NEW YORK, United States — Early Monday morning, J.Crew Group Inc. filed for Chapter 11 bankruptcy protection in the US, the first notable apparel retailer to do so in the pandemic but certainly not the last. So many American makers and sellers of fashion were deeply in debt — and at risk of defaulting — before this all started. Now, as sales have vanished, so has the cash to make loan payments. J.Crew Group, which also includes Madewell, sure did owe a lot of money. Its creditors, to whom it was indebted $2 billion, are now its owners. (About $1.7 billion of its debt was converted into equity, and a new $400 million loan was issued.)
J.Crew and its newish chief executive, former Victoria’s Secret head Jan Singer, said in a statement that this restructuring will allow the business to move toward the goal of “long-term profitable growth” by closing unproductive stores and focusing on what makes J.Crew such a beloved brand. That is, high-quality, reasonably priced clothes trading on an idea of American-ness that feels more like a fantasy-verging-on-delusion than ever.
This is the reset J.Crew believes it needs to succeed. But is it even possible?
On Instagram recently, J.Crew posted a series of old catalogue covers from the 1990s and early 2000s, when the iconic New England label’s “Preppy Handbook” look reached its peak, sun-washed appeal. The images were a throwback to a simpler time, something shoppers may be yearning for as they look to escape the realities of the pandemic. This past weekend, as news of the impending bankruptcy filing spread across the internet, sentimental types posted their own favourite images from J.Crew’s past as if mourning the loss of a celebrity. (Everyone loves resurfacing shots of artist Matthew Barney, who famously modelled for the brand in the 1980s, playing rugby.)
The company is betting above all that brand loyalty will carry it through this mess. “J.Crew and Madewell are enduring and much‐loved brands because of you,” a consumer FAQ regarding the bankruptcy stated. And it’s true, people care about J.Crew, even after all the hullabaloo of the past decade: the inflation and deflation of the Mickey Drexler-powered, Jenna Lyons-driven aesthetic, the botched makeover by short-term Chief Executive Jim Brett and the current, quieter retooling led by Singer and Women’s Creative Director Chris Benz.
Now it’s impossible to cover up the shortcomings.
One friend, a creative executive in his late 30s, texted me on Monday and asked what the J.Crew bankruptcy meant for him? He wears a lot of J.Crew; how will this affect him? Where will he get his “weird-ass Wallace & Barnes sh*t for 70 percent off now?”
That last bit, referring to the J.Crew men’s sub-brand Wallace & Barnes, is the key. Consumers say they love J.Crew. (An entire thread has unspooled on Reddit, where J.Crew men's lovers who are not familiar with the difference between Chapter 11 — restructuring and Chapter 7 — liquidation — are in a state of mourning.) But they are also trained to expect 70 percent off. Gap, another iconic American brand with plenty of goodwill, has spent the last 15 years trying to regain the magic: they’ve hired different designers, had no designer at all, banked on nostalgia and looked to the future. Nothing has worked, because Gap never changed the way they sold clothes: they kept relying on promotions, and opening new stores, to increase sales. They continued to be on a model driven by discounts, not by differentiated product. That approach has never really worked, but now it’s impossible to cover up the shortcomings.
J.Crew's one advantage is that it already has a direct relationship with its customer: around half of the group's sales come from e-commerce, a far larger percentage than nearly all of its competitors. And it has looked fresher in recent months, as Benz’s first fully realised collections become available. But is it fresh enough? In some ways, the brand is well-positioned for this era: its best-selling garments are brightly coloured cashmere sweaters and great-fitting chinos. Weekend clothes, essentially. One problem, of course, is that everyone does weekend clothes. Another is that the J.Crew fantasy — tanned summers in Maine, flushed cheeks in Aspen — feels very white, and very privileged, and potentially uncomfortable for customers who aren't those things, and are feeling even more marginalised as our country falls apart. It's not an easy problem to solve.
In order for J.Crew to succeed, it would have to actually reset. Build a business driven by e-commerce, by making stuff that looks like nothing else, by blending nostalgia with relevance, by focusing on profits rather than sales growth. (Madewell — which is growing, but not as fast as it once was — isn’t going to save J.Crew, just as Old Navy didn’t save Gap. More mismanaged brands, more problems.)
But even if J.Crew proves that consumers do care about value and quality — that they want their well-priced basics from this purveyor above all others — the business is unlikely to be sizable enough to satisfy its new owners. (The reason J.Crew and all these other retailers are in so much trouble now is because they borrowed too much money in the first place.) A more likely scenario is that J.Crew Group will be sold to another entity: perhaps to a better-positioned mall retailer like American Eagle, which has shown interest in expanding its portfolio in the recent past, or to a licensing company. (Gap Inc.'s deal with IMG is just the most recent example of what a licensing deal could look like.)
The pandemic is going to change a lot of things about what we buy, and how we buy it, but it’s not going to change the desire for investors to make the largest return possible on their bets. A healthy J.Crew isn’t necessarily a big J.Crew. If there’s once again pressure to grow too fast or sell too many things, there is no saving to be done. Only prolonged grief.
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