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J. Crew Won’t Chase the Athletic Trend, Says CEO Drexler

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Athletic apparel has taken off in the last year, and most retailers are vying to get a share of the market—but J. Crew won’t be joining the fray.

In an interview with Bloomberg Television Monday, J. Crew CEO Mickey Drexler said he considered joining the masses in the move to make more activewear by creating sports and yoga clothing a la leaders like Lululemon and Under Armour, but decided against it.

“Where we thought about being in was the active, professional kind of business, but we’re not getting in because we don’t have the expertise to do that,” Drexler told Bloomberg.

But according to market research firm The NPD Group, activewear growth is setting the pace for the overall apparel market, so J. Crew’s pass could prove a missed opportunity.

For the 12 months ended June 2014, activewear sales grew 7 percent while total apparel sales only saw a 1 percent uptick. Activewear sales accounted for $33.7 billion, representing 16 percent of the total apparel market, NPD reported.

“Activewear is booming, with sales growth exceeding that of the apparel market as a whole, and it’s because consumers are wearing activewear not only to the gym, in the gym, and from the gym, but they are working out, going out, and even hanging out in activewear,” Marshal Cohen, chief industry analyst at The NPD Group said in a report released last month.

“Retailers and manufacturers across the board know that activewear is active, and they all want a piece of the action,” Cohen added. “Because of this competition, it’s not enough for them to simply jump on the activewear bandwagon. To truly capitalize on this ongoing trend, they need to unveil products that are colorful and unique, and fuel the activewear demand not with repetition, but with innovation and creativity.”

Knowing that, Drexler opted against targeting the trend, and said, “We’re pretty satisfied with the breadth of our product, and now it’s about correct expansion, correct design and quality.”

The retailer posted a comparable company sales increase of 4 percent for its second quarter, but gross margins dropped to 37.7% from 41.1% in the previous year period, and net income fell 38 percent to $10.8 million from $17.5 million in the second quarter last year.

Drexler said the vibe in retail is difficult and challenging right now and that customers are increasingly after the best deal. But the answer, he said, is to be more creative, more strategic and deliver more to your customers than competitors do.

“I think retail is an art and a science. You better have both. You better have creative—if you don’t differentiate your product, move forward, design it well or have something that is not available and you’re just building on price, you’re going to eventually lose because someone will sell it for cheaper,” Drexler told Bloomberg. “To me it’s all about product and it’s about execution, it’s about sourcing, it’s about customer service—but isn’t the first thing the consumer buys is the product?”

Drexler admitted that he has seen less and less foot traffic in malls over the last six months to one year. The problem he said, is “Every department store is a mall today, every mall is a mall and I think that’s an issue. Where’s the differentiating product?”

But Drexler, and the J. Crew brand, are looking long-term. “We move forward as we see the market demands, we have a very successfully factory value business, and if retailers want to create by only doing price and cheap, then long-term will tell the story,” he said.

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