default-output-block.skip-main
BoF Logo

The Business of Fashion

Agenda-setting intelligence, analysis and advice for the global fashion community.

J.Crew to Push Ahead with Madewell IPO

The struggling retailer is relying on the deal to offset outstanding debts of almost $1.7 billion.
A Madewell store in the Meatpacking District in New York | Source: Shutterstock
By
  • Bloomberg

NEW YORK, United Sates — J.Crew Group Inc.'s Madewell brand is still driving growth at the struggling retailer, giving its push for a spin-off some fresh momentum.

Madewell sales rose 13 percent to almost $152 million in the third quarter, the company reported in a filing, while sales at the parent company declined.

As part of plans to take Madewell public, J.Crew reached a deal with its debtholders to separate the businesses.

The company also plans to exchange a portion of its term loans for new, senior secured notes, according to the filing. The debt swap would also include shares of the new parent company, Chinos Holdings Inc. The ad-hoc creditors can withdraw their support if the deal isn’t completed by March 18, according to the terms of the transaction support agreement.

With an agreement in place, “we expect both J.Crew and Madewell to have sustainable capital structures and to deliver enhanced value for our stakeholders,” Interim Chief Executive Michael J. Nicholson said in a statement.

J.Crew is relying on the Madewell deal to raise capital amid a heavy debt load. The company listed its outstanding long-term debt at almost $1.7 billion as of November 2.

Fierce Competition

The transaction could shore up J.Crew’s junk-rated balance sheet, which includes some debts quoted at about 82 cents on the dollar. The company carries a CCC- rating from S&P Global Ratings, which in September cast doubt on the prospect for a turnaround because of competition from fast-fashion chains, e-commerce, big-box discounters and falling mall traffic.

While overall revenue declined, things appear to be stabilising at the namesake J.Crew brand. Its same-store sales, a key measure for retailers, were flat in the latest quarter after two straight periods of declines.

Madewell comparable sales rose 10 percent in the period, the same pace of growth as the past two quarters.

J.Crew also made headway on profitability: its gross margin, the percentage of sales left after deducting the cost of production, increased by more than 2 percentage points from a year earlier. Its net loss, however, more than tripled to $19.9 million.

The company said it expects to open 10 Madewell stores and one J.Crew store this fiscal year, while closing about 20 locations.

By Jonathan Roeder and Katherine Doherty; editors: Anne Riley Moffat, Lisa Wolfson and Rick Green

© 2024 The Business of Fashion. All rights reserved. For more information read our Terms & Conditions

More from Financial Markets
A financial lens on the fast-changing fashion sector, including markets, investors and deals.

In 2020, like many companies, the $50 billion yoga apparel brand created a new department to improve internal diversity and inclusion, and to create a more equitable playing field for minorities. In interviews with BoF, 14 current and former employees said things only got worse.


For fashion’s private market investors, deal-making may provide less-than-ideal returns and raise questions about the long-term value creation opportunities across parts of the fashion industry, reports The State of Fashion 2024.



L Catterton, the private-equity firm with close ties to LVMH and Bernard Arnault that’s preparing to take Birkenstock public, has become an investment giant in the consumer-goods space, with stakes in companies selling everything from fashion to pet food to tacos.


view more

Subscribe to the BoF Daily Digest

The essential daily round-up of fashion news, analysis, and breaking news alerts.

The Business of Fashion

Agenda-setting intelligence, analysis and advice for the global fashion community.
CONNECT WITH US ON
BoF Professional Summit - New Frontiers: AI, Digital Culture and Virtual Worlds - March 22, 2024
© 2024 The Business of Fashion. All rights reserved. For more information read our Terms & Conditions, Privacy Policy, Cookie Policy and Accessibility Statement.
BoF Professional Summit - New Frontiers: AI, Digital Culture and Virtual Worlds - March 22, 2024