Despite its best efforts to turn things around, J.Crew is still seeing disappointing earnings results after years of incremental sales decline. For the fourth quarter of fiscal 2016, total revenues across all brands were down 2 percent to $695 million, with the all-important comparable sales (those in stores open at least a year) down 5 percent following a 4 percent decline in the same period of 2015. For the entire year, revenue declined 3 percent to $2.43 billion. Comparable company sales decreased 7 percent following a decrease of 8 percent last year. The only bright side was that gross profit margin increased slightly, from 35.7 percent to 36.1 percent, and the company saw a profitable fourth quarter: Net income was $1.1 million compared with a net loss of $7 million in the same period last year.
J.Crew continues to be the disappointing older child who didn't reach its potential where Madewell is the younger, more promising golden child. For the year, J.Crew was down 6 percent overall, 8 percent on a comparable basis, while Madewell was up 14 percent overall, 5 percent on a comparable basis. Thus, the company announced during its earnings conference call that it would open 10 new Madewell stores during fiscal 2017, while opening only two new J.Crew ones and closing up to 20 underperforming locations.
"While the overall retail environment remains challenging, we continue our disciplined management of expenses and inventory and remain focused on delivering the very best, iconic J.Crew and Madewell products our customers love across all channels," said CEO Mickey Drexler in a statement. "As a team, we are taking important steps to drive improved operational excellence across the company."
President, COO and CFO Michael J. Nicholson did his best to outline some of the ways in which the company plans to turn things around and it was pretty much what you'd expect: improve omnichannel and mobile shopping capabilities, launch in-store pickup, better communicate product value and quality, increase customer loyalty, make data-driven decisions to personalize the shopping experience, make the supply chain more efficient, etc. In addition to several vague statements intended to reassure investors that it would be streamlining operations to keep the company from losing so much money, Nicholson also mentioned "increasing speed to market and reducing product costs," which sounded a bit like a move in a fast-fashion direction that probably won't placate the many customers who have been complaining about J.Crew's quality lately. Of course, the call was more about placating investors.
Despite these plans, the company's outlook for fiscal 2017 isn't great. Execs expect either a small (low-single digit) decrease or equally small increase in revenue. A decline at J.Crew brand is certain, though it will likely be offset by an increase at Madewell.