J.Crew Profit Down & Sales Up

"Thanks!" to TeriLynn13 (in this post), who shared the following from Fashionista (click here for the article in its entirety):

J.Crew's Sales Picked Up Last Quarter
After a whole lot of markdowns, J.Crew says it has a better handle on its inventory levels.
By Eliza Brooke
September 5, 2014

While J.Crew's creative team is busy preparing for the brand's Fashion Week presentation on Tuesday, its business execs had some pleasant news to report on Thursday afternoon. Sales picked up for the brand in the second quarter of the year, with revenue increasing 12 percent to $627.2 million — this after a season of markdowns that wound up damaging J.Crew's business. Overall, the first half of the year saw 9 percent revenue growth.

On the company's earnings call, execs said that while inventory is still higher than they would like it to be, the percentage of spring and summer product still in stores is lower than it was at this point last year. So, according to them, inventory composition is "healthy."

As might be expected, direct sales are growing at a faster clip than in-store sales — that would be 14 percent ($173.6 million for the second quarter) and 11 percent ($443.5 million), respectively. Comparable company sales also improved over the course of the first half, up 1 percent for the half following a 4 percent rise in the second quarter.

Over at MarketWatch (click here), they share:

J.Crew Group profit declines 38%
September 4, 2014

J.Crew Group Inc. said its second-quarter profit fell 38% as the privately held retailer posted higher revenue amid increased expenses. The retailer... said same-store sales rose 4%.

For the quarter ended Aug. 2, the company posted a profit of $10.8 million, compared with net of $17.5 million a year earlier. Revenue rose 12% to $627.2 million. The company saw an increase in the cost of goods sold as well as in general and administrative expenses. ...

Well mixed news for J.Crew but at least they are getting a handle on their inventory. I know we have talked a lot about this topic before (click here). It's good to see J.Crew taking the right steps necessary. I am also curious to see how well they manage the Spring and Summer inventory now that we are transitioning to Fall and Winter.

Speaking of which, I thought Teacups (in this post), had an interesting take on the situation:

I probably haven't been around the JCA community long enough to recognize if this lull or inactivity is from a collective "crewed out" experience or if it is part of a cycle. For me personally, I would say the current malaise is largely a result of the depressing feeling of visiting the jcrew website. I recognize that they are not the only retail clothing manufacturer who has gotten caught with far too much inventory, but there has to be a better way of managing it than letting items sit in the sale section for the rest of eternity. There has to be some time limit. I don't know if the magic number is 4 months, six months or whatever. I do know that looking at the sale section hovering at about 2000 items makes me not want to even begin to look through it. When you find items you have sitting in your closet languishing month after month, you are less likely to want to wear it or purchase more items which are likely similar. And I love a sale. I just feel like they Jcrew needs to take the hit and move on before all of the joy is gone and I become less interested in the site and the store. I have not given up yet but they need to hurry. 

I love J.Crew sales! It is always exciting to see that coveted item get marked down, and make its way to the home closet. However, there is an abundance of merchandise sitting in the sale section from last year. Just lingering a lot longer than usual, without any additional mark down. As a result, I have been finding myself checking out the sale section less frequently too.

What are your thoughts on J.Crew's performance? What do you predict will happen with their inventory issues moving forward? Do you think J.Crew can reverse their issues?

J.Crew's Got an Inventory Problem {no, really?}

 

The following article is from Fortune (click here to read in its entirety) about J.Crew's current profit outlook:

J.Crew's misplaced optimism to slam profit through holiday season
By Phil Wahba
June 5, 2014

Clothing retailer’s inventory is still too big for its britches. The problem with being a fast-growing company, quickly expanding your flagship brand and rolling out newer concepts, is that you can forget how quickly consumers’ mood can sour.

J.Crew has learned that the hard way, letting inventories build way, way up even as shoppers seriously cut back on trips to the mall and sought out big bargains.

