The J.Crew Group is having a tough time. It was less than two years ago that the retailer was toying with an IPO, but months of falling sales and a turnaround plan that has yet to bear fruit have put those plans to rest — and have left investors worried. On Thursday, the company delivered some more bad news: Comparable sales at its flagship brand were down 12 percent in the fiscal third quarter — much steeper than last year's drop of 3 percent — with total sales amounting to $526 million. Total sales across all of its brands, including Madewell, were down 6 percent to $619.4 million; the company's net loss amounted to $759.7 million, a 20 percent greater loss than it reported in the same period last year.
Madewell, a small but rising star in the company's portfolio (it makes up less than 15 percent of the Group's total revenue), had a less spectacular quarter than usual: Instead of a double-digit increase, comparable sales were up only 1 percent in three months ending Oct. 31. Overall sales were good, though, up 14 percent to $78.7 million, driven in part by several store openings over the course of the year. By year's end, there will be 103 Madewell stores in operation.
"It goes without saying that much of the retail industry is experiencing dramatic changes," Mickey Drexler, J.Crew's chairman and CEO, said in an earnings call late Thursday afternoon. "And while this has been a particularly challenging period, we are navigating through and taking actions that will benefit us over the long term. Of course, it is important to reiterate that this does not happen overnight."
While results are "still not where we'd like them to be," Drexler noted that the customer has been responding well to recent product and merchandising strategies; in particular, women's blazers, dresses and suiting have performed well, as has men's shirting, outerwear, suiting and denim. He also emphasized the success of J.Crew's "iconic classics with a twist" and heritage items. "Overall, we believe the product is where it needs to be," he said. "And again, our goal and focus is to maintain the J.Crew level of design, style and value that our customer expects."
The company also announced it has filled the chief operating and financial officer positions left open all year: Michael J. Nicholson, formerly the chief operating and financial officer of Ann Taylor parent company Ann Inc., has been hired to fill both roles, effective Jan. 11. Meanwhile, new J.Crew Creative Director Somsack Sikhmounmuong — who was transferred to the flagship brand after Tom Mora was ousted in June — is busy designing his first collections; we'll see a selection of them come New York Fashion Week in February.