Very interesting news! I am honestly shocked that the last quarter's income fell 90%.J. Crew Profit Shrinks 90% in Q4
By Vicki M. Young
March 22, 2011
In what is likely to be its last annual regulatory filing, J.Crew Group on Monday said fourth quarter income fell 90 percent.
The specialty chain, which became private on March 7 upon the completion of its acquisition by affiliates of TPG Capital and Leonard Green & Partners, said income for the three months ended Jan. 29 fell to $4 million, or 6 cents a diluted share, from $40.4 million, or 61 cents, in the same 2009 quarter. Total revenues rose 2.4 percent to $471.5 million from $460.6 million. Same-store sales for the quarter were not reported in the filing.
The annual report, ...gave no details on why profits declined so sharply although company executives had warned last month that the retailer faced significant challenges.
For the year, income fell 1.5 percent to $121.5 million, or $1.84 a diluted share, from $123.4 million, or $1.91, in 2009. Total revenues rose 9.1 percent to $1.72 billion from $1.58 billion. The company said same-store sales rose 4 percent for the year.
The firm said that by operating division, revenue from its stores rose 7.4 percent to $1.19 billion from $1.11 billion, while that from its direct channel gained 14.6 percent to $490.6 million from $428.2 million.
By segment category, the men’s business grew in 2010, while the women’s category declined. Women’s was 62 percent of the business compared with 65 percent in 2009.
In all honesty, I can understand why there is a drop (although not that steep!) My own shopping in the last two months has dropped significantly. During the holiday season, I had been calling my personal shopper practically everyday. Now, not so much. Even the latest Mickey Green Card is not enough to get me to buy like I use to at their stores (and I am trying, but I can't seem to make the $150 minimum!)
My closet is just so full of J.Crew items that it's hard to justify buying another striped tee (although, they are so pretty!) The few pieces I do buy seem to come from eBay (finding those J.Crew items from seasons past that I missed out on). I have even been upping my visits to other stores, like Anthropologie and Banana Republic (they have been running some amazing sales, which always get me!)
But back to the article... I am not at all surprised that the men's collection is doing well. Their line has been consistently offering great classic styles with updated cuts. Bravo Frank! Here is to hoping J.Crew can turn things around for the ladies collection! :)
What are your thoughts on the latest financial news? Can you believe that J.Crew income for their last quarter fell 90%? What do you think J.Crew can do, to turn things around?
I don't know why, but many of the J. Crew stores in my area (probably many areas of the country) have the men's section relegated to the back of the store and they are often only 1/3 the size of the woman's section.
ReplyDeletephototristan: My local stores are the same (men have a smaller section). I think its because men buy less than women. Also, I think its because the men's section tends to offer the classic pieces like polos, perfect shirts, and khakis. (As oppose to women's section, where it incorporates classics with the latest styles). :)
ReplyDeleteHonestly, I'm not surprised. JCrew's quality has really taken a dip while their prices continue to soar. And I'm sorry, but it is absolutely ridiculous to think that "free shipping over $100 or $150" is any kind of a bargain when BR offers free shipping on $50 orders. Very frequently I have found myself wanting something that's $50 or $70 but I'm unwilling to pay $8 in shipping and taxes to get the item. I wouldn't have hesitated if I was shopping with BR and the shipping would be free. JCrew seriously needs to get with the program.
ReplyDeleteWell you can only regurgitate the same styles so often without repercussion. Given that a lot of stores have similar styles at much better pricing - not surprised.
ReplyDelete90% tells me people are tired of what JCrew is offering. I wouldn't have thought that kind of a decline was possible for any decent retailer.
Well, maybe they should lower their prices 15-25% instead of having constant sales. I sometimes wait until stuff goes on sale or until they send out a coupon, and by then I may not care anymore.
ReplyDeleteI would have actually thought that the weekend-only factory section would have boosted sales, but I find that most of the fabric from that stuff is of noticeably lesser quality.
Also, they tend to sell out of the most awesome stuff, so maybe they should stock more of the good stuff and less of the weird stuff...!
I am very interesting in this. 90% drop seems impossible..I wonder if the money has been funneled elsewhere? I'd love to hear some insight from those who understand this stuff.
ReplyDeleteI'm not at all surprised that woman's sales are decreasing. I haven't bought anything besides socks in over a year. I DO continue to buy for Dh though. I totally agree about the Men's in store selection really lacking! I went to the store over the weekend with the intention of using the Mickey card on a blazer for Dh (if they'd let me) But they didn't have it in store, so $250 saved.
