We already knew J.Crew's fiscal third-quarter earnings slumped 43% from the "J.Crew News: Fiscal Third-Quarter Earnings" post. However, this article adds light to the ongoing outlook for J.Crew.S&P lowers outlook on J Crew to 'negative'
December 5, 2011
Standard & Poor's Ratings Services lowered its outlook on J.Crew Inc. to "negative" from "stable" on Monday, saying that it expects the preppy retailer's short-term performance to come in below its expectations.
J.Crew, based in New York, went private in March in a $3 billion deal with private equity firms TPG Capital and Leonard Green & Partners.
S&P said that J.Crew took on a heavy amount of debt as part of its leveraged buyout. The company also has struggled with its profitability, reporting earlier this month that its profit fell 43 percent in its fiscal third quarter.
J.Crew has tried to correct some merchandising missteps this year, which S&P pointed out as an example of the fashion risk inherent in the intensely competitive sector. S&P said it expects the company will see little to no margin improvement as weak economic conditions and increased competition continue to weigh on the retailer.
The rating agency said that while it expects J.Crew's operations to stabilize, they will likely do so at a lower level than S&P had anticipated. As a result, S&P lowered its outlook on J.Crew to but reaffirmed all its ratings on the company, including its "B'' corporate credit rating.
J.Crew runs 269 retail stores and 96 factory outlets in addition to its online and catalog business.
This also helps explain all those promotions we have been seeing from J.Crew lately. (We can expect to see a lot more of them in the future too!)
What are your thoughts on this latest news? Any points you found interesting?
I think that for the most part, they've got their inventory counts under control. However, some of the quality shortcuts taken with the merchandise (especially sweaters) have still left them with a glut of stuff to get rid of. Personally, I'd rather see half the items at better quality. Do you really need to be offered 2 V-neck stripe sweaters, one mostly acrylic (Wynter,55807) and one terrible pilly yarn (Dream, 55732)?
ReplyDeleteAmen, Silver Lining! And really, I'd buy more of what they offer if the quality would improve. I am praying this will mean less acrylic, but who knows.
ReplyDeleteSadly, I'm afraid this will mean more acrylic. Short-term outlooks require more rollouts in a faster time period, meaning less design, lesser quality and supposedly higher profit margins. But that's for the average mass retailer... and J. Crew's customer base is not average!
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ReplyDeleteYeah... I refuse to buy sweaters that contain acrylic, which eliminates most of J.Crew's current offerings from my potential buy list. I know I'm not the only one. I hope they don't think they can decrease quality and get away with it.
ReplyDeleteDo we think maybe they "overcorrected" on the merchandise assortment? I'm glad they got rid of haphazard ruffles and army wear everywhere, but I am pretty bored with many of the current offerings.
ReplyDeleteAs many others have commented I'm no longer buying basics either, like sweaters due to acrylic and mohair content and/or pilly yarns, and work suits and wool pants because the pants are unlined.
JC, it doesn't save you money to take these shortcuts when the product is undesirable to the customer as a result.
To be fair, other retailers are using cheaper fabrics now too, and I have cut down on buying from those brands as well.
Will mickey be repeating the same mistake he made when he was at Gap for over expanding? As a loyal customer I love to see J crew is doing well in business but will definitely hesitate to buy if the quality slides
ReplyDeletesilver_lining, I could not agree more! I also agree with Cass that the use of cheaper fabrics has been adopted by a lot of retailers.
ReplyDeleteShopping these days tends to feel like a Catch-22. Quality has declined while selling prices have remained about the same, so those of us who have been affected by the economy (which is to say all of us) but still want or need new clothing have no reasonably affordable option but to purchase items that are essentially disposable after a handful of wearings. There's no long term benefit to either our wallets or our wardrobes, and we end up right where we started.
JC remains my go-to retailer because I prefer their aesthetic and the clothes tend to fit me well when I connect with the right size, but when, for instance, I read comments from gigi and other JCAs regarding items that do not pass the "F21 test", it does tarnish the J.Crew brand in my opinion. The bottom line is that, especially in times like these, shoppers don't want to pay $138 for a mostly acrylic sweater that's going to look ragged in a month's time.
I would love to send my Xmas wish list to JC headquarters this year. It reads:
1) Better cashmere (and no, not more advertising about how your yarn comes from the best cashmere mills in Italy, better manufacturing)
2) Free everyday online shipping on orders of $50 or more
3) Uniform customer service policies from store to store and online
4) Uniform pricing and sales from stores to the website
5) Better selection and training of store managers and associates for an improved customer service experience in-store (meaning friendly faces and knowledge of the merchandise)
6) Consistent sizing from season to season and from item to item
7) Consistently lined suiting pieces
8) Tissue tees and favorite tanks of the quality offered back in 2008 (sad that those are still in my dresser while my early-2011 ones died tragic and holey deaths)
9-12) Marketing overhaul. Think fewer free oranges, planners, etc. which do tend to alienate your loyal customers who don't receive them, less "borrowed from the boys" or "we want one in every color", and more of a focus on what makes each item unique and what goes into the design and manufacturing processes. Personally, I'd take a silly video of Jenna and Marissa designing shoes in Italy any day in place of overused bits of copy that do nothing to distinguish one item from the next.
Wow Dara, that about sums it up! J. Crew should hire you!
ReplyDeleteOoof!
ReplyDeleteWell, I also agree with silver. They need to retrench and REALLY focus on quality. And to me, quality does NOT mean everything should cost $250 and never go on sale.
I also think they need to start listening when customers say something fits weird or the fabric is horrible or the seams ripped apart -- because we see those comments consistently on certain items. Imagine the info they could glean from adding a review/feedback feature to item pages! You'd know right away why something isn't selling, you could mark it down quickly and clear the stock out.
I also am on the anti-acrylic bandwagon. At this price point, why would I be interested? Pffffftttt.
wow, Dara, well said!
ReplyDeletealso agree that over-expansion (delusions of grandeur?) has a lot to answer for, and while I may be spending less, a much greater proportion of said "less" is spent elsewhere.
Silver Lining & Dara: Could not agree more! I would be okay with fewer choices too if QUALITY was 100% better. We really do not need 10 different striped sweaters each season and absolutely they should go back to 2006-2008 because the quality was on point, colors were wearable, patterns were awesome and I am sorry....the CREWCUTS collection was less intrusive. I think they spend more money on design/quality for CREWCUTS then the adult section. Now, all I see in my B&M is CREWCUTS. My 13 year old niece would not be caught dead in JCREW...she said it's too girly. They should have stopped at 10
ReplyDeleteShariyu, an interesting point about Crewcuts!
ReplyDeleteIt occurred to me recently that the floor and display space devoted to Crewcuts in my B&M keeps expanding. Maybe that is reflective of corporate resources and priorities as well.
It may be coincidental, but the growth of Crewcuts and the quality/service declines in the Womens' line seem to have happened along the same timeline.
This is a silly post--J. Crew Revenue was up double digits and there SSS was up 5%. The miss to profits was driven out of over $20M in debt financing charges on last years 2.1. Given the same debt rate to last year the company would have been up 18% in profit. The additional finances charges are a result of them going private and the additional debt they incurred as a result. However, I do agree that the quality in the product has started to be spotty and disappointing in some areas, but I still like the assortment and feel that it is tasteful and relevant.
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