After years of declining sales, failed turnaround attempts and a revolving door of creative and business leadership, J.Crew officially filed for bankruptcy on Monday.
The coronavirus pandemic has not been kind to retailers of all shapes and sizes. One might expect small, independent retailers to be the most vulnerable, but those being forced to close large brick-and-mortar store networks — while also dealing with mounting debt that had already put them on thin ice — were also likely to unravel. As with Neiman Marcus, which is also expected to file for bankruptcy, credit analysts saw this coming even before the virus hit.
Chinos Holdings, the brand's parent company, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Eastern District of Virginia on May 4. According to the Wall Street Journal, J.Crew has been in talks with lenders ever since March, when the company apparently cancelled its plans to take Madewell public. The company hoped that it would be able to use proceeds from that IPO to pay down some of its $1.7 billion in debt and provide more financial flexibility.
Someone could write a book chronicling the J.Crew brand's years of struggle. There was the Jenna Lyons era, when the former creative director and president elevated the brand to a more fashion-forward aesthetic with higher price points that excited the fashion world but alienated core customers. There were ongoing missteps with fit and quality as the brand scrambled to compete with fast fashion and more digitally-savvy retailers. It also launched new sub-brands that it quickly scrapped. And then there's been the incessant discounting that has torn into profits and watered down the brand's image.
Cohesive leadership has been lacking as well. Mickey Drexler, who is largely credited with the brand's one-time success, took the company private in 2011 in a deal that left it with $1.5 billion in debt. He stepped down as CEO in 2017 and then as board chairman in 2019. (He remains a strategic advisor with a stake in the company.) The company operated without a CEO for over a year after Jim Brett left in November of 2018 following his own failed turnaround attempt. Former Victoria's Secret CEO Jan Singer was appointed this January. The J.Crew brand also got a new creative director last year, Chris Benz, whose designs have just begun hitting shelves.
And then there's Madewell. Drexel launched Madewell in 2006 and the brand has seen positive sales growth ever since. In more recent years, Madewell has acted as a saving grace for J.Crew, offsetting the latter's consistent declines. Thanks in large part to Madewell, J.Crew's most recent earnings weren't all that bad. The company reported a $1.5 million profit for the year ending Feb.1, compared to a $74.4 million loss the previous year.
Of the bankruptcy filing, Singer said in a statement: "This agreement with our lenders represents a critical milestone in the ongoing process to transform our business with the goal of driving long-term, sustainable growth for J.Crew and further enhancing Madewell's growth momentum. Throughout this process, we will continue to provide our customers with the exceptional merchandise and service they expect from us, and we will continue all day-to-day operations, albeit under these extraordinary Covid-19-related circumstances. As we look to reopen our stores as quickly and safely as possible, this comprehensive financial restructuring should enable our business and brands to thrive for years to come."
If J.Crew survives this bankruptcy, it's going to take some a lot to get consumers excited about the brand again, especially as this pandemic accelerates widespread change throughout the industry.