All I can say is: thank god I no longer own J.Crew stock. The escrow agent paid me earlier this month, so J.Crew's problems are no longer my problems.
ReplyDeleteI agree that women's fashions have been mismanaged - quality control, design, production have all had problems that have drawn comment here. But inflated compensation programs, overambitious expansion, and outdated technology have had roles here too. Plenty of companies, large and small, public and private, seem to be doing quite well without my money. How odd.
ReplyDeleteGo back to the classics, J.Crew!
ReplyDeleteI am less than thrilled with their funky stuff and hardly ever find anything I like anymore. They should do the same for their women's line as they do for their mens': give a fresh update to classic looks.
This does not mean making it neon and covering it in gaudy sequins.
I'm being harsh, because I still love J.Crew, but lately I'm finding it harder and harder to love them.
Kate: I hear you on shipping. It was nice to see J.Crew offer free shipping on any item for awhile last week. Hopefully they will bring that back.
ReplyDeleteMaryMoo: It is amazing how many other stores are offering similar styles to J.Crew. The competition has really stepped up in terms of styles and prices. I think it definitely has hurt J.Crew's sales.
April W.: I agree about pricing. It seems like their items go on sale in just a few weeks. So why doesn't J.Crew just start out with lower prices?
Shannon: I thought the 90% drop was shocking too. Seems too steep to believe.
Jeane: I too sold off my J.Crew stock awhile back. Just didn't like the way the private deal went down and decided it was time to let it go (at a loss too!)
WellFedFred: I have been courted by other companies too! And it seems to be working. ;)
ShortBlonde: Agreed! J.Crew, remember to include classics with twists- the things that made them great. Take the School of Fish dress from a few years ago, I saw it sell for $200+ on eBay.
My spending at J Crew has sharpy declined. I'm not wowed by the offerings. I just saw a catalog from 2007 or 2008 and I would buy all of it if they re-released it. Granted, I wasn't shopping at JC at that time.
ReplyDeleteBut, in all fairness, I haven't really been wowed by much at other retailers either. I hope women's design will get better soon.
I agree with Shannon, a 90% drop seems almost impossible no matter how original products are getting, how bad the economy is, etc. Something like 40-50% is still a HUGE dip but at least realistic.
ReplyDeleteIf they say 90% drop, I would imagine it is for other reasons. I worked for a large financial institution which had record sales but Q4 results indicated NEGATIVE earnings. However, if you read closely, that negative was NET earnings. A few big acquisitions were made and thus, brought the NET earnings down.
However, regardless if the 90% was because some large expenditures were made, it still shows that J.Crew is declining. As beautiful as their items are, you don't get repeat customers when the items repeat themselves with every new shipment. At the end of the day, beautiful styling on the website and in catalogues are nice to look at, but don't make me want to buy the same striped tee 10x.
I have to second April W's comment - I'm sure that J.Crew items go to sale faster than almost any other retailer I frequent, but the initial price points are generally higher. Case in point - I had to have the Loxley buckle peeptoes when they released, but decided to hold out. Now they are on sale, but no longer a must-have for me. If they hadn't been $200 plus initially, I probably would have bought them.
ReplyDeleteI notice a lot of you talking about your Personal Shopper- I've always seen that on the site but never taken advantage of it. What exactly does that entail? Maybe I'd like to start using one too...
ReplyDeleteI believe it has to do with their higher prices. They just keep getting higher and I refuse to pay $60 for a t shirt that I cant even wash without it ripping to shreds.
ReplyDeleteI know I purchase about 90% less from JCrew than I did a year (or more) ago. I think their prices are too high for the (poor) quality and their new return policy is not customer friendly. I have a whole closet full of JCrew items from 2002-2009 with a few 2010 purchases. I used to buy 90% of my daughter's clothing from Crewcuts and my most recent purchase for her was June 2010. The styling just doesn't appeal to me as much anymore. I still like to check this site and JCrew.com occasionally but not multiple times a day like I used to....
