hnnhcronin Mickey Drexler, longtime CEO of J. Crew, has chosen to resign from his post June 5th, 2017; however, he will continue to stay on as chairman of the company, as Drexler owns 10% of J.Crew. Drexler’s resignation was preceded by the news that longtime creative director of J.Crew, Jenna Lyons, resigned in April. Drexler’s reasons for stepping down as CEO are likely related to J.Crew’s ten straight quarters of sales decline. Last year, sales declined 2.2% from the previous year. This sales slump is not exclusive to the classic preppy retailer. Especially higher priced brands such as Ralph Lauren, Michael Kors, and Victoria’s Secret have been hurt by the emergence of fast fashion companies and the declining foot traffic in brick and mortar stores.
Millennials have turned away from stores like J.Crew, who offer simple closet staples and conservative styles, in favor of companies such as H&M, Zara, and Forever21. Those retailers, known as ‘fast fashion’ companies, quickly turn over new styles as trends evolve and offer trendy imitation pieces of the clothing seen on the runways. Millennials are less inclined than previous generations to spend large amounts of money on fashion and prefer to instead spend that money on technology. J Crew’s relatively high prices are pushing younger consumers elsewhere. Many items sold at J.Crew can be found elsewhere for less, and consumers are keenly aware of that.
Since the rise of social media, traditional brands have struggled to maintain a loyal customer base. Millennials prefer to buy clothing and accessories online rather than in-store, hurting companies like J.Crew who have been slow to respond to the new social media realities. Drexler admitted as much as J Crew did not adapt quickly enough to the importance of social media in the modern retail market. Failing to create the same social media presence as other companies, J Crew ‘se-commerce sales have been unable to compensate for its brick and mortar sales slump.
Mickey Drexler is credited with reviving J.Crew from a struggling preppy retailer to a household name. Just as his leadership at Gap resulted in extraordinary success and a popularized casual wear movement of the 1990s, Drexler took J. Crew in a new direction that resulted in years of sales success. Drexler added a wedding line, beach clothing, and childrens clothing. Drexler fashioned a more upscale brand image for J. Crew and emphasized a neat store layout and impressive customer service. In 2006, J. Crew went public, but it later privatized in 2011 after a rough year for the retail sector in a deal with private equity firms TPG Capital and Leonard Green & Partners that loaded the company with a large amount of debt.
James Brett is scheduled to take over Drexler’s duty as CEO in July of 2017. Brett is currently the CEO of West Elm, a furniture retailer of Williams Sonoma. Brett has experienced great success at West Elm. Once James Brett is CEO, J.Crew plans to have Drexler focus on the merchandising of J.Crew, while Brett would initiate a plan to reduce company debt.
Despite its troubles J.Crew does have some growth prospects. J Crew’s sister company, Madewell, is experiencing sales growth. Madewell targets a younger customer base since it adopts the popular trends seen on the runway. Last year, sales at Madewell increased by 14%. The increased popularity of the brand will likely help J.Crew company could help augment the company’s turnaround strategy.
Sources:
Chong, Sei. “Morning Agenda: Mickey Drexler to Resign as J. Crew C.E.O.” The New York Times,
The New York Times, 6 June 2017, www.nytimes.com/2017/06/06/business/dealbook/drexler-jcrew-retail.html.
Cnbc. “J.Crew Names James Brett as CEO, Drexler to Continue as Chairman.” CNBC, CNBC, 5
June 2017, www.cnbc.com/2017/06/05/reuters-america-jcrew-names-james-brett-as-ceo-drexler-to-continue-as-chairman.html.
Garcia, Tonya. “J. Crew Has a New CEO, but That Won’t Fix Its Debt Problem.” MarketWatch, 8
June 2017, www.marketwatch.com/story/j-crew-has-a-new-ceo-but-that-wont-change-its-debt-problem-2017-06-06.
J.Crew. “J.Crew Group, Inc. Announces Fourth Quarter and Fiscal 2016 Results.” PR Newswire:
News Distribution, Targeting and Monitoring, 21 Mar. 2017, www.prnewswire.com/news-releases/jcrew-group-inc-announces-fourth-quarter-and-fiscal-2016-results-300427223.html?tc=eml_cleartime.
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