least two years old in that group. I actually felt a little sheepish the last time I walked into my closest store, because I realized all I've done this year is use it as a return depot.

    ReplyDelete
  19. I am impressed with Mickey's accurate assessment of consumer perceptions, actually. I think it bodes well for a future assortment that includes wearable skirt lengths and the prints that we all love. Yay!

    ReplyDelete
  20. What I want to say here could easily have been stated under the Jenna Lyons post from a few days ago: I find the doublespeak about J Crew frustrating. How can JL be regarded as the second coming in one article this week and then the next article has MD acknowledging that they've missed their mark on the women's side? Can this problem all be laid at Marissa's feet?

    I know my disinterest in current J. Crew offerings began at the advent of JL's cult of personality, which isn't to take away anything from her accomplishments or work ethic. Rather, it's to say that I don't want to dress just like her.

    ReplyDelete
  21. Well duh - Mickey et al *may* have finally realized that perhaps their target demographic should not be the F21 market. Maybe. I'm not holding my breath. I hope they have taken a good look at the catalogs of 3-5 years ago for some direction and inspiration. As to quality, I am very afraid that quality as we know it has gone forever, a sign of the times due to material and fabrication costs. Time will tell. But don't wait too long, JCrew - there are other retailers who have already stepped up to the plate to scoop up your dissatified customers.

    ReplyDelete
  22. I suspect at least some of this is coming from a completely different direction -- while I am a huge Jenna Lyons fan, the whole fall/winter aesthetic -- heavily drab olive, heavily casual and "borrowed from the boys", not even slightly feminine/ruffle/girley or even formal (other than mannish jackets), it just wasn't fun. I just didn't covet any of it -- J crew is just so good at making pretty clothing at an approachable price point, and I just felt that this past season, there was much less in the way of "pretty"....

    ReplyDelete
  23. Where do you go now to find good quality clothing? The only place I can see is some designer brands at Nordstrom, some Anthro, and a little bit of Brooks Brothers. Just wondering where you all go....

    ReplyDelete
  24. I found this skirt at Anthro and more than one person has commented to me that it looks like vintage JCrew. For those of you longing for old school JCrew skirts, I highly recommend...

    http://www.anthropologie.com/anthro/catalog/productdetail.jsp?id=20776431&catId=CLOTHES-SKIRTS&pushId=CLOTHES-SKIRTS&popId=CLOTHES&navAction=top&navCount=42&color=049&isProduct=true&fromCategoryPage=true&isSubcategory=true&subCategoryId=CLOTHES-SKIRTS-ALINE&templateType=subCategory

    ReplyDelete
  25. I'm laughing here because I can't get on the J Crew web site but I'm able to get on any other site. It's not funny if J Crew's web site is down, but my reaction to it is! Mini panic! Must check status of orders! Must see if items popped back! What do I do?????? :)

    (My word is spityho?)

    ReplyDelete
  26. Thanks for sharing the article. I am encouraged by what Mickey said and can't wait to see longer skirts and more prints as well as more inventory of customer favorites. I agree quality must improve and I know I would pay more for better quality. I would even buy more if the quality was there. I would like to add that I hope they return to consistent sizing. I am tired of making so many returns. I can understand offering some "trendy" items like a jumpsuit or a (one) romper but there are 10 different romper styles on J. Crew at this moment. Why? They used the beautiful green print for a romper but not a skirt or "traditionally styled" dress. I guess to close all I can say is thank God there was only one jumpsuit !

    ReplyDelete
  27. oh HO! Sounds to me like the powers that be have FINALLY heard the voices of their most loyal customers! Now there's an idea -- listen to the people who've been wearing your clothes for like 20 years. We know what we're talking about! lol.

    ReplyDelete
  28. I do have to chime in even though my thoughts are no different than the comments already made.

    I am longing for the day that Jcrew gets back to being Jcrew. Honestly I'm embarrassed that Jcrew is obsessed with mini skirts. Such a small percentage of people actually look good in them and honestly IMHO a mini that you can't bend over in isn't that classy and I see Jcrew as a classy retailer.

    I can't stop without mentioning my desire for color, print and quality.

    For instance the mirabel dress and skirts are adorable but I love to see them on cobal blue or a red. While I'm at it let's make it office appropriate and add some length or even venture away from a pencil skirt and make a midi out of it.

    How interesting would it be if they came out with the top 10 Jcrew best sellers over the years. This classics that are selling for more than they originally retailed for!?

