Monday, May 18, 2009

Interesting Article About J.Crew & The First Lady

There is an interesting article over at the Big Money (click here) about J.Crew:

There Is No Michelle Effect: J.Crew is having a great year, but that’s got little to do with the first lady.
By Caitlin McDevitt

May 18, 2009

Every time Michelle Obama wears a cardigan, it happens again: a nationwide gush-fest over the way that the first lady is boosting retailer J.Crew (JCG). Michelle Obama Lifts J.Crew! Can Michelle Save the Fashion Retailer? The First Lady Brings J.Crew to London! The Crew Cashes In!

The theory that the first lady has saved the preppy clothing store from a recessionary doomsday fits nicely with the fact that J.Crew stock has doubled in value since the inauguration. Shares have risen from $9.61 per share to $19.23. And TBM for this reason included J.Crew stock in its tongue-in-cheek but successful Obama portfolio.

But is Michelle really the cause here? In a recent research report, courtesy of JPMorgan (JPM), you can find a collection of 10 myths "that along with Easter Bunny," one retail analyst writes, "we're not sure we believe in either." The "Michelle Obama Bounce" is fourth on the list, suggesting that she's had no meaningful impact on the financial standing of the company. In a November earnings conference call, J.Crew CEO Millard Drexler acknowledged Michelle Obama's endorsement as a publicity boon but admitted, "I can't say she drove plus comps," meaning any increase in sales at stores. Her name wasn't mentioned at all in the most recent earnings call in March.

Indeed, it may well be that J.Crew has done more for Michelle Obama than she has done for J.Crew. By wearing the retailer's reasonably priced clothes every now and then, she has convinced American women that she understands them—an invaluable reputation in a recession. While J.Crew is undoubtedly pleased with the free publicity and occasional single-item sales bumps that she provides, the retailer would be doing just fine without her.

So, if it's not Michelle, what has kept the company afloat? There are a few likely explanations. For one thing, the retailer is cutting back. In February, it eliminated 95 positions, stopped matching contributions to 401(k) plans, and sacked merit-based wage increases. Another reason for stability: J.Crew isn't anchored to the sinking shopping mall: Approximately 30 percent of sales come through its catalog and Web site, Such sales not only offer higher margins, but they can pick up the slack for weak mall traffic. Also, according to analyst estimates, 20 percent of J. Crew's sales come from its outlets, which offer markdowns that are especially appealing in a downturn. And, in its standard stores, it has lowered price points for popular items like ballet flats and jeans.

However, unlike other retailers, J.Crew hasn't had to dramatically slash prices to keep sales up. There are some new customers who think of J.Crew as a bargain anyway: those shoppers trading down from ultra-expensive luxury brands. Like suddenly cost-conscious hedge fund wives, says Tatiana Boncompagni, author of the recently released book titled, well, Hedge Fund Wives. "Most of the women I know whose husbands or boyfriends work in the industry have become sudden acolytes of internet shopping and J.Crew," she writes. The arrival of the well-heeled has not gone unnoticed by the company. "There's a big migration going on," Drexler told shareholders in November.

Not everyone would agree that J.Crew is affordable, but that reputation has been its key to surviving the retail sector's toughest stretch in decades. And it's also what makes Michelle Obama's association with the brand so sticky, despite the fact that she has worn J.Crew only a handful of times since the inauguration. "It's quite special that women readily have access to very same clothes the First Lady of the United States wears," says Mary Tomer, creator of Mrs. O, a blog that tracks outfits worn by Michelle Obama.

Even if it's overblown, her endorsement will be milked by J.Crew for whatever it may be worth. The company created a landing page breaking down the elements of the outfit Michelle wore on The Tonight Show and another after she wore J.Crew in a Vogue photo shoot. The retailer has also purchased Google ads linking to that appear alongside searches for "Michelle Obama."

