Ahead of the Bell: J.Crew Group By Associated Press
November 24, 2008
J.Crew Group Inc. has been increasingly cutting prices to move inventory sitting on shelves which will likely pressure the retailer's results over the next several quarters, analysts said Monday. The New York company reports third-quarter results on Tuesday.
Needham & Co. analyst Christine Chen said she expects a "challenging holiday," due to high inventory levels, despite increased promotional activity. Retailers across the board are suffering as consumers shop mainly for necessities only amid financial-market turmoil, tight credit markets and a prolonged housing slump.
"Although clearance stores appear to be reasonably clean, we have seen the level of promotions in both the direct business and retail stores, through J.Crew's famous secret sales, continue to increase," wrote Chen, who rates the company "Buy." "We suspect J. Crew still has too much Summer/Fall inventory, which has resulted in higher markdowns in order to make room for new Holiday floorsets." She lowered her estimates for the third and fourth quarter as well as 2008 and 2009 to reflect a continuing difficult environment and cut her price target to $15 from $32.
Meanwhile, Brean Murray, Carret & Co. analyst Eric Beder said in a note to investors Monday that he is also concerned about inventory levels, and doesn't expect improvement until the second half of 2009. "With the stores remaining heavily discounted, investors have now put J.Crew, in our opinion, correctly on the clearance rack," Beder wrote. "The discounts have kept coming, from higher sales on clearance items, to more and more e-coupons and inventories bulging at the store level."
However, he raised his rating on the company to "Hold" from "Sell" due to the decline in the stock's value. Since the beginning of the year, J.Crew shares have fallen 81 percent. "We believe the drop in J.Crew shares now reflects the potential for a material miss tomorrow when the company announces third-quarter results," he wrote.
I appreciate hearing the views of the two analysts in this piece (especially since one recommends to "hold" while the other recommends to "buy".) It is clear that J.Crew has been doing a lot of promotions lately and that is impacting them.
As mentioned in an earlier post (click here), J.Crew is having a conference call tomorrow to review "third quarter fiscal 2008 financial results." It will be interesting to find out how top executives address the concerns mentioned in this article.
I think one recommends "Hold" and the other recommends "Buy." Just trying to be helpful. :)
ReplyDeleteOh and I am looking foward to seeing what the results are tomorrow as well.
ReplyDeleteIt will be interested how low J.Crew is willing to go with these discounts and if it will allow us to stack discounts to move inventory. I sincerely hope the stock price goes up!
ReplyDeleteSteph, I phoned in an order this evening and was allowed to use the 20% off sale items with the 15% off educator's discount and gave me free shipping because I wasn't gonna place my order otherwise. Why they consider this "stacking" is beyond me since the educator's discount is not technically a promotion. Nevertheless, it seems like things are headed in the right direction to move merchandise out the door.
ReplyDeleteAmeilia: Great catch! I just fixed my error. Thanks!!! :)
ReplyDeleteSteph: I couldn't agree with you more- I want that stock price to go back up to the $40s. :)
They wouldn't stack a code for me even though I told them I wasn't going to place the order without both - 20% and free shipping over a certain amount- and they were like, Sorry, policy." So, I didn't place the order. I thought I was nice and everything. Maybe I just got a sour rep on the phone.
ReplyDeleteMissy, that's great that those discounts were honored! As an associate, can I just make a humble plea to all the holiday shoppers to be kind to the associates? I often disagree with policies on discounts, but am unable to make exceptions as it is forbidden by my store managers AND J. Crew's company policy. I got reamed out this morning because my supervising manager wouldn't allow me to honor a certain discount on a certain item. Please understand...it's not my fault, and I try as hard as I possibly can to be friendly, helpful, and accomodating. Trust me, if it were up to me . . . Happy holidays to all, and please don't abuse the associates! :)
ReplyDeleteanon @ 9:03 - That stinks. That person was an a-hole. That's the only reason I could not work at J.Crew. I could stock and fold stuff all day for the discount but if someone was mean to me I would tell them to stuff it!!!
ReplyDeleteAnon @ 9:03:
ReplyDeletePolicy seems to vary from store to store-it seems to me that when you're a regular customer you get treated like a royalty (when it comes to stacking discounts etc.) :)
Every SA I spoke to in my both local stores is kind and helpful. I do want to give you an example of how miscommunication caused me and SAs a great deal of stress. I ordered a pair of sandals online in my regular size and asked if it was a final sale. I was told no. When they arrived, they were so tiny I couldn't even put them on, not to mention walk in them. I went to the store to return them and an SA wouldn't let me (the receipt said final sale for some reason even though no additional discount was applied). I said I asked if the sandals were final sale and was told no. I tried them on in front of her and asked what I was supposed to do with a new pair of shoes that don't fit. She finally allowed me to return them and said it was a "one time courtesy". I don't blame SAs, some areas in the instruction book for SAs are grey and managers deal with them on individual basis. I'm just hoping that some things will be established in the future because if I am not able to return something that doesn't fit (sizes are unfortunately inconsistent at JCrew) I'll just stop buying online...I mean, I am STILL not sure when something is final sale-when additional discount is applied or?
