J. Crew's struggle continues as flagship brand falters

Dive Brief:

J. Crew continued to struggle in the first quarter of 2016 as its flagship brand again faltered. Same-store sales across the company fell 7% in the quarter, compared to an 8% decrease last year. Total revenue fell 3% to $567.5 million from $582 million year over year.
Sales at the J. Crew brand decreased 6% to $480.7 million in the quarter and same-store sales decreased 8%, following a 10% decrease year over year. Madewell sales increased 17% to $72.5 million in the quarter, and its same-store sales increased 6%, following a 12% increase year over year.
The company's Q1 loss was mitigated to $8 million year over year, because last year’s $462.4 million loss included impairment charges.

Dive Insight:

J. Crew's focus on its better-performing but lower-priced Madewell brand is paying off somewhat, probably because it appeals to a more price-conscious younger consumer. But its flagship brand, once highly regarded and sporting healthy price tags, continues to falter amid quality and style issues.

The scenario recalls Gap Inc.’s launch of its Old Navy brand. While for years Old Navy was seen as a stroke of genius and a success story, the flagship Gap brand suffered as Old Navy grew. Of course, Old Navy was the brainchild of one Mickey Drexler, now CEO of J. Crew, when he led Gap Inc.

Drexler has acknowledged J. Crew’s quality problems and style misses for months now. But, with cost cutting also a focus at J. Crew, elevating quality could be difficult. And while in the past J. Crew customers were willing to pay more for better buys, the company’s more frequent sales events may have conditioned many shoppers to wait for price breaks.

Drexler is trying to connect with J. Crew loyalists directly, last month sending an email to customers with a little small talk, an appeal to check out its latest apparel and an invitation to write to him personally at [email protected] with any feedback.

Still, the retailer’s quarterly report doesn’t turn the page in the major storyline. Loyal customers, who were willing to pay more for its classic designs and who kept favorite J. Crew items in their closets for decades, seem to be more estranged from the brand. Some consumers noted that while J. Crew's apparel quality appears to have declined, 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.”