Still, it seems that the frenzy to buy the items she has worn fizzles quickly. Either the items sell out almost immediately or they linger on the Web site and lose their appeal. Two pieces she has recently worn, a yellow argyle cardigan and the same sweater in purple, have been demoted to the sale section on As for the rest of the Obama family, J.Crew is making sure that the publicity they've provided isn't as short-lived. The retailer has only recently begun to take orders for the pink and blue J.Crew coats that Sasha and Malia Obama wore to the inauguration four months ago. As for the silken white bow tie that the President wore that night, J.Crew won't put that up for sale until September.

The author, Caitlin McDevitt, contacted me about this article, looking for a few of the items Michelle Obama wore that are still available at J.Crew. [I ended up suggesting the Featherweight Cashmere Argyle Cardigan (Item 11507; was $188.00, now $99.99) in silver olive salt & lavender stone salt-- And I am happy to see she was able to incorporate them into her story.] The article is very interesting in that J.Crew helped First Lady Michelle Obama as much as she helped the firm. :)

What are your thoughts on the article? Disagree or agree with any of the points made?


  1. I think Ms. Obama has certainly reminded people about J.Crew if not introduced the brand to a wider audience. I think she's undoubtedly given the brand a bump.

    I know J.Crew is not unique in this by any means, but I find this part depressing: In February, it eliminated 95 positions, stopped matching contributions to 401(k) plans, and sacked merit-based wage increases. Especially when used in the context of J.Crew 'cashing in.'

  2. I think it's refreshing to see a famous family dressed in stylish, (mostly) affordable clothing. Some of their J. Crew choices (like the girls' coats) were custom-made, but I can see them wearing the coats to school or out with their grandmother.

    I like Michelle's style. She pairs a lot of classics with bold prints and colors. Of course, all of her outfits aren't perfect and stylists and journalists will debate her choices over the next four years. I think she does well most of the time. :o)

  3. Most of the girls i know who were J. Crew before the current administration continue to do so. J. Crew in my p.o.v. has been well established in the vein of classic American prep. The first lady looks great in it, enough said. She has great personal style and we've all seen that. I dont think J. Crew has necessarily given her a boon. And yes i agree w/ roxy about the depressing news involving layoffs and benefit reductions. As i said before most of my lady friends were jcrew types way before the Obama effect. But interesting article....

  4. I don't think it hurts the brand, it can only help the brand. But like most companies, cost cutting and bottom line #'s, staying in the black helps a lot more than a celebrity or Mrs. O wearing the clothing.

  5. There seems to be more synchronicity happening here than anything else. Luckily for J.Crew fashion is currently heavily favouring the preppy/American look, that along with a few other factors help them to continue to do well.

    I do think J.Crew runs a decent company and they were in good shape before the recession. With them being seen as good value with reasonable prices they should continue to do well.

    I agree with Caesar, most were into J.Crew before Michelle was getting press for wearing it.

  6. Hey Caesar, I'd like a review of the watch along with some pictures. Hope you don't mind.

  7. OT for SoCal Peeps

    New JCrew Factory Outlet opening at Ontario Mills in July!

    New Outlet Store

    Ontario Ontario Mills
    1 Mills Circle CA 91764
    909 477 2071
    Opening 07.28.2009

    I don't know about anyone else but this sure beats driving to Camarillo/Cabazon.


  8. Ms. O and JCrew have a nice symbiotic relationship with each other right now - as the article said, Ms. O gets credit for being "frugal" and J.Crew gets the free press.

    I don't agree that their bottom line hasn't been helped by her - if that were the case, then why would J.Crew give her a splash page and be "milking her endorsement...for whatever it may be worth"? Why would they plan to start a production line of jackets based on the ones the kids wore? Even on the smaller scale, items that sell out b/c Ms. O is wearing them affect the bottom line. The stock market uptick probably WAS helped by Ms. O, and the JC probably knows it; they're just playing it cool, & are keeping it under the hat.

    Also, I agree w/roxy, that sucks that the employees are taking a hit in benefits, even with the company doing relatively well (compared with other retailers). Let's hope they bring them back once the profits are in the black again.

  9. 1. Preppy is not the style of jcrew any more.

    2. Jcrew is adopting a new style featuring ruffles, metal colors, casual pencil skirts, etc.

    Michelle Obama likes the new jcrew. I miss preppy jcrew though.

