The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
NEW YORK, United States —Madewell has been among the few bright spots at J.Crew in recent years. Now, the struggling retailer is considering a spinoff of the fast-growing sub-brand as a way to pay down debt and fund a turnaround.
Nicholson was one of four executives who have stewarded the challenged retailer since Jim Brett stepped down as chief executive in November. Former Ralph Lauren chief executive Stefan Larsson was a leading candidate for the top job, but multiple sources familiar with the negotiations said in March that he declined because there weren't enough resources to support a turnaround given the company's debt load. In 2017, the company negotiated with creditors to push back the maturity of $566.5 million in debt from 2019 to 2021.
In the most recent quarter, the group posted disappointing results as profit margins decreased. At the core J.Crew brand, comparable sales fell 6 percent. However, Madewell's comparable sales rose 22 percent. Total revenue increased 3 percent to $733.8 million, with the sub-brand driving about a fifth of the group's overall sales.
Madewell's growth is decelerating: total sales increased 16 percent in the company's fourth quarter, the lowest rate in seven quarters. However, investor appetite for denim is hot right now, on the heels of Levi Strauss & Co.'s successful debut on the New York Exchange last month. VF Corp., the parent of Vans and The North Face, announced last year that it's also planning a spinoff of denim brands Lee and Wrangler. The market for jeans has seen tremendous growth in recent years, totaling over $100 billion in retail value last year, according to Euromonitor.
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Madewell has been led by Libby Wadle since 2017; she joined J.Crew in 2004 and was part of the group that launched the sub-brand under former chairman and former chief executive Millard "Mickey" Drexler in 2006. Drexler stepped down as CEO in 2017 and resigned from the board in January.
J.Crew also announced Thursday that chief experience officer Adam Brotman, who Brett hired from Starbucks a year ago, is resigning. Also exiting is longtime board member Carrie Wheeler, who will be replaced by TPG Capital's Jack Weingart. Private equity firms TPG Capital and Leonard Green & Partners took J.Crew Group private in a leveraged buyout in 2011.
Related Articles:
[ J.Crew CEO Jim Brett Is Leaving the CompanyOpens in new window ]
[ The Challenging, Emotional Remaking of J.CrewOpens in new window ]
[ J.Crew Chairman Mickey Drexler Steps DownOpens in new window ]
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