Both customers and SAs want shopping to be fun, right? :)
SanFranciscoCA - I agree. I get great treament at my store and like all of the SAs but I never know what I am going to get on the phone. It's why I like B and M so much more than online. Inconsistent service, shipping charges, and you often cannot feel or try on the merchandise first so you feel like you are taking a gamble on the purchase.
ReplyDeleteOops I meant "treatment."
ReplyDeletei've been pretty lucky with phone orders in that i had a really great experience with a CS that i asked her when she worked and from then on i call in then and specifically ask for her=) its not because she gives me discount after discount but she never tries to get me to buy anything that i don't ask for and she's really efficient and most importantly it seems like she tries to be accommodating as much as possible. im sorry to hear that other aficionadas have had so many difficulties =(
ReplyDeleteThis is OT, but it goes along with "J Crew and it's policies" that we discuss often here. Has anyone ever returned an item because it was "defective"? And I mean, say, after you wore it (a cashmere sweater) and noticed it pulling apart in small places, looking like a tear?
ReplyDeleteI don't mean receive it damaged and take it/send it right back for replacement - but rather return it because it didn't hold up?
I know that Talbots will take an item back ANYTIME, even a top I had for two years (a holiday item) that started to come apart around the collar. They gave me a full refund. Does J. Crew really live up to their "quality is our highest priority" statement?
Thanks.
I have been saying the past few months that the bottom had not been felt...I still think it has not fallen as low as it will go. JCrew's next catalog will be resort wear and I don't look for that to be a HUGE seller as lots of vacation destinations are taking a hit in this economy. There are great deals to be had in Hawaii right now if you have extra $ around!
ReplyDeleteAnon @10:53
ReplyDeleteI returned a dream sweater last year after wearing it several times and it pilled terribly. It was even final sale and they gave me a refund (did have to pay return shipping though). So at least in my (limited) experience they do stand behind their products.
Hooray J.Crew!
Anon at 10:54: I returned two shirts this fall because of quality issues. One was a liberty print that I purchased last fall at full price, but had only worn 4 times. The sleeve fabric split down the forearm. My regular B&M took it back with no questions and issued me a gift card for the full price even though I did not present a receipt. They know me well and know that I purchase full-price, particularly shirts that I love.
ReplyDeleteI returned a grey silk shirt because the color did not hold well when it was cleaned. Returned to a B&M where I rarely shop (farther from home but had to be in the area). Manager took it back no problem. I had a receipt and was within 60 days of purchase so I think he would have given my money back. But since I purchased something while I was there, the credit off-set part of the purchase.
If you really believe its a quality issue--return the item!
I went to two jcrew stores sunday and one had 20% off additional sale items while the other had 50% additional off. Both stores are always busy and are located in the largest shopping centers in my city so I don't understand the difference in promotion and marketing strategy here.
ReplyDeleteAnonymous @ 10:23. J. Crew does stand behind their merchandise, so if it is a quality issue, by all means return the item.
ReplyDeleteTalbots has recently changed their return policy (Since Sept 1) and they are no longer as generous as before. Just so you are aware, Trudie has really changed things there.
Trudie?
ReplyDeleteWhoever Trudie is, I don't think Talbot's has improved recently. At my b&m, they used to have a really nice accessories area--now it's gone, and my heart is broken. I have to tell you, I got great buys on some excellent looking shoes there, and now, the prices on the clothes (which I'm not always that into anyway) are higher and the shoes are gone and I don't really like the new website either...sniffle sob sniffle!
ReplyDeleteIt's sad to see the J.Crew stock price drop even more, but definitely not surprising. I really think that if they had kept the old *pre-upgrade* practices in place, such as allowing the educator/student discount to be applied to online orders, making the extra 20 or 30 percent off automatic instead of a code, and then also allowing free shipping on the order...I think they would have completely moved all of their merchandise by now (and quite possibly at a higher profit, too). It seems as if there are numerous statements lately about *complaining* on this site, but obviously they don't realize that customers were used to a completely different J.Crew than what it is now, and the changes have NOT been customer friendly OR for the better. I think J.Crew hurt themselves by changing the way they do business...the sale section used to clear out everyday in a matter of minutes, and now the same inventory just sits there for months on end. You would think they would get a clue.