    Jcrew I hope your reading this. I'm still in my 20s and you still didn't wow me with your short skirts and trendy frocks.

    This should be a vent post....sorry!

    ReplyDelete
  29. This comment has been removed by the author.

    ReplyDelete
  30. J.CrewJD: I also picked up the Goldfield skirt from Anthro and love it! It's definitely worth the $30, and I also sized up. :)

    JA: I just received the Sailboat Skirt from Anthro this week, and it is absolutely adorable. I agree that it is reminiscent of old J.Crew and that is one of the reasons I loved it from the minute I saw it on the website, and blogged about it here.

    ReplyDelete
  31. Alexis!
    I blogged about this a few months back, but did you know Urban Outfitters has a pair of flats SUPER similar to the oxford ballets? I could only find the brown version online now, but they did have a black and white version - maybe check a UO if you are nearby! They're only 34$!!! :O

    http://rufflesandsequins.blogspot.com/2011/03/j-crew-for-less.html

    Hope that helps!!
    Tasia

    ReplyDelete
  32. I wonder how the men's collection has fared, because I am very happy with the direction J. Crew has gone in. Classic, but a bit edgy.

    ReplyDelete
  33. Thanks for sharing this article and I agree with all of you JCAs. I'm glad MD is recognizing that going too trendy and not having many classic items turns customers away especially when customers realize how some items are really poor quality.
    I went to a B&M this week and only tried a handful of styles. I just didn't see anything "new" that I didn't have or intrigued me. Just the same old stripes, plaids, and same colors.
    Unique prints and classic timeless pieces are what draws me to JCrew so I welcome the idea they will be focusing on these styles.

    ReplyDelete
  34. I have got only two or three items this spring/summer. I have decided to buy things I would like to keep for long, not things I will be donating or selling the next year. I am packing to move and I noticed most of the pieces I want to keep are from 3-4 ago.

    ReplyDelete
  35. I am so hopeful for Fall. Please longer lengths on the dresses!
    Great discussion here.

    ReplyDelete
  36. I'd like to see them add more structured dresses, like the Blakely last spring. The Rumi & others like it are a bit too floppy/sloppy-casual to my eye. I'd love to see pretty, classy blouses & camis also but no ruffles!). I have enough t-shirts & perfect shirts & button downs. I'm okay with 3/4 sleeves; I find them flattering though hard to layer smoothly under skinny-sleeved sweaters.

    More ladylike styles, please! And color and one-of-a-kind prints -- what JC does best.

    ReplyDelete
  37. The Casbah print is a prime example of why JCrew is in the mess it is in. The Casbah print is gorgeous imo...a real breath of fresh air after all the nudes and grays and olives. When I first saw the print, I furiously searched for a skirt...thinking for the first time in a long time that i would happily pay full price. Sadly there was no skirt but there was a romper! I would love to have a fly on the wall at that design meeting. Seriously, how many women can pull off a romper? Maybe the design team feels they are selling out if they stick to classic items for the masses but they need to realize that we aren't all built like Jenna, and that for most of us mini skirts work for very few occasions.

    **my word verification is shorte...another sign JCrew skirts are too short.

    ReplyDelete
  38. Glad they are paying attention! I ordered the felted wool mini in two colors, only to have to return it (didn't realize QUITE how short 15" is--yikes!). Also, they put pleats on the rear end--hello?

    ReplyDelete
  39. As a still relatively spring chicken (I'm 23), I know I can sometimes pull off the shorter hem lines, but the skirts were DAMN short this time around. I feel borderline criminal wearing some of my J.Crew minis. I'm glad to see they've acknowledged their problems!

    ReplyDelete
  40. That was a great article. It was interesting to hear what items the rely on year after year. There weren't enough prints and the miniskirts weren't my thing as much, but I loved the classics they redid with a modern twist.

    There were sleeper hits, but not in the usual categories and a lot of items looked pretty great if you tried them on, but didn't photograph well or look that interesting on the hanger.

    For instance, the boxy silhouette shirts looked especially good. ie. striped button-back tee, silk utility tee, silk henley tee. "Weekend wear" items were really flattering and almost all the J.Crew sales associates I talked to were buying them as well --- coastline stripe pullover, the marled sweatshirt tees and sweaters, the daytripper pant. And the casual day dresses have all had lovely range of styles and have fit like a dream.

    In place of print, they went with different textures and hues which I loved like the poppy and blush suggestion or the tangerine and twig. Using different fabrics on the same shirt (silk accents) on the swoop tee or chambray and slub cotton.

