- J. Crew filed for Chapter 11 bankruptcy on Monday.
- The company said it had reached an agreement with its lenders to convert about $1.65 billion of its debt into equity. As of February, it had nearly $1.7 billion in debt.
- In the early 2000s, sales were booming at the company and it was considered to be one of America’s most popular chains.
- More recently, it has struggled and faced an identity crisis after being criticized for being unaffordable and impractical.
- Here’s the story of the rise and fall of the company.
- Visit Business Insider’s homepage for more stories.
J. Crew has become the first major US retailer to file for bankruptcy during the coronavirus pandemic, which is forcing it to keep its stores closed, therefore, taking a big hit on sales.
But while the coronavirus pandemic might have been the nail in its coffin, its troubles predated this tricky period. For the past few years, it has been trying to execute a turnaround under new management after several years of sliding sales.
In its heyday, in the mid-2000s, it garnered a reputation for being one of America’s most iconic preppy chains. Find out more about the rise and subsequent fall of the company below:
J. Crew first launched as a catalog in 1983 and was originally targeted toward price-conscious customers.
Its early years have been described as a “runaway success” but by the late ’90s, it had stumbled into problems and TPG Capital, a private equity firm that is known for turning failing companies, bought a stake in the company.
It wasn’t until Mickey Drexler became CEO in 2003 that the company turned itself around and enjoyed years of sales growth, however.
Drexler, who was known as the “the merchant prince” at the time, had been held responsible for transforming Ann Taylor and Gap before he took up the role of CEO of J. Crew.
In 2006, J. Crew went public and acquired its now popular sister brand Madewell.
The J. Crew brand became known for its classic androgynous and geek-chic look, channeled by longtime creative director, Jenna Lyons, who was crowned as “the woman who dresses America” by The New York Times.
Source: The New York Times
Under Drexler and Lyons’ leadership, sales growth peaked between 2004 and 2013.
The brand started to take off with celebrities; Michelle Obama was among its loyal high-profile fans.
“In the mid-aughts, J. Crew cracked the code of all-day dressing for the ‘creative class’ by combining the formal with the informal: it sold tuxedo jackets you could wear to the office and sequined blouses that could work under military jackets,” Joshua Rothman wrote for The New Yorker in May 2017.
In 2011, the company went private in a $3 billion leveraged buyout by TPG and Leonard Green & Partners.
But by the end of 2013, as the brand had gradually become more expensive and more exclusive, it suffered an identity crisis. Profits declined 42% that year, and the company suffered a net loss of $657.8 million in 2014.
It was criticized for becoming unaffordable and impractical.
In 2015, writer Tricia Louvar wrote an open letter to Lyons on The Hairpin, prefacing it with “you are pretty dope,” but stating that all dopeness aside, the clothes J. Crew was selling were unaffordable and not practical. “If only I, an ordinary mother on a modest income, could afford to wear a $400 cashmere skirt, silk barely-there blouse and belt to a one-time business-casual event,” she said.
Same-store sales continued to drop throughout 2015, 2016, and 2017 as competition from cheaper rivals such as Zara and H&M intensified.
In early 2017, Lyons left the brand, Drexler cut jobs and addressed the company’s woes in an interview with The Wall Street Journal.
Drexler said that its biggest mistake over the last few years was that it had raised prices at a time when customers were increasingly cost-conscious.
“We became a little too elitist in our attitude,” he told The Journal, adding: “We gave a perception of being a higher-priced company than we were — in our catalog, online, and in our general presentation. Very big mistake.”
In the interview, Drexler promised to lower prices and “adopt a more accessible image,” The Journal wrote.
In June, Drexler stepped down from his role as CEO but stayed on as chairman of the company. Jim Brett took over as CEO.
Brett launched a turnaround plan of his own – lowering prices, adding plus-sizes, and selling the brand’s low-cost Mercantile collection on Amazon for the first time, something Drexler had said the company would never do.
It seemed to pay off. J. Crew’s same-store sales numbers turned a corner in August 2018 after dropping for the previous four years.
But in November 2018, Brett abruptly stepped down as CEO after only 17 months on the job. In a statement to the press at the time, he hinted that clashes with the board were the reason behind his departure; The Wall Street Journal later confirmed these suspicions.
Sources familiar with the matter told The Journal that Drexler had taken issue with Brett’s decision to start selling clothing on Amazon, as well as his plans to grow the company’s budget line, J. Crew Mercantile.
Drexler was reportedly concerned that these moves would cheapen the brand.
It wasn’t until early 2020 that the brand got a new CEO – Jan Singer, the former Victoria’s Secret’s CEO.
Singer has had her work cut out for her, as of February, the company was saddled with nearly $1.7 billion in debt.
According to The Wall Street Journal, the company had planned to leverage a 2020 initial public offering of sister brand Madewell to lessen some of its debt. Plans for the IPO were abandoned near the end of March, however, as the company failed to reach a deal with lenders.
On May 4, the company announced that it had filed for Chapter 11 bankruptcy protection, making it the first major retailer to fail during the pandemic.
The company said that it had reached an agreement with its lenders to convert about $1.65 billion of its debt into equity.
It has also secured $400 million in funding from its lenders to navigate its way through the restructuring process.
“This agreement with our lenders represents a critical milestone in the ongoing process to transform our business with the goal of driving long-term, sustainable growth for J. Crew and further enhancing Madewell’s growth momentum,” CEO Jan Singer said in a statement on Monday.
She continued: “Throughout this process, we will continue to provide our customers with the exceptional merchandise and service they expect from us, and we will continue all day-to-day operations, albeit under these extraordinary COVID-19-related circumstances. As we look to reopen our stores as quickly and safely as possible, this comprehensive financial restructuring should enable our business and brands to thrive for years to come.”