J.Crew's Perpetual Markdowns Are Hurting Its Business

On the upside, (pretty much) everything at J.Crew is now on sale!
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Eliza Brooke
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On the upside, (pretty much) everything at J.Crew is now on sale!
Jenna Lyons at the CFDA Awards. Photo: Dimitrios Kambouris/GettyImages

Jenna Lyons at the CFDA Awards. Photo: Dimitrios Kambouris/GettyImages

On Wednesday evening, J.Crew reported that it lost $30.1 million in the first quarter of 2014 and that its gross margins dropped to 38.7 percent from 44.7 percent last year. Now we know why: J.Crew execs explained on an earnings call Thursday morning that those margins have thinned because of decreased store traffic and increased promotional activity, or in layman's terms, its too frequent sales.

According to the J.Crew team, there is no one particular style of clothing that's selling more slowly than the others; instead, sales have been "disappointing" across all product categories, and they have excess inventory that they need to unload. Fortunately, those unsold products aren't totally out of season. 

J.Crew Chief Financial Officer Stuart Haselden says that he doesn't believe the brand's price positioning is off at this point, although the team will certainly adjust its pricing as needed.