Dive Brief:
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J. Crew Thursday reported improved results that largely came from cost-cutting efforts. Overall same-store sales decreased 4% in the fourth quarter, compared to a 3% drop the same time last year. Total revenues increased 1% to $711.0 million.
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The retailer’s lower-priced Madewell brand fared better than its flagship line, with same-store sales increasing 12% and sales increasing 26% to $92.5 million in the quarter. J.Crew sales decreased 3% to $604.5 million in the quarter, and same-store sales decreased 5%.
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Gross margin was 35.7% compared to 37.6% last year, and selling, general, and administrative expenses were $834.1 million, or 33.3% of revenues, compared to $846.0 million, or 32.8% of revenues last year.
Dive Insight:
Last summer was full of bad news for J. Crew, which lobbed a series of fashion misses and fielded complaints about quality from many of the retailer’s biggest fans.
Loyal J. Crew customers often keep their clothes for decades, but recently were reporting that quality issues were turning them off. And they note that while quality appears to have lowered, the price tags haven’t followed suit.
“It’s sad because it’s a brand I love,” one customer told The Wall Street Journal last spring. “I feel a little bit lost as to where I would even shop now.”
CEO Mickey Drexler last summer acknowledged some of the problems and promised to bring back the retailer’s “iconic classics.” Yesterday Drexler said that cost-cutting helped put the company in a better position, and that it’s revamping its inventory, merchandising, and marketing.
"Looking ahead, our team is focused on delivering further improvements in the business by executing on our strategic initiatives to deliver long term, sustained growth for our brands” he said in a statement.
Still, cutting costs is all well and good, but, in an era when many people are prioritizing spending on experiences over stuff, the retailer will likely have to do more than that to bring back customers. Bloomberg notes that the company will use more debt to meet some of its financial obligations and has increased its borrowing capacity.
Plus, if the company maintains its focus on better performing but lower-priced Madewell and Mercantile brands, it will be interesting to see if its flagship brand continues to suffer. That has been the story with Gap and Old Navy in recent years. Notably, Old Navy was the brainchild of one Mickey Drexler when he led Gap Inc.