ReplyDeleteCount me in as somebody that has spent way less this year (only 4 pieces in 2011). The quality is poor, the designs are stuff that for the most part, everybody else is doing, and the prices are out of control (and wildly fluctuating from B&M to online to even Crewlet). Kris, I totally hear what you are saying - I've had several items in my cart for what feels like forever waiting for a markdown. However, by the time they are marked down they'll inevitably be FS and then I won't be interested anymore. If the price points were lower to begin with, maybe I'd purchase - but now every time I see a cute $88 cami, I know that within 6-8 weeks (or even sooner) it'll be $29.99.
ReplyDelete$40 T shirts? Tiny shorts? Bubble-hemmed mini skirts? $795 leather dresses? J Crew is out of sync with the older, larger consumer, who likes classic styles, and regularly gets offered early discounts (like 40% off brand new items) by companies like BR and GAP.When I am being offered a new, simple unlined cotton sleeveless shift dress I could get at Target for $29 - 40, at more than $100 at J Crew, I am checking out.
ReplyDeleteNot suprising with the current economic recession and I understand with the earthquake in Japan, all luxury goods like J. Crew, are taking a hugde hit.
ReplyDeleteDitto to most of the comments! I was getting ready for a recent trip and must have walked in to J Crew 4 times and purchased nothing! I was really trying to find some nice unique pieces and nothing @ J Crew stood out or was any different than what I bought last year @ J Crew. I already have a TON of paper thin tees, striped tees, sequin tees, $60 scarfs and do not ever need mini skirts or bubble skirts. Even the Jewelry which I usually always buy has been a dud lately. My spending over this time last year is down a lot. So Anthro, Banana and Talbots got my $$.
ReplyDeleteI commented in another thread that my spending is way down. Well, I had to go look. I haven't even placed 10 orders in 2011. It's around 7-8 orders and they've all been pretty small. Even if their 90% dip translates into something else in the econ world, it sounds like many of us have really significantly decreased our spending.
ReplyDeleteOK, on a fourth quarter 2010 comparison with fourth quarter 2009, the profits look absolutely dismal. However, for the entire year of 2010, profits only dropped 1.5%. So I wonder if there was something extraordinary about fourth quarter 2009.
ReplyDeleteI'm remembering with amusement the thread about the trip to Italy. Perhaps they shouldn't have used a private plane. :)
OMG, 90%? I am kind of shocked. Although when I think about it... my actual buying from jcrew.com and b&ms (as opposed to the clearance store/eBay) has fallen sharply.
ReplyDeleteThey need to be more competitive regarding promos, free shipping, etc. Everyone else has FS over $50 it seems like.
I do agree with Shannon that seems almost impossible to have that much of a drop... it's suspicious!
90% income is certainly serious, but this article doesn't say their sales are down. In fact the numbers indicate that revenues rose 2.4% for the quarter, which is unspectacular but similar to what some of J.Crew's competitors reported.
ReplyDeleteAfter expenses, etc. were factored in the income was down to $4.1 million for the quarter. So really they could have paid down a huge loan, or credit line of equity, or something of that nature. And if J.Crew did that it's actually a good thing! It means that they are now relying on their own cash instead of someone else's. Since they were just bought out, I would not be surprised if they were trying to get rid of obligations to companies that are not TPG.
Now if J.Crew's income was low because of penalty charges related to their lines of credit or debt or EBITDA/EBIT or something, that's not so good. But the story doesn't seem to hit on those points. I'd be curious to know...
Though I still love it for skirts and sweaters, but I've decreased my spending on J. Crew drastically - probably by 80% - since BR started shipping to Canada a few months ago. It replaced J. Crew as my go-to. The styles are adorable and high-quality, there are frequent and good promos, and BR makes it so easy with free shipping and free Canadian returns. I'm hooked!!
ReplyDeleteNot surprised. And while I'm sure the loss is due to several things, I have to say that I will no longer be buying staples at J.Crew. After receiving crappy cashmere for 3 years and then this year's summer weight cashmere that was disgusting, I give up. The chino seams twist in the dryer now and those nasty Jackie cardigans with nylon that pick and don't hold their shape after 2 washings..... I'm done!
ReplyDeletewow, terrible numbers for J Crew and not very reassuring comments from JCAs. Yikes! I bought some things in store today, but the $120 dresses were $40, the $80 sweaters were $20 -- pretty huge markdowns for relatively recent items -- and so it does make you think: why not price lower so your sales are quicker? Look at the Maritime dress -- it was priced (relatively) low and sold quickly. But I guess lower prices are the opposite goal of the $800-umbrella-admiring Dear Leader. (sorry to keep bringing up the $800-umbrella)
ReplyDeleteProfitability is not necessarily an indication of sales. It has more to do with the types of investments the company has been making and payments on loans, etc. Store sales are up. There may be an increase in the men's share of the business simply because they are opening more men's "liquor" stores in areas like lower Manhattan where the men's collections were previously under- represented.
