Wednesday was a bit of an earnings Groundhog's Day for J.Crew. Once again, the retailer reported a decline in sales and profits. In the second quarter of fiscal 2017, comparable sales for the J.Crew brand declined 8 percent over the same period last year. As a company, J.Crew comparable sales declined only 5 percent and total revenue declined 2 percent. That's "thanks" to Madewell, which consistently outperforms its older sister brand and did so once again in Q2, posting an 11-percent jump in comparable sales.
Profit-wise, the company basically hemorrhaged money: Net loss for the quarter was $20.7 million compared to an $8.6 million loss in the second quarter last year. However, gross margin, or the percent of revenue the company brought in after incurring the costs of the goods, increased — from 35.7 percent to 38.6 percent.
"Since joining J.Crew in July, I've come to a better understanding of how these iconic American brands can be made to play a more meaningful role in our lives," said new CEO Jim Brett in a statement. "Overall, I am optimistic about the opportunities that lie ahead, particularly when reviewing the strong talent, capabilities and commitment within the organization. The team delivered solid progress on our transformation plan during the second quarter, highlighted by expansion in gross margin and reduced expenses that drove an increase in Adjusted EBITDA. And I am confident about evolving our brand strategy to drive long term profitable growth."
In its last earnings report and conference call, the company provided more details about what it's doing to turn itself around. Layoffs, store closures, management restructuring and a debt swap to lenders were some of the changes being made on the business side; while design and merchandising teams will focus on better improving customers' value perception by rethinking price point and quality; and marketing will move further towards the digital side of things. The company is also exploring wholesale.
As we've learned from so many other faltering retailers, these turnarounds take time. So just because we're seeing the literal opposite of an improvement right now, doesn't mean J.Crew won't be able to reclaim its former glory eventually — especially when it has Madewell bringing in some cash on the side.