Coverage: J.Crew lays off staff, fires women’s design head

It’s no secret that J.Crew is struggling to keep core customers. Many have criticized the retailer’s styles and rising prices. The company has alienating core customers and lagging sales figure show it. In response, it’s laying people off and putting in a new head of women’s wear.

USA Today had these details in a story by Nathan Bomey:

Fashion retailer J.Crew today slashed its corporate staff and ousted its lead women’s fashion designer amid a sales slump.

The company said it is cutting 175 full-time jobs, including some open positions, with most spots located at its New York City headquarters.

J.Crew also announced that it is ousting Tom Mora as head of women’s design. He will be replaced by Somsack Sikhounmuong, who was leading design for the company’s Madewell brand.

The company has been grappling with poor results from its women’s fashion and accessories business as shoppers seek out hot alternatives such as Forever 21 and H&M.

Sales at J.Crew stores open at least a year fell 10% in the quarter ending May 2, compared to the same period a year earlier.

The Quartz story by Marc Bain pointed out the J. Crew is a turnaround story that’s failing:

“We are making meaningful and strategic changes across our organization to better position us for future growth,” Mickey Drexler, CEO of J.Crew, said. “While many of these decisions were difficult, they are necessary.”

Drexler, a legend in the retail sector from his days running Gap, took over as J.Crew’s CEO in 2003. In his first 10 years at the helm, J.Crew tripled its revenue and was generally considered a massive success story.

It notably made big headlines back in 2008, when Michelle Obama wore one of the brand’s dresses for her appearance on The Tonight Show with Jay Leno, shortly before her husband, Barack Obama, won his first US presidential election. Leno, referring to reports that Republican vice presidential candidate Sarah Palin had a clothing budget of $150,000, asked Obama if her dress cost $60,000.

“Actually, this is a J.Crew ensemble,” she replied. “Ladies, we know J.Crew. You can get some good stuff online!” (The brand had another big cameo with the Obama family at the 2013 inaugural.)

Despite the important plugs from celebrities, The New York Times story by Julie Creswell pointed out that J. Crew is grappling with a huge amount of debt:

But J. Crew’s problems run deeper than a bad sweater or two. Thanks to a leveraged buyout of J. Crew that Mr. Drexler and two private equity firms orchestrated more than four years ago, the company has $1.5 billion in debt on its books.

“He’s got all of the challenges that you get with running a troubled retail business. Now he has a troubled retail business with lots of debt,” said Howard Davidowitz, a longtime retail consultant.

Crew has lots of company. Abercrombie & Fitch has been hit by slumping sales and its stock is trading at six-year lows. Same-store sales are down at Gap Inc. Aéropostale is fighting for its survival.

Behind the downswing in fashion retailing are two trends that analysts say J. Crew either missed or is playing catch-up on.

Alexander C. Kaufman wrote for The Huffington Post that many of the issues came as J.Crew moved away from quality basic pieces:

The move follows what Drexler called in March “a lousy year” for J.Crew’s women’s clothing business. The chief culprit: sweaters.

“The lion’s share of our women’s issue is isolated to knits and sweaters, which has been an outsize portion of our business,” Drexler said on a conference call with analysts last week.

Stores stocked too few of the popular Tippi sweater and too many of the Tilly, a cardigan Drexler said “didn’t fit that well.”

“One-third of our business is a mix of both knits and sweaters,” Drexler said on the call. “The amount of the business is big enough to impact the negative comps in the company.”

Earlier this year, J. Crew reshuffled its top ranks as Chief Operating Officer James Scully departed just three weeks after Stuart C. Haselden, the chief financial officer, left to join Lululemon.

BuzzFeed’s Sapna Maheshwari pointed out that prices are rising, but quality is suffering, driving consumers away:

Crew’s falling sales also turn up thepressureon Jenna Lyons, the company’s bespectacled executive creative director who has appeared on HBO’s Girls.

In March, the Hairpin published an open letter to Lyons, which bemoaned her “tireless collections of one-season wear floral patterns” and the brand’s steep prices. The author, Tricia Louvar, calculated that an everyday outfit from J. Crew costs $596.

Drexler, 70, stood by the brand’s quality on last week’s call. He noted that additional challenges came from unpredictable traffic and “rampant discounting” within the retail industry.

“While we focus on getting our overall top line back on track, we’re also taking action on our expense structure,” Drexler said. “This includes some organizational changes which we’ve been working on to be more streamlined and efficient and supporting our long term growth.”

While J.Crew is shuffling the ranks and trying to return to its former glory, it does have a large debt load and investors who are looking for returns. The real test will be if it can actually get customers to walk back through the doors and open their wallets again. The perception of high prices and poor quality can be difficult to overcome.