ReplyDeleteThe best designs and materials coming from J. Crew these days are in their collection, which I can't afford...until they go on sale, with an additional 30% plastered on top of that. Agreed that their prices should be lowered, and their non collection clothes should ditch the sequins and go back to the basics.
ReplyDeleteYeah, this isn't right. A store like Rockefeller center probably pulled in $4 million alone.
ReplyDeleteThe best personal shoppers out there do $1 million a year, I've been told!
So, there's got to be some other factors besides retail sales.
I hope that someone at J.Crew reads this blog. I agree with everyone that the current shipping prices are out of line with other retailers. I planned on going to a b&m this week with my green card, but once I realized that I had to spend 150 to get the discount I passed. The quality issues are a real problem for me. I just started switching my closet from winter to spring and realized that I'm on J.Crew overload. I don't need anymore paper thin tee shirts, ballet flats that fall off my feet or more sweaters that pill after 10 minutes. My rewards card was 25 bucks last time- WAY DOWN! My money is going to Anthro. Sorry for the long comment. :)
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ReplyDeleteI just want to point out again that the comparison is fourth quarters only, 2010 compared to 2009. For the 2010 year overall there was only the most minimal loss. I'm sure the economy has a lot to do with it.
ReplyDeleteAgreed -- J.Crew's merchandise is higher in price and lower in quality, consistency, and customer service than other retailers. The customer service is what really gets me... all this "final sale" nonsense just signals to me that they realize most of their clothing is poor quality and don't want to deal with it. I have bought less and less over the past few years, and I don't see that changing unless they adopt more customer-friendly policies. I still like checking out their styling and buying a few items when they're deeply discounted, but it's just not worth the trouble to buy there regularly anymore.
ReplyDeleteI love j.crew, but I think the quality has also gone down lately and think they are trying to do too much--too many clothes, too much sale merchandis (cheapens the brand), and the factory line is atrocious.
ReplyDeleteI got so excited when I saw the spring fashion in the catalog and online, and then I went to my local store last week (NYC, Columbus Circle) and was less than impressed with some of the quality of items that looked so good in print. Not worth the money. I wish they would get better quality control and then maybe I'd be willing to pay full price for more items.
The shipping thing bugs me too. Honestly, I can't always spend $150, especially if I just want a couple of basic shirts. They are a large enough company to offer free shipping on less spending. Even though I live in NYC, it is usually a lot easier to shop online for me. That being said, I end up not buying as much from j.crew because of the shipping and final sale. Speaking of final sale, I get leery about it anymore after the last 2 items having annoying flaws: zipper on cashmere sweater doesn't work properly and silk hem of dress is too pulled tight looking weird. I asked online about it and they said "there are no defects, just unloading inventory". Not so sure about that...
p.s. new to the blog, really enjoy it.
I couldn't agree with everyone more! I have definitely been cutting back significantly. I used to be good for a few orders a month, but I've only placed one order since January, and can't see myself using the new Mickey card at all.
ReplyDeleteThe quality is terrible, the shipping is ridiculous, and whenever I walk into a store, I'm lucky if a sales associate even makes eye contact with me, let alone says, "hello." The styles they're coming out with don't hold a candle to the same ones that made me fall head over heels for the brand a few years ago. I just can't justify spending the type of money I used to on clothing that elicits a "meh" reaction from me, or giving money to a brand that doesn't care about their customers. I know this is a redundant comment, and most has been said before, but I just thought I'd add my sentiments.
JCG never got the majority of my shopping dollars because I'm extended misses/small plus and TLB serves those markets, but I liked spending my share. Now, though, I just wait for deep sales.
ReplyDeleteGigi, my clothing spending is WAY down in 2011, too. In February, I returned more than I bought. This month my only purchase was two pairs of Nick & Nora summer pjs at Target, which totaled less than $50.
ReplyDeleteI am waiting for bridesmaid dresses to go on sale, do they hold yearly sales??? their clothes are so pricey if you ask me! in these economic times its no surprise they aren't doing well people are opting for gap at the lower prices.
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