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J.Crew's 2018 Relaunch Failed, and It's Suffering the Consequences

The brand lost tens of millions due to unsold inventory.
Photo: Spencer Platt/Getty Images

Photo: Spencer Platt/Getty Images

J.Crew is the James Kennedy of retail. For those of you who do not watch "Vanderpump Rules," what we mean is this: Much like the controversial TV personality, the company has screwed up countless times, yet we continue to give it chances because a small part of us still believes it has potential and wants it to succeed. Last fall, J.Crew embarked on the latest of its many "rebrands," this one under a new CEO, Jim Brett, who has already departed the company, and it failed — big time. In the fourth quarter of fiscal 2018, the company posted a net loss of $74.4 million compared with a net income of $34.7 million in the fourth quarter the previous year. J.Crew brand net sales decreased 4 percent for both the quarter and the year as a whole.

"The J.Crew brand delivered disappointing results in 2018 as many new strategies we deployed were ultimately not successful and negatively impacted our financial performance," said Michael J. Nicholson, President and Chief Operating Officer, in a statement. 

At this point, after years of these disappointing results, we (like J.Crew investors, presumably) are tired. Why does J.Crew keep making these mistakes? Why does it still not know what its customers want? Do we care anymore?

Like Business of Fashion wrote last November, perhaps J.Crew needs to die in order to be reborn — in the same way that Kennedy needed to lose his DJing gig at SUR to learn a lesson and get his shit together. (Did we take this analogy too far? Perhaps.)

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Thanks to Madewell, overall company sales increased 3 percent to $733.8 million in the fourth quarter and 5 percent to about $2.5 billion for 2018. Madewell sales increased a whopping 26 percent to $529.2 million for the year; in 2018, the brand opened eight new stores and successfully launched both men's and extended sizing, with denim becoming a major growth driver and wholesale also delivering increased sales.

J.Crew tried some new launches and expansion tactics last year as well, but quickly determined they weren't working. As announced back in November, it closed the sub-brands Mercantile and Nevereven; executives confirmed during a conference call Wednesday that they eliminated this sub-brand strategy that Brett had implemented and are instead moving towards simplification. Nicholson noted that the sub-brands "caused confusion" and left J.Crew with so much excess inventory that it had no choice but to revert to discounting, which of course hurt profits. The fall 2018 relaunch also cost the brand a lot in marketing expenses that "further pressured performance."

Executives spent much of the call trying to reassure investors they have things under control. Like Kennedy desperately assuring Lisa Vanderpump that he hasn't been drinking and has been undergoing counseling for his anger issues (yep, too far), that part of the call sounded a bit like a broken record. However, there were a couple of wins in 2018: J.Crew's new loyalty program is proving successful, and the brand's wholesale revenue grew thanks largely to Nordstrom. "Swift actions" are being taken to fix the brand's inventory problem, and work is being done to "rebalance and refine the assortment to provide customers with styles they desire." 

Evolving J.Crew into a "digitally-led operating model" is also a big priority and that will involve better digital marketing and migrating to a "cloud-based solution" to "modernize the backend for J.Crew and Factory." There will also be new shopping features and enhanced personalization online. As for brick-and-mortar retail, there are plans to close approximately 20 stores across J.Crew and Factory. Meanwhile, the company is working on "developing the store of the future," a "convenience-oriented, service-focused, digitally integrated" extension of its retail strategy.

That sounds somewhat intriguing, but the most interesting thing J.Crew has going for it at the moment is its recent appointment of designer Chris Benz as SVP of design for women's and Crewcuts. He may be the brand's last hope at drumming up some excitement — and giving us a reason to to give it yet another chance.

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