    I'm not necessarily a fan of the utility genre or eyelet or lace, but J.Crew's take on them has opened my eyes to how these trends can be fresh and modern -- I've really liked the striped shirts and dresses, they're a far cry from F21 in style which you can immediately tell once you put them on. The Jcrew interpretation of stripes is always chic, while F21 striped shirts are always disposable after the season ends.

    ReplyDelete
  41. Thanks for sharing the article, Alexis. I hope J Crew makes some needed changes. I was in store the other day and aside from that blue/red paisley skirt, I was very uninspired. It wasn't just the short skirts, it was just overall boring, and not great quality either. I don't mind boring on the outside but gorgeous on the inside (beautiful silk lining, finished seams), but boring and bargain-looking is just bad business.

    ReplyDelete
  42. I definitely agree about the length of the skirts - besides JCrew pencil skirts, all of them are TOO SHORT for work.

    But I certainly did my part for their profits ... LOL!

    ReplyDelete
  43. Someone noticed! The 3/4 sleeve length drives be batty, from day one. One can always pull up a long sleeved sweater. And the silly sequin pants and totally silly diaper-ish pants..thumbs down. They'll recover; love JC.

    ReplyDelete
  44. @Sara: Talbots has really changed their clothing lately - still amazing quality and reasonable prices, but much more updated in style. I hate to say it, but I have been buying more and more there since JCrew has gotten a bit too trendy.

    ReplyDelete
  45. I just noticed there are two Genny's on this site posting now. I am the "old timer" been here since the beginning with no picture by my name:) Just to clarify. Thanks.

    ReplyDelete
  46. J.CrewJD and FabulousFloridaMommy I took your suggestions about the Goldfield skirt and made my very first Anthro purchase! I ordered 2 sizes since I have absolutely no idea what size I take in Anthro. I have never tried on anything from them but have lusted after them for some time. Thanks for the suggestion and I hope JC takes a look at this skirt to get an idea of what some of us JC loyalests are longing for!

    ReplyDelete
  47. Oh no Genny! Why does Blogger allow two users with the same name? I noticed that there's a Tamara with a capital 'T', and I figured that they allow different cases, but I didn't think they'd allow the same name! I wonder if there's any way to change your name, I might add Chicago to mine.

    ReplyDelete
  48. OK Genny, I see that you can change your name, not that you'd want to unless you want to change it to Original Genny or something. :) I changed my picture back to the mossy oak Collins, so pretty. :)

    ReplyDelete
  49. This comment has been removed by the author.

    ReplyDelete
  50. tamara,
    Thanks so much for your reply and suggestion. I took it and found the setting to change my name.

    ReplyDelete
  51. Just to echo what has already been said, this is exactly what we've all been discussing here endlessly for the past year! What took them so long? I really hope there are positive changes!

    ReplyDelete
  52. Hi tamara, I think I may be the "other Tamara" - or is there a third? I changed mine to Tamara Heather so as not to confuse. I don't believe I've ever been in a situation with more than one Tamara before!

    ReplyDelete
  53. Hi Tamara. :) I've changed my name now too, it wouldn't be fair for you to be the only one who did it.

    ReplyDelete
  54. It's funny... when I worked at the Gap waaaaayyyyy back in the day, the brand went through a similar identity crisis under Mickey.

    I remember that it seemed like one minute, we were selling sweaters in every color of the rainbow and then we were suddenly doing this "fashion-forward" thing that seemed kind of Express-y. And we all know what happened to Gap after that...

    I think J.Crew needs to find a better balance. Of course you want to incorporate trends and some degree of fashion-forwardness -- but as a mall store, you also need to be able to sell your product as well.

    I'd rather see a focus on creative styling/wardrobing rather than a focus on individual pieces. Rompers just aren't going to work for the vast majority of customers -- so show us what we can do with pieces that DO work in our daily lives with accessories, layering, etc., J. Crew!

    ReplyDelete
  55. I agree with everyone about the short skirts! Give me some alternatives to wear to work, Mickey and Jenna. If I get fired for dressing inappropriately, I won't have any money to spend at JCrew!

    ReplyDelete

Dear J.Crew Aficionadas & Aficionados: Please feel free (and encouraged) to share your thoughts and opinions. :) However, please note that this is still a personal blog. So comments that are considered inappropriate (e.g. obscene, racist, homophobic, personal attacks, rude, and just plain mean) will be removed.

And now back to J.Crew! :)