EMILY WOODS REDUCES ROLE WITH J.CREW
Byline: Thomas J. Ryan
NEW YORK — Talk about a great executive package. Under the terms of her amended contract, J. Crew Group chairman Emily Woods only has to work four days a month.
The amendments, which were part of Crew’s 10-K, officially acknowledge moves the company made in February to reduce Woods’s day-to-day responsibilities — including those of head designer — Crew chief executive officer Mark Savary said Tuesday. Savary said the move had been part of Crew’s long-term plans since he became ceo in May 1999.
“We both saw that ultimately it was going to make sense to have a singular management,” said Savary. “This is something that we talked about when I first met Emily, and we thought as long as we’re starting a new year, why not do it now.”
The announcement follows a year of solid improvement for Crew, which cut its net loss to $6.6 million from $15.4 million with the help of operating earnings gains at its J. Crew branded business.
Woods — who co-founded Crew with her father, Arthur Cinader, in 1983 — will remain chairman and will continue to play an important part in guidance and strategic planning, Savary said. Under her employee contract, Woods will continue to receive her chairman’s salary at least through October 2002. She received a base salary of $1 million plus a $1 million bonus in 1999.
“She’s kind of pulled out of day-to-day activities at the firm,” said Savary. “But what she’s responsible for is the strategic oversight of the brand and the company. She’s maintaining an office here, and she’s in periodically. She’s an important board member and still part of the team.”
The strategic planning committee includes Savary and David Bonderman and James G. Coulter, both directors and founding partners at Texas Pacific Group, which acquired J. Crew in October 1997 in a $560 million leveraged buyout and controls 60.2 percent of Crew’s equity. Woods owns 19.2 percent.
According to her amended contract, Woods “shall not be required to devote more than four days per month to the affairs of the company,” although she may work more at her discretion, the 10-K notes. She kept her office at Crew’s headquarters, and may perform certain duties and act as spokesperson at the discretion of Woods and Crew.
Lately, Woods has been much more visible as a spokeswoman for the company.
She recently did a Q&A article in the Sunday Fashions of the Times supplement, and went to Hollywood during the pre-Academy Awards fashion frenzy to try to get celebrity placement for J. Crew fashion.
As part of the responsibilities shift, Scott Formby, who Savary said has been head designer of the Crew brand for “a long time,” will report to Trudy Sullivan, president of the entire Crew brand, instead of Woods.
Sullivan rejoined Crew in late March after a brief stint as head of Kids ‘R’ Us, Savary said. Sullivan had headed Clifford & Wills for Crew and previously headed the J. Crew mail order, he added.
Savary, previously president of Nestle Frozen Foods, replaced Howard Socol, who resigned in January 1999, reportedly after experiencing difficulties working with Woods. Savary earned $1.9 million from Crew in his abbreviated stint last year, including a $1 million signing bonus, $560,000 base salary and $335,000 annual bonus.
The 10-K shows that Crew’s revenues decreased 13.1 percent to $716.6 million due to the 1998 sale of Popular Club Plan to Fingerhut and discontinuance of Clifford & Wills. Excluding those businesses, the remaining J. Crew brand sales grew 14.5 percent to $716.6 million, while operating earnings climbed 18.2 percent to $41.1 million.
J. Crew Retail’s revenues rose 21.8 percent to $333.6 million due to an increase in store count to 81 from 65 and a 1.8 percent gain in same-store sales.
The company is planning to add 20 full-price stores this year.
Crew’s 42-unit Factory Outlet revenues increased 5.7 percent to $102 million, with comparable-store sales ahead 3.8 percent.
J. Crew Direct, which includes catalog and Internet, saw revenues increase 10.2 percent to $278.5 million.
Sales at jcrew.com more than tripled to $65.2 million from $21.6 million, while catalog sales decreased to $213.3 million from $231.2 million as the company adopted initiatives designed to migrate catalog customers to the Internet.
Gross margins improved to 44.9 percent from 43.8 percent, largely as a result of higher initial markups due to lower merchandise costs, though operating costs were weighed down by $6 million in direct advertising expenses for jcrew.com, the cost of operating additional stores, and consulting fees for information technology initiatives.
The bottom line in the latest year included a write-off of $11 million for software development costs and Clifford & Wills markdowns. The year-ago figures included charges of $23 million for write-offs at Clifford & Wills, severance costs for its former chief executive and restricted stock grants, offset partly by a $10 million gain on the Popular Club sale.
The loss for the year reflects interest expense of $38.9 million tied to the Texas Pacific leveraged buyout. In the prior year, interest costs reached $39.3 million.
The retail concept increased sales per gross square foot to about $571 from $558 in 1998 and generated store contribution margins of 26 percent. The stores averaged about 8,250 square feet in size and $4.7 million in sales.
J. Crew catalog’s circulation grew to 75 million from 73 million, while pages were 9.3 billion versus 8.8 billion.
Its telemarketing facilities handled 5.9 million phone calls in 1999.
Crew said women’s apparel has increased to 65 percent of sales last year from 47 percent in 1995.