By  on March 6, 2002

NEW YORK -- All hands on deck -- J. Crew is bracing for another management upheaval. The women's and men's wear brand is seeking a chief merchant who also could assume the chief executive officer title, succeeding the current ceo Mark Sarvary.

J. Crew's preppy, fun, family image is certainly distinct, but the company needs a lift and must further stand out from the wide field of other American brands, such as Banana Republic, Ralph Lauren, Abercrombie & Fitch and Tommy Hilfiger. The company has even more competition with the blending of Structure men's wear into Express Men's by the parent The Limited Inc., creating a higher quality, more fashionable collection.

"The board and Mark agreed to search for the best possible merchandising officer," said a spokesman for Texas Pacific, which owns 80 percent of J. Crew. Asked if that person would also carry the ceo title, the spokesman replied, "That's unclear." He added that the new executive's experience and skills will determine the title and responsibilities. It's practically a sure bet, however, that any top merchant recruited would insist on the ceo title, or at least a transition period into the ceo slot.

Korn/Ferry International has been hired for the search, sources told WWD. Robert Kerson, managing director of Korn/Ferry's retail practice, declined comment.

Other top retailers, including Gap Stores and Eddie Bauer, are searching for top merchants and Neiman Marcus Stores, which is being run by Burt Tansky, ceo of The Neiman Marcus Group, needs its own ceo. All that will make it more challenging for J. Crew to find the talent it needs.

However, one source said the company has some candidates and hopes to name a chief merchant in two to three months and that Sarvary has expressed interest in maintaining a key role in the company after a new chief merchant-ceo comes on board. Sarvary would function more strictly in an operating capacity. "He's more of an operator, rather than a brand merchant," said the source. "J. Crew needs a merchant with a retail background, a retail maven."

Sarvary was named ceo in May 1999, after serving as president of Nestle Frozen Foods. He received a $1 million signing bonus and a $1 million interest-free loan to purchase a primary residence in the New York metropolitan area. He also received stock options and has two years left on his five-year contract.Recently, J. Crew's catalog and Internet businesses have been performing better, while the retail stores have been struggling. There has also been some improvement in the men's offerings.

Sarvary is credited with pumping up management in design and merchandising areas, including hiring Blair Gordon, executive vice president and creative director, who held top store and creative positions at Nautica and Polo Ralph Lauren. Sarvary is also credited with implementing stricter controls and has been very involved in making the J. Crew stores as image-conscious as the J. Crew catalog. The company plans to double its store count to 260 units by 2005, and at some point along the way hopes to reach $1 billion in sales. In 2000, the company did $826 million in sales and $83 million in earnings before interest, taxes, depreciation and amortization. But last year was rough, with the company reportedly experiencing declines in sales and operating profits. Crew is private, but reports results because of public debt issues as a result of its October 1997 sale to Texas Pacific.

Last November, Sarvary unveiled J. Crew's new retail look at the 8,500-square-foot unit on the southeast corner of Madison Avenue and 45th Street. There are bigger graphics, magnified from the catalog, inside the store and in the windows, and many more mannequins styled with entire J. Crew outfits. "Madison Avenue really communicates the brand more elegantly," said Sarvary, at the time. "Not only is the product crucial, but communication of the brand is crucial. The catalog is no longer the primary communicator of the brand." He was unavailable for comment Tuesday.

J. Crew also is considering J. Crew Kids stores, but not immediately, and eventually will revisit the possibility of going public. Last spring, the company considered an initial public offering, but decided against it due to Wall Street's volatility and the hostile climate for IPOs.

J. Crew's image was created by Emily Woods, of the J. Crew founding family. Sarvary took over the reins from Woods, but he has sought to preserve the image. Woods holds a 15 percent stake.

At times, there has been a lack of discipline on the product side, where a chief merchant could help. The company moved too fast with product launches, but has recently shifted to strengthening core products, such as sweaters, outerwear, denims and shoes. Sarvary points to a renewed focus on "newness, not edgy newness, and a consistent color palette," particularly in men's.

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