Don’t label it a turnaround — it’s more of a “women’s fix” in the works at the J. Crew Group.
“I don’t consider a company that has a bad year necessarily a turnaround,” Millard “Mickey” Drexler, the chairman and chief executive officer of J. Crew Group, said during Wednesday’s conference call reviewing what he acknowledged was a “lousy” year and outlining how the company is shoring up its women’s offering. J. Crew is seeking a lift in its women’s business to be more in sync with the healthier J. Crew men’s wear, kids’ and Madewell businesses.
“We had winners and we had losers,” said Drexler. “There were missteps on iconic classics. We gave up a little more than our customers wanted to give up. We had some silhouette issues a lot of women would know about.
“The changes are in the stores right now to a degree. This ain’t brain surgery in that regard. We are getting back to who we are in a much quicker way. If you look at the women’s assortment, I think you will see that we are back to who we were.”
To build a better collection, “It actually doesn’t take a very long time. I don’t call this a turnaround. I call it ‘fix women’s goods.’ We move forward….Needless to say, it’s been a tough year. The numbers speak to that, first and foremost, and the team and I own that.”
On Wednesday, J. Crew reported a net loss of $30.6 million in the fourth quarter ended Jan. 31, largely due to impairment charges related to the value of its stores, slowing sales in women’s and increased markdowns. In the fourth quarter a year ago, the company reported net income of $5.9 million.
Comparable company sales decreased 3 percent in the latest quarter, with total revenues up 3 percent to $705.3 million. Merchandise margin in the fourth quarter decreased about 190 basis points.
For the year, J. Crew lost $657.8 million, reflecting impairment charges and refinancing costs, compared with net income of $88.1 million for 2013. Total revenues increased 6 percent to $2.58 billion. Comparable company sales decreased 1 percent.
J. Crew brand sales for the year rose 3.7 percent to $2.3 billion and declined 1.9 percent on a comparable basis. Madewell’s sales rose 35.2 percent to $245.3 million with comps ahead 14.1 percent.
Sales per gross square foot were $618 at J. Crew stores, down from $663 in fiscal 2013, and $747 at Madewell, up from $709.
Drexler said the J. Crew women’s collection has been infused with a lot of color, new ‘‘dominant” pant offerings, and a return to classics.“We brought back color in a major way.…I think you will see a very focused women’s assortment, very cool classic clothes with a certain evolution of J. Crew style. Our customers love seeing creative ways to put outfits together. We are on it,” Drexler said, emphasizing, “We have attacked every category that needed to be attacked. It’s early days. I have no promises when this is going to be good or not good.”
According to J. Crew officials, the company has begun seeing traction on women’s pants with the launch of Martie and Ryder Pants. Footwear and jewelry are also doing well, and some of the “cool classics” Drexler alluded to that are trending well include chinos, washed shirts and Regent blazers. They also cited a proper balance between bright, upbeat colors and signature prints. Dresses and outerwear have also done well recently, and expectations are high for the recently added Lacoste women’s, men’s and kids’ styles.
Though the business is down, the love is still there, as Drexler sees it. “J. Crew and Madewell are much-loved brands,” the ceo said. “The emotional connection is critically important. First and foremost, it’s all about the goods.”
Drexler covered a lot of ground during the call. Here are some of his comments:
• On Madewell: “We have persevered and invested in the business and it’s paying dividends.” Launching a business like Madewell, he said, “is not for the faint of heart for sure.” Madewell began selling on Nordstrom.com on March 2 and in 15 Nordstrom stores on March 6.
• On overseas growth: “International remains an important piece of our longer-term strategy. We’re not rushing it…We find J.Crew is an international language. Great product sells all over the world.”
• On the retail landscape: “It’s a very tough environment. The world is hugely promotional. They’re giving the goods away, but I’m not blaming it” for J. Crew’s difficulties.