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J.Crew Must Die to Live

The struggling specialty retailer is close to being a lost cause. Here's what should be done to try to save it.
Source: J.Crew
  • Lauren Sherman

NEW YORK, United States — In many ways, outgoing J.Crew chief executive Jim Brett was set up for failure. The former West Elm and URBN exec, who spent the last year and a half restructuring the struggling specialty retailer, wanted to erase J.Crew's past by lowering prices, selling on platforms like Amazon and smoothing out the aesthetic quirks that once made it sparkle. Those moves were never going to sit right with company insiders who missed the "old J.Crew," whatever that means exactly.

According to employees on both sides of the argument, the “old J.Crew” camp — led by chairman (and former CEO) Millard “Mickey” Drexler — took issue with many of Brett’s changes. Tensions between the two cohorts had grown over the past few months as many of Brett’s initiatives, from the launch of new labels to the introduction of a loyalty programme, rolled out to little fanfare. He was also insistent that further discounting was necessary in order to get the company, which saw 15 straight quarters of losses, back on track. Then there was the pared-down product, which had lost what was left of the magic that made J.Crew so popular in the first place.

Now, Brett is out and a committee made up of new and old faces will try to fix J.Crew. Along with appointing a new CEO, it's likely that they will also make changes on the creative side of the business. (Chief marketing officer Vanessa Holden, a longtime colleague of Brett, has already left the company.)

Brett’s departure, while not entirely unexpected, did feel sudden. (Some of his direct reports did not know about his exit in the week before the announcement.) And analysts are worried.

“The departure of Jim Brett is worrying as it leaves J Crew leaderless at a time when it desperately needs a focused effort to rebuild sales and reconnect with consumers. The suddenness of the exit suggests there is a tussle over how to develop the brand among the various senior stakeholders,” Global Data Retail’s Neil Saunders said in a note. “It does not have the luxury of switching lanes as it tries to find the best route to recovery.”

The company’s third-quarter earnings, set to be released this week, should hint at whether Brett’s strategy had any impact on sales at its marquee brand. But regardless, J.Crew is nowhere near where it needs to be— and it may never get there.

Its rise and fall is symptomatic of the wider hollowing out of the so-called premium segment, which has neither the "cheap and chic" appeal of fast fashion nor the cultural cache of luxury. Just look at Gap. Brett's strategy may have worked in the short-term — discounting always helps to juice sales — but after a few quarters, discounts would not have been enough.

If you’re a category leader — such as Levi’s in denim, or Lululemon in leggings — it's possible to work through something like this. But J.Crew has no hero product. It cannot thrive by making decent-looking commodity items.

Boredom is the death knell for a brand, and anyone can see that consumers are bored of J.Crew. On Saturday afternoon around 5 pm, I stopped by its new-ish menswear shop in DUMBO, a neighborhood in Brooklyn where a lot of affluent people live and a lot of affluent tourists visit. The store, which also has a barber shop in an attempt to give it a community feel, was eerily quiet, the dark wood decor pleasant but uninspired. It felt dated.

The fading of middle-of-the-road brands like J.Crew parallels the disappearance of middle-income households. "Crew should have continued up market and gone luxury; it was timed perfectly with Gilded 2.0: the depleting American middle class," retail advisor Web Smith said via Twitter.

It's true: you either have to be extremely basic (Uniqlo) or extremely emotional (Gucci) to make it today. That's why it's so interesting to watch the rise of direct-to-consumer apparel label Everlane, which is predicated on minimalist basics but continuously tries to make the consumer feel special.

This morning, I received a marketing email from Everlane touting sweaters made of ultra-luxe, triple-ply, Grade-A Mongolian cashmere. The subject line read, “Hey Lauren, Here’s Something Just For You.” I have no idea how many people received that note — which went on to say that I was on the “exclusive” list to shop this limited-edition product — but I do know that it felt personal. (I haven’t bought the sweater. But I might.)

In a too-perfect coincidence, right under the Everlane email was a note from J.Crew regarding “35% off festive looks for everyone.”

So, where does that leave the incumbent, with its slow sales and looming debt?

At least J.Crew has Madewell, which is still growing, to keep things moving. It’s at times like these that conglomerates make so much sense: When you have a portfolio of brands that rotate in and out of relevance, you don’t need to overwork one of them. Just consider the transformation happening at Abercrombie & Fitch under well-respected creative director Aaron Levine. Because of the success of Hollister, Levine has been able to spend the last couple of years making Abercrombie into something relevant. It’s finally showing in the results, with same-store sales up 2 percent in the last fiscal quarter. There is still a long way to go, but now there is also hope.

J.Crew can't be too reliant on Madewell, though. It has been an aesthetic leader for some time now, and consumers will eventually get bored. The company would be smart to start ramping up the vaguely California-surf-inspired Point Sur label, which Brett thought could be a standalone brand. He wasn't wrong on that account. With the right creative lead, it could be the group's next star.

As for the mothership: It’s time to forget, once and for all, about restoring J.Crew to its former glory. The committee can get through this holiday season with discounts and promotions and the goodwill the brand still possesses, but it ought to bring in a new designer as soon as possible. Someone who can turn out fun, emotional clothes that will make people forget the past. It's an epic undertaking, but it's the only real chance they have.

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