I was on a plane traveling to Asia when I was flipping through the channels to see what to watch. I came across this CNBC documentary that was about J. Crew and I figured why the hell not…maybe it would put me to sleep. Turned out it was quite interesting and consequently no sleep for me.
Fast forward a few years; J. Crew has been making fashion headlines lately for all the wrong reasons: off target designs and declining quarterly sales. I decided to write this review because it details the inner workings of J. Crew and gives some insight into why J. Crew is having issues now. Onwards!
Rise, Fall, Rise Again
CNBC has a show called CNBC Originals (yes, I know, not very original) that delves into various topics from business profiles to various hot button issues. CNBC Originals decided to do a profile on Mickey Drexler and J. Crew in 2012 due to the phoenix-esque rise of J Crew. The piece was called J. Crew and the Man Who Dressed America.
J. Crew has an interesting back history. When I was a kid, J. Crew was almost exclusively a catalog business. They didn’t have a strong retail presence until the early 90s. At the time, people ordered from catalogs like they order online today. I remember getting the catalogs in the mail and marking the pages for the styles I wanted and then ordering by phone (duh!). The look of J. Crew at that time was an imitation of Ralph Lauren minus the price tag.
It wasn’t until the late 90s that J. Crew started to struggle. The company had focused on growing its retail presence but designs became repetitive and somewhat bland for that time; some fashionistas might look back in hindsight and label it normcore.
And this is where the documentary picks up. The documentary tells the story of how J. Crew reinvented itself to become uber-popular again. What’s cool is that the documentary spends quite a bit of time interviewing one of the main reasons behind this re-emergence: Mickey Drexler.
Mickey Drexler has been called the king of fashion retail by some. Even Anna Wintour in an interview within the documentary praises Mr. Drexler’s involvement and in depth knowledge of J. Crew’s inner workings. As the head of Gap, Mr. Drexler was credited for the khaki and button down culture that propelled Gap to major growth in the 90s. He is also credited for recognizing the need for a more affordable brand that the Gap did not service which led to the development of Old Navy.
So late 90s, J. Crew was not doing well and change was needed. That change didn’t come until 2003 with the hiring of Mr. Drexler. According to the interview in the documentary, Mr. Drexler had just been fired from the Gap after two consecutive years of declining sales. According to Mr. Drexler one of his neighbors in San Francisco was a principle of the financial firm Texas Pacific Group which was the majority owner of J. Crew at the time. His neighbor upon hearing about his firing, asked him if he was interested in working at J. Crew. That hiring changed J. Crew “overnight.”
J. Crew within the next few years of that hiring became known for quality off the shelf high fashion styles. It’s hard to pin down the new J. Crew look except to say that the style is clean, a higher level of stylish preppy, and neat. The look of J. Crew has become so eye catching that Michelle Obama has been known to wear J. Crew quite often.
Along with the styling updates that Mr. Drexler brought about there were three other noticeable changes that happened during that time period: the overall prices have gone up, J. Crew has brought in mainstream brands to sell in their stores, and J. Crew has focused on the growth of their men’s business. Style and quality do have a price tag and that cost has been passed on to the customer.
What’s hinted at in the documentary (my experience in the fashion industry backs this up) is that design and styling are a very important part of the success of any retail fashion business. In the case of J. Crew, the design and styling became stale in the late 90s and the turnaround in 2000 can be attributed to finding designs that worked and then executing those designs with proper styling in store.
From Vision to Execution
From the documentary it’s clear that Mr. Drexler is very hands on. Some may even label his management style as micro management. Mr. Drexler likes to be a part of all aspect of design from visiting suppliers in Asia, going to style outs with his merchandisers, working with designers, and walking the J. Crew retail stores. I work with several large retailers and to be perfectly frank, I don’t know of that many fashion CEOs who are involved to that level of detail. That is pure passion.
Another interesting tidbit from the documentary: a lot of Mr. Drexler’s success is based on his instincts. It’s clear from the interviews in the documentary that part of the reason Mr. Drexler likes to be involved in all levels of the business is because he does run on instincts. If he sees something he likes (or dislikes), he can quickly point them out to his merchandisers.
And that has worked; his instincts are spot on. And when they are not Mr. Drexler has an answer for that too: it’s okay to have a few failures, but it’s more important to have more successes than failures. That seems to be Mr. Drexler’s mantra.
One of those instincts was the promotion and championing of Jenna Lyons to Creative Director during his tenor as CEO. Jenna Lyons has become the muse of J. Crew with her unique styling that has translated to much success at J. Crew. Again, the documentary does a good job of interviewing key employees who help make J. Crew the iconic store that inspired the First Lady to buy off the rack.
Overall, I think the documentary was well done. I would highly recommend watching it for the indepth look of the executive team at J. Crew and also because the documentary filmed at a time when J. Crew was at the pinnacle of it’s success. If you are interested in fashion and retail, this movie is definitely worth checking out.
Fast Forward to Present: Fall Again
Now that I have finished reviewing the documentary, let’s fast forward to the present. The documentary came out in 2012. And from the documentary, one would assume, it was only a matter of time for J. Crew to become even bigger with greater successes on the horizon. But that didn’t quite happen. And this is why I wanted to write this article.
As recent at three years ago , J. Crew was on top of the world and every fashion retailer wanted to imitate that success. Something interesting happened within the last two years though: J. Crew has had declining sales by some reports as much as 10% from the previous year. What could have caused this 180 degree reverse?
In analysis, there are several different factors for this decline, but let’s first go over the scuttlebutt. It has been whispered that the blame is on Jenna Lyons. During the height of J. Crew’s success, there were rumors that Ms. Lyons was promoting herself more than J. Crew and ultimately to the detriment of her employer. From attending galas to giving interviews, Ms. Lyons was in the limelight that focused on her eccentricities and design processes. And some might argue that loss of focus is one of the reasons for the recent decline of J. Crew.
J. Crew’s official answer of course is that Jenna Lyons is not to blame (for now). In fact, Mr. Drexler points to some bad product selections as one of the culprits in the decline of sales. This is probably part of the issue, but in my opinion, the issue is bigger than just a few poor merchandising decisions. The bigger picture is that J. Crew missed the boat on two major trends that are booming right now: the athleisure market and the fast fashion market.
J. Crew could have jumped on the bandwagon for the athleisure market as their clientele (medium/high income individuals) are already shopping at Lululemon for their $100 yoga pants. Though J. Crew management may still be fixated on “runway” fashion and not diluting their image with athleisure wear…which is a conscious strategic decision versus one of eyes wide shut.
Regarding fast fashion, I believe that the fast fashion market may be out of reach for J. Crew at this point. J. Crew has painted themselves in the corner with runway fashion that in some cases prices off the rack styles for over $400 for a sweater. Not affordable in the least. And to make matters worse, customers are complaining that at that price point, there has been a significant degradation in overall quality and fit. J. Crew’s core customers are becoming so irritated at the retailer some have even penned a public letter calling J. Crew out.
To combat the declining sales, J. Crew is making course corrections: laying off 175 corporate employees, hiring/stealing away Madewell’s (related to J. Crew) head of design, opening up a cheaper J. Crew called J. Crew Mercantile (rhymes with Old Navy), and offering huge sales to make room for new inventory. Time will tell if this will be enough to get J. Crew past this slump and becoming the darling of the fashion world again.
I will keep my eyes on this and if anything changes, I will post more!