That’s a key date for J. Crew Group and Millard “Mickey” Drexler, its chairman and chief executive officer. It’s the day the retailer’s next delivery hits store floors, and Drexler told analysts on a conference call Thursday that will be when the changes he and his team are making to the struggling J. Crew brand will be visible.
“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,” he promised.
The delivery will focus on what J. Crew terms its “heritage” products, which include such items and categories as ballet flats, cashmere, the Jackie cardigans, the Regent blazers, washed shirts and denim.
But as the company focuses on those items, Drexler admitted there will be less emphasis on its higher-priced J. Crew Collection products, which it has used over the last few years to try to move more upmarket and generate more press attention while increasing the visibility of president and creative director Jenna Lyons. More recent press attention has focused on consumer criticism of Lyons and J. Crew’s products.
On Thursday, Drexler was upbeat about the upcoming offerings on a day when J. Crew reported further poor financial results, posting a net loss of $13.6 million in the second quarter versus net income of $10.8 million in the second quarter of last year.
Total revenues in the quarter ended Aug. 1 dropped 5 percent to $593.6 million while comparable-company sales fared even worse, falling 11 percent.
Adjusted earnings before interest, taxes, depreciation and amortization was $41 million compared to $67.6 million in the second quarter last year.
By brand, J. Crew sales decreased 10 percent to $506.5 million and on a comparable basis fell 13 percent. In comparison, Madewell has been having a good year. Madewell sales increased 22 percent to $67.9 million, and were up 8 percent on a comparable basis.
“Our performance in the second quarter was in line with our expectations,” Drexler said. “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.”
The positive comments Thursday regarding assortments going forward suggested some retreat from commentary in June when the company said declines at J. Crew in women’s apparel and accessories were expected to continue “at least through fiscal 2015.”
Drexler said in the conference call that the company was focused on three things: product, marketing and customer service. He stressed how J. Crew is changing as “calibration of product, not a change in direction.”
With product, Drexler said the team was focused on “core strengths in key categories” that differentiate the business. “We can’t overlook the fact that our heritage assortment has come back in a very strong way,” he said.
With marketing changes, Drexler said efforts center on driving key categories and heritage items through a 360-degree approach including social media, style guides, traditional print and outdoor advertising.
With customer service, Drexler cited engaging technology across all customer touch points, personalization of e-mails to speak to customers more about what they are interested in, and a more seamless experience between desktop and mobile shopping.
Drexler also provided an update on the launch of the J. Crew Mercantile value division, which opened its first location at the Park Lane shopping center in Dallas last month. “Our plan is to open eight stores for the balance of the year,” he said.
He described Park Lane as “a mixed location of discounting, regular price retailing, food and supermarkets” and “an ideal place for us to put a value version of our business.” He described the launch of J. Crew Mercantile as “really a distribution decision.” The new concept represents an expanded effort to seek the value-driven customer in more places than just with factory outlets, such as strip centers, off-price centers and power centers.
For the time being, the J. Crew Mercantile stores will carry the same merchandise that the factory outlets sell. It is merchandise specifically produced for the outlets and reflecting the J. Crew aesthetic but at lower prices. It’s possible that in the future a label just for the Mercantile stores gets introduced. 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, clearances and sample sales.
Meanwhile Madewell, Drexler said, continues to perform well and is on track to add 20 stores to the fleet, ending the year with 105 units.
The J. Crew Group is opening a total of 52 stores this year, including 11 J.Crew units, 21 factory outlets — which include the eight J.Crew Mercantile units — and the 20 Madewells.