J.Crew has been shifting in its seat trying to adjust to a new normal of shrinking sales and growing debt, but nothing has quite paid off, so the company is cutting its prices.
The retailer’s biggest problem, as CEO Mickey Drexler confessed in an interview with The Wall Street Journal, is that it mis-anticipated how quickly technology would change the game.
“I’ve never seen the speed of change as it is today,” Drexler told the Journal. “If I could go back 10 years, I might have done some things earlier.”
But since the effects of technology hit J.Crew like a ton of bricks, the retailer seems to have lost its way.
For its fourth quarter results for the three months ended Jan. 28, J.Crew reported sales down 5 percent to $572.6 million and revenues down 2 percent to $695 million. Net income was up $1.1 million in the quarter, compared to a $7 million loss in the previous year period. For the full fiscal year 2016, however, sales at J.Crew were down 6 percent and earnings were down 7.3% to $188.5 million from $203.4 million. Sales at J.Crew stores open at least one year have declined for the last 10 quarters.
In April, J.Crew announced that it would let 250 employees go in order to make the business more efficient, which followed just weeks behind its announcement that long-time designer and brand icon Jenna Lyons would be leaving the company as both Drexler and Lyons “agreed it was time for a change.”
The next change coming for J.Crew it seems, will be a focus on lower prices. The company, Drexler told the Journal, became too “elitist,” valuing quality so much so that it forgot to factor in the very real impact e-commerce and social media (which drives shoppers to spend less on more in order to avoid the faux pas of duplicating an outfit on Instagram) on prices. People are simply spending less on clothing.
J.Crew hasn’t taken quality off the table, but Drexler said the company will lower prices on roughly 300 items and an analytics team will be focused on optimizing prices for each of those garments.
“We’re being much more competitive in our pricing,” Drexler told the Journal. “We’re not going to allow our competitors to take from us.”