ReplyDeleteFFM, I totally agree - sure, there are statements that we Aficionadas/os are "spoiled", but we have been - by the days of FS/NM codes and additional percentages off, etc. Online ordering used to be user-friendly and totally easy and also had better deals than the B&M. Now it's a stress-inducing crapshoot.
ReplyDeleteGET OVER IT and move on, every day it is the same thing I cannot combine the discounts, shipping costs are too high, please stop the constant complaining.
ReplyDeleteBusiness is hurting everywhere not just J Crew.
"if they had kept the old *pre-upgrade* practices in place, such as allowing the educator/student discount to be applied to online orders, making the extra 20 or 30 percent off automatic instead of a code, and then also allowing free shipping on the order...(and quite possibly at a higher profit, too)"
ReplyDeleteI am SURE that they changed these policies because they were too costly and cutting into profits. You do realize how much the cost of shipping has risen this year, don't you? How can you translate costly policies into higher profits? You do realize that profits are revenues minus cost? Revenues go up when more items are sold, but profits do not necessarily.
I think they are hit by the same overall retail environment as everyone else and also to a degree by the website issues.
J.Crew has changed policies because they are trying to go *upscale*, and Mickey doesn't want to be known as a *sale* brand. Not to mention I'm sure they are trying to make up for the loss of revenue caused by the website fiasco, and somehow feel that by taking away the incentives that drew customers to them in the first place, they would end up profiting. It doesn't appear as if that's the case, and that is my point. Why take away the exact things that BRING in more business to your company? It doesn't make sense.
ReplyDeleteI realize their are costs associated with shipping and handling, but they are NOT as high as J.Crew would lead you to believe. The fact that they now charge tax on the shipping is beyond ABSURD...every other retailer is able to offer decent or free shipping rates...I refuse to believe J.Crew is not capable of doing the same...they merely choose NOT to.
their = there
ReplyDeleteLands End also charges tax on shipping, I got charged last week.
ReplyDeleteUPS has also raised their prices to ship, you are also paying for the box, tissue paper, someone to go pick the order and have it delivered in 3 days. I guess they could drop the box in the mail and it could take up to 14 days to reach you at a lower cost, which would rather have?
You can try to justify the outrageous shipping costs all you want, but when it comes down to it...charging $10.50 for a blouse that ways 3 ounces (shipped in a paper bag) or $18.50 to ship one jacket is STILL completely ridiculous. I simply stated that J.Crew's shipping charges are too high...most retailers are able to have a flat rate, or at least a more reasonable one...I find it hard to believe that J.Crew cannot do the same.
ReplyDeleteways = weighs...sorry...I hate typos. ;)
ReplyDeleteComplaining on the blog is not going to lower shipping charges ffm, that is the price of doing business with JC, if you don't like it you have the choice to go elsewhere.
ReplyDeleteThere is a difference between stating a fact or opinion and complaining...I know quite well that I can choose to shop other places, and I have...I also choose not to purchase from J.Crew unless I can get free shipping. Just because I state a well known fact that J.Crew shipping charges are higher than the majority of other retailers does not mean I am complaining...it is stating a FACT, plain and simple.
ReplyDeleteAnon at 10:43, keeping in mind that Jcrew's items take almost 14 business days to reach me already, and in fact several orders have taken longer than this thanks to "shipping problems to Canada" - while the website, btw, still states that shipping to Canada should be between 4-7 business days (although CSRs always state company policy is 10 business days for Canada - if that's the case, please disclose this on your website)
ReplyDeleteAlso, keep in mind that almost every retailer i know, Nordstroms, Neiman Marcus, Saks, Martin and Osa, GAP, offer either free shipping above a certain amount every day or a flat-rate shipping option. And I think Neimans, Saks and Nordstrom are definetly high-end!
And why are jcrew's shipping charges based on dollar values purchased and not weight of the item? Does it cost more to ship a $300 lightweight silk dress than it does to ship a $30 wool cardigan? Come on, now if the $300 dress came packaged better, I could (maybe) understand...but it really doesn't...
ReplyDeleteAnon @6:51
ReplyDeleteWhy are you so personally offended by someone bringing up issues with J.Crew? If you don't want to read it just move on to the next post. People are allowed to state what they don't like about something.
I for one am interested in what FFM has to say. Obviously she still loves to shop at J.Crew and enjoys the J.Crew "stlye".
But it is a fact that is stated over and over again, day in and day out by alot of posters here, not just by you, it shows up in almost in every discussion, it is not going to change things.
ReplyDeleteAnony@10:43,
ReplyDeleteYou paid shipping from Land's End??? Free shipping codes for L. End have been around for weeks...even months...I never pay shipping from them!