    I think, as jcrew changes its style, it is losing some customers (such as me) and gaining some (like MO). We will see how well jcrew does in three years.

  10. Hey guys :)
    Off topic (and sorry for that, this is a nice thread about what I thought was a great article) but wanted to let everyone know about two pairs of pants I received today in case anybody else was on the fence about them. I ordered them Friday morning with the 20% off code and I cannot believe they came today- it usually takes four days for a J. Crew order to arrive. Nice!

    The first pair is item #13811, the Faded-chambray seaside pant. These are so cute! I ordered them because I am going on vacation to New Orleans next week and wanted some light-weight casual pants to wear in the muggy heat. I had thought about them for awhile but was finally convinced when I realized the inseam was 32 inches and I wouldn't have to hem them. The only iffy part of the pant is the belt, but I think that is probably because I am not really a belt girl and am probably just not rocking it quite right (does anybody have any tips?). I tend to wear sleeker, fitted tops and the belt looks a little strange and lumpy with the ones I have tried on so far. The pants are super soft, almost feel like pajamas and they are true to size- I am wearing the same size as I always do in Crew pants. They are also as light-weight as I expected. Love them!

    The other pair is item #13426, The Heavyweight jersey pant. Again, bought for my trip. I got them in the navy. This spring has put me in a definite navy phase and I know they will look cute with whatever top I throw them on with. I bought them to wear over my bathing suit at the pool and to yoga (I never miss class, even on vacation). They are in the larger end of running true to size. I am sure they will shrink some after being washed, but I probably could have sized down. Then again, they are a casual lounge pant and I don't mind them being a little baggy in the waist; that's what the drawstring is for. They are SO exceptionally soft and feel like a thicker version of the Crew's slub. I have a few slub cotton tops from last summer, like the wrap tank and the ball and ruffle trim cami, and the pants feel just like those do.

    Good night, all. Enjoy the rest of your week- the three day weekend is in sight!

  11. Very interesting article. And interesting that "30 percent of sales come through its catalog and Web site," You think they'd really want to fix the final website glitches, have the free shipping perks for cardholders and such to drive that up even more. Although maybe 30% is already a high number.

  12. Thanks for the post! Great article. Very interesting read:)

  13. I think the MO effect is like icing on a well-thought out cake. JCrew seems to be mastering the B&O/website/outlet sales balance, as well as making unpopular cutbacks that make a difference - in addition to the employee cutbacks, I'd add the customer ones of promotion/coupon/discount/free shipping limitations, some quality fall off and other nips & tucks. On the other side, their collaborations with boutique brands, expansion of the Collection concept and unique designs are attracting different customers and helping to retain its existing followers. It's a horrible time to be in retail now, I wouldn't say that JCrew is flourishing, but they are weathering the storm based on sound decision making done before the retail implosion. I'm sure when things improve economically, they will do right by their employees.

  14. I'm with Jen in saying that the MO phenomenon is "icing on a well-thought out cake". Very well said. It's a two-way street, IMO. Wonderful timing on J.Crew's part for Mrs. Obama to be rockin' their clothes, but at the same time, J.Crew has been playing it smart with expanding with catalog and website sales, too.

    However, like roxy, it's sad to read, "For one thing, the retailer is cutting back." And it does make me wonder, because of that, did some of the quality - in terms of customer (referring to inconsistent rulings regarding discounts, etc.) and item assembly - that J.Crew was known for get sacrificed? Also, as we've all known for a while, their website has not been really up to par (MUCH better than a couple of months ago though) since their upgrade about a year ago, what with site crashes, page and photo snafus.

    All in all, though, like what Ms. Mary Tomer said in the article, it's great to say that you shop where Mrs. Obama gets her clothes too! :)

  15. While I think MO has her own unique style, I wouldn't consider it all good. Those outrageously expensive ($450?) Lanvin sneakers looked like something you would find at a flea market - hideous. And to wear them to a food bank benefit, was it?, kind of tacky. The Dazzling Dots skirt, although a lovely fabric, was not flattering to her figure and now I read she's into false eyelashes. I thought those were only for trannies.


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