J.Crew is off to an ugly start this year.
Less than a week after reporting dismal sales and mentioning impending "organizational changes," the company is eliminating 175 jobs, mostly from its New York headquarters, according to a statement today. A spokesperson told BuzzFeed News that number includes employees who were fired and open positions that will no longer be filled.
It also said Somsack Sikhounmuong, the design head for Madewell, will replace Tom Mora as the head of women's design for J.Crew. The layoffs were first reported by Racked and followed by a press release at 5 p.m. Wednesday.
J.Crew has been losing luster with its once-loyal fan base, with shoppers criticizing the brand's recent styles, quality, sizing, and prices. The Wall Street Journal outlined those frustrations in a story last month titled: "Dear J.Crew, What Happened to Us? We Used to Be So Close." Some customers have used the hashtag #reviveJcrew to air their complaints about the brand at the suggestion of the Capitol Hill Style blog.
Last week, the company said J.Crew's sales fell 5% overall in the three months ended May 2 and 10% on a comparable basis, citing mistakes in women's sweaters and knits; last year, the brand's comparable sales fell 1.9%. While Madewell has thrived in that time, that brand only accounted for 10% of the company's $2.6 billion in sales last year. The company also wrote down the value of the J.Crew trade name, a common move out of underperforming retailers.
"We are, needless to say, clearly disappointed with the results," CEO Mickey Drexler said on a conference call last week. "We recognize there is work to be done and we're on it."
Drexler, a retail industry legend who built Gap Inc. into a powerhouse company in the '90s, said "the lion's share" of issues with women's merchandise was "isolated to knits and sweaters." He admitted that the company overemphasized its super-pricey "Collection" business at the expense of marketing its more affordable, everyday items. It also made tops too "oversized and boxy," and failed to bring back classic items, he said.
J.Crew's falling sales also turn up the pressure on 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."
J.Crew was bought out by private-equity firms in 2011 for almost $3 billion, and early last year, reports swirled that the company might pursue an initial public offering or a sale to Fast Retailing Co., the Japanese owner of Uniqlo.
In June 2014