2009: J. Crew’s Year
It’s
been a good year for J. Crew. The company has benefited from lots of
free press and an unofficial endorsement of its clothing line from the
nation’s first lady, Michelle Obama. It has also watched its share price
more than double. Now, J. Crew is getting another boost from an analyst
who sees the company outperforming its rivals.
John
Morris, an analyst with BMO Capital Markets, raised his rating on J.
Crew and wrote to investors, that it would “capture market share from
department stores, which are playing fashion too safe, planning inventory
too lean, and over-focusing on private-label goods.”
According
to Mr. Morris, the firm’s channel checks show
J. Crew’s fall merchandising is “trend-right and differentiated… Net/net,
this is a company that has a strong product offering, one of the best
management teams, and growth potential," he wrote.
Discussion
Question: What is your assessment of J. Crew and the competition it faces? What
can department stores pick up from their strategy?
Mickey Drexler lives in rarefied air as one of the greatest retail merchants–ever. I believe his success is rooted in his laser focus on delivering that elusive “moment of delight” to customers from product offering to shopping experience. He understands the importance of delivering the brand experience at every customer touch point. He has revitalized the J. Crew brand and successfully conquered the elusive 20 – 30 something segment with a clear point of view. He has clearly accomplished, in the current environment, what other aspirational brands have not and that is delivering exceptional product with an exceptional customer service experience.
It’s hard for me to envision J. Crew (or just about any other apparel retailer not pursuing the moderate teen market) breaking out of the pack in any meaningful way until consumer spending turns. It’s just not where money is being spent right now.
It’s all about fashion!…and J. Crew delivers. If the company continues to deliver great looks and pays attention to prices, customers will keep coming back.
A major plus for us shoppers at J. Crew over the years is that the company was able to offer us modern classics. The clothes and shoes had interesting color and style, but remained “untrendy” enough and were of high quality so that you knew they were safe investments and that you could enjoy wearing the garments for several seasons. Frankly, all this talk of “fashion forward” and “less safe” than department store assortments has me a little nervous. Sure hope they don’t unintentionally jettison their loyal customers.
Mickey’s running the show–that’s their real strength. One of the last of the great merchants. If only the Gap had someone like that.
Mr. Drexler is indeed one of our industry’s giants. And one man does not make a fashion retailer’s assortment. That being said, shopping the stores and running through the online assortment, I have a definitive impression of who JCrew is trying to be. Which is a nice change in specialty apparel. There is nothing apparently highly risky about the merchandise positioning, and the price points are moderate. At the same time, while interpreted differently, most of the hot looks shown in New Arrivals online and merchandised for attention in the store are industry “knowns” (ruffles, boyfriend jeans, etc).
Overall, JCrew looks solid, comfortable, and appropriate. Well managed (although the last earnings showed a major gross margin decline we’d like to see reversed) and well marketed. All of which adds up to good performance….which in today’s market might actually translate to “over perform”. One critical question is the inventory control and SKU investment behind focused trends. It is possible that Crew has overestimated total demand across all styles within these trends.
A couple of years ago, I remember reading glowing reports in the trade papers about Steve & Barry’s merchandising strategies. A year later they were out of business.
J.Crew’s buzz, publicity, and well-merchandised assortment are all great. I just hope that their profit levels match all the buzz.