J. Crew Mercantile store openings are being planned for 2015 and 2016, with the first unit set to open in late July at The Shops at Park Lane in Dallas. The number of J. Crew Mercantile stores seen opening over the next two years was not disclosed.
The company will continue to operate its J. Crew Factory Outlets, but J. Crew Mercantile represents, as one source close to the company said, “an expanded effort to seek that value-driven customer in more places than just with factory outlets. The company is becoming limited with factory outlet real estate. This really allows the company to get into strip centers, off-price centers and power centers.” As of last month, there were 144 factory outlets operating.
J. Crew Mercantile will be an upstart in an already mature field of outlet and off-price retail players such as TJ Maxx, Ross Stores, Saks Off 5th and Nordstrom Rack, which have all been performing well and continuing to grow their store counts.
For the time being, the J. Crew Mercantile stores will carry the same merchandise that the factory outlets sell. It’s merchandise specifically produced for the outlets and reflecting the J. Crew aesthetic but at lower prices. It’s possible that in the future a Mercantile label just for the Mercantile stores gets introduced. Just like the outlets, the J. Crew Mercantile stores will sell men’s, women’s and kids’ merchandise.
No clearance merchandise from the regular J. Crew stores will be available at J. Crew Mercantile. The outlets do not sell clearance goods. The regular J. Crew stores clear merchandise through markdowns, clearance sales in the stores and on the Web site, and through sample sales.
J. Crew Mercantile will be run by J. Crew’s factory outlet division.
For the past year, business at the J. Crew Group has been difficult, dragged down by J. Crew women’s mostly, while men’s wear and the Madewell division have performed better. For 2014, the group reported total revenues increased 6 percent to $2.6 billion, while comparable sales decreased 1 percent. There was a net loss of $657.8 million largely due to impairment charges and refinancings.
For the quarter ended May 2, 2015, the company reported a net loss of $462.4 million largely due to impairment charges. Total revenues decreased 2 percent to $581.8 million, while comparable sales decreased 8 percent. By brand, J. Crew sales decreased 5 percent to $508.7 million or 10 percent on a comparable basis. Madewell increased 33 percent to $61.9 million, and 12 percent on a comparable basis.
To keep costs closer in line with sales trends, the company in June cut 175 jobs from its headquarters, or about 25 percent of the staff there, and named Somsack Sikhounmuong head of women’s design for the namesake J. Crew brand, succeeding Tom Mora. Sikhounmuong was heading up Madewell design. Joyce Lee was named head of women’s design for Madewell. Other strategic and organizational changes were made across the company in areas including store operations, production, sourcing and merchandising.
While recent business has been down, it is believed that J. Crew executives were contemplating a new value-driven division prior to the downturn, partly because they felt they weren’t sufficiently meeting customer demand and because they saw little cannibalization between the full-price stores and factory outlets.
J. Crew Mercantile is not a complete surprise. A year ago, J. Crew Group Inc.’s chairman and chief executive officer Millard “Mickey” Drexler told WWD that he liked the sound of the J. Crew Mercantile name and decided to trademark it. At that time, he explained, it wasn’t entirely clear what he would use the name for, though there was speculation it would lead to a lower-priced store concept.
“The way we run the company, we are always thinking creatively, innovating and managing our assets,” Drexler said. “We have secured names and trademarks with either loose ideas or intentions, or with our imaginations. Sometimes things come of it, or they don’t.” J. Crew did register the name for a variety of categories and services, including jewelry, fashion and travel accessories, umbrellas and backpacks. Drexler was not available Friday to discuss Mercantile.
While he ran Gap Inc., Drexler launched Old Navy, but based on prices offered at J. Crew outlets, J. Crew Mercantile would be at a higher price rung than Old Navy.
In addition to the J. Crew and Madewell stores and factory outlets, the company operates Crewcuts stores; the J. Crew catalogue; jcrew.com; jcrewfactory.com; the Madewell catalogue and madewell.com.