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About J. Crew Operating Corp.

J. Crew Group is a retailer known for its preppy fashions, including jeans, khakis, and other basic (but pricey) items sold to young professionals through its catalogs, websites, and about 375 retail and factory stores across the US, Canada, the UK, and Hong Kong. Clothing is sold under the J. Crew and Madewell banners. The company operates about 130 stores under its Madewell brand, a women's-only collection of hip, casual clothes. The company sources more than 85% of its merchandise from factories outside the US, about 55% being sourced from China and Hong Kong. Founded in 1947, the company first made its name as a catalog retailer. In 2019, J.Crew said it would spin off its Madewell brand into a separate, publicly-traded company. 

IPO

In 2019, J.Crew said it would spin off its Madewell brand into a separate, publicly-traded company. Ultimate parent company Chinos Holdings, Inc. will change its name to Madewell Group, Inc. then make an initial public offering (IPO) of the Madewell business. J. Crew will use the proceeds from the IPO to pay down debt.

Operations

J. Crew Group had two operating segments prior to the planned spin off, J.Crew and Madewell, which are aggregated into one reportable segment.

The J. Crew brand (comprising J. Crew Retail and J. Crew Factory) generates more than 70% of total revenue. More than 55% of J. Crew's total sales come from women's apparel sales, while men's and children's apparel sales generate over 20% and over 5% of total sales, respectively. Accessories brought in the remainder of the retailer's total sales. J Crew Retail's stores are upscale and located in high-end regional malls, lifestyle centers, and on-street locations.

J. Crew Factory stores are located primarily in large outlet malls and sell a specific line of merchandise tailored after the classic J.Crew style.

The company's fast-growing Madewell line, planned for a spin-off, offers women's apparel, mainly denim. Its products are sold at around 130 Madewell stores, select J.Crew retail stores, its websites, and through select partners. Madewell accounts for about 20% of total revenue. 

The retailer sources its products either through buying agents (around 60%) or by purchasing merchandise directly from trading companies and manufacturers within the US and overseas (around 40%).

Geographic Reach

New York-based J. Crew Group boasts over 355 stores in about 45 US states and the District of Columbia. Nearly half of its stores are located in the states of California, New York, Florida, Texas, Massachusetts, New Jersey, and Pennsylvania. The US market accounts for essentially all of the retailer's sales.  Beyond the US, it operates over a dozen stores in Canada, six stores in London, and two stores in Hong Kong.  

The company owns two facilities: a customer call center, order fulfillment, and distribution center in Lynchburg, Virginia, and a distribution center in Asheville, North Carolina.

Sales and Marketing

J. Crew Group projects its brand image through consistent creative presentations and messaging in its store environments, websites, social media channels, partnerships and collaborations, experiential activations and direct mailings; and through its high-quality customer service.

Advertising costs were $127,149 in fiscal 2018, $89,621 in fiscal 2017, and $92,478 in fiscal 2016. The retailer also offers a private-label credit card that accounts for about 15% of its total net sales. J. Crew Group's customers are affluent, college-educated, professional and style-conscious women and men.

Financial Performance

J. Crew has struggled with revenue growth in recent years as its styles have fallen out of favor with customers. Its annual revenues have fallen nearly 4% since fiscal 2014.

Revenue grew to $2.4 billion in fiscal 2018, an approximately 4% increase from the year prior. The growth was driven by a 26% increase in Madewell revenues, but offset in part by a nearly 4% decrease in J. Crew revenues. 

Net loss was $120.1 million in 2018, from a net loss of $123.2 million in 2017, reflecting the impact of excess inventory write-downs and the benefit related to the lease termination payment. Selling, general and administrative expenses fell 5% in 2018 to $824 million.

Cash on hand at the end of 2018 was $25.7 million. Cash used operating activities was $69.3 million in 2018, while investing activities used $52.7 million. Financing activities provided $55.1 million.

Strategy

J. Crew Group is making major strategic changes to improve the company's long-term growth potential, maximize value, and deleverage its balance sheet.  

In one of its biggest moves, the company is planning an IPO of its growing Madewell business. J. Crew Group, which filed paperwork for the Madewell IPO in September 2019, sees the IPO proceeds giving J. Crew some financial flexibility to address its debt and providing an improved platform for a J. Crew turnaround. 

J. Crew Group has been under severe pressure in recent years with struggling sales, losses mounting, and competition from online retailers increasing. J. Crew's leadership has been working to trim its large debt load of $1.7 billion and delay repayment deadlines by up to two years, giving the company time to return to profitability and stand a chance of avoiding insolvency.

In 2019, the company launched a multi-year cost optimization program expected to save some $50 million and help contribute to the turnaround. 

J. Crew is working to modernize, with ongoing improvements in terms of online, speed to market, personalization, and convenience. The company has also hired Chris Benz as head of women's design. He is expected to give the brand a lift through a fresh design perspective. 

 

J. Crew Operating Corp.

225 Liberty St
New York, NY 10281-1048
Phone: 1 (212) 209-2500

Firm Stats

Employer Type: Privately Owned
Vice President: Nicholas Lamberti
Employees (This Location): 450
Employees (All Locations): 6,300

Major Office Locations

New York, NY