The casual clothing company reported a big decline in its adjusted profit for the first quarter, primarily because its gross margin, a measure of merchandise profitability, plunged a staggering 6 percentage points to 38.7% of sales. (In contrast, at Gap gross margin barely budged, hovering around 39%.)

J.Crew Chief Financial Officer Stuart Haselden blamed a decrease in mall traffic and made allusions to a cold winter hurting sales. But J.Crew’s overly ambitious buying played a big role in the margin depletion, too.

Inventory rose 16% during the quarter on a square-foot basis, while comparable sales fell 2%. That disconnect led to big markdowns as J.Crew tried to clear unsold merchandise. Haselden told analysts on a call the problem would persist until about the holiday quarter. “We have more than we’d like to have,” he said.

Despite the pressure on sales, J.Crew doesn’t plan any large-scale store closings of the kind underway at Abercrombie & Fitch, Aeropostale and, a few years ago, Gap. “Our store base is very productive,” Haselden said.

That may be, but J.Crew faces some choppy waters through the holiday season. Traffic at J.Crew stores this quarter so far is still down from a year earlier, and the retail environment is not getting any less promotional.

And competitors are faring better- Gap just reported a 1% increase in comparable sales for May

Very interesting to see J.Crew's bottom line being impacted by increased inventory and reduced traffic...

It is no surprise to any of us that J.Crew has too much merchandise on hand. All one has to do is take a look at the current sale section. The numbers for the Women's items are around 1000-1600. These numbers were not on the radar a few years ago, and now they seem like the norm.

Some unsolicited advice... (1) J.Crew needs to offer kill prices for items that are on sale for over a year. I am referring to all the Holiday sweaters. Just sell them cheap, and move on as a lesson learned.

(2) J.Crew needs to get back to more "classic with a twist" offerings or at least hire a really good stylist. The following are the current looks J.Crew loves. This use to be a feature I looked forward to. Now, I don't bother.

There is not one look here that I care to recreate. Don't get me wrong, I love certain pieces. However, they are not styled "at their best". (I am tired of seeing sweats and pajamas as a day-time staple.) I would trade in all of the looks above for the one look below from J.Crew's Spring 2008 Collection Look Book.

This is the type of outfit that is styled to perfection. I want to buy e.v.e.r.y.t.h.i.n.g. here. This is what J.Crew needs to get back into.

What are your thoughts on the article? Do you think J.Crew will change their ways in response to the decrease in profits/ increase in inventory? Please share your thoughts!

J.Crew Updates Website Back End {customer reviews and more!}

As many of you have noticed and commented, including Tiffany Rose (in this post), J.Crew has a major back-end update to its website today. Unfortunately, as many of you have noticed and commented, expect a log of bugs and hiccups in the system today... Things appearing and disappearing on product pages, pages not loading, etc.

What is new? First, customer reviews are up and running on the site. They can either be spotted on the upper right hand side of the page -and- beneath the product info.

Customers can rate the item overall (out of five stars), overall fit (whether its true to size), in addition to their opinion. Similar to other sites, including their sister company Madewell.

Overall, I am super excited about this feature. I was actually interested in the Pleated Knit Dress this morning and read several reviews that all said how the fabric was too thin. I was able to make an educated decision on whether or not this dress would be good for me and avoided the dreaded buy/return. Moreover, I was on the fence about the Patio Skirt in Photo Floral Skirt and the reviews were glowing making me get it. Yey for customer reviews!!!

As I was placing an order this morning, it was mentioned that the distribution center / online and in-store inventories are now mainstreamed into one system. Therefore, online now reflects all of J.Crew's inventory. Moreover, J.Crew will *no* longer be offering the "we will find it" service since online will now show all available merchandise.

We have seen how this works already as J.Crew tested out this feature in the past few months. (Remember ordering online and getting an item fulfilled from a retail store.) I am wondering if we should be expecting most orders to be broken up into lots of mini-orders- shipping from across the country? Or... If items from stores will be shipped to distribution centers and then packaged/shipped to customers?

What are your thoughts on the new and improved J.Crew? Do you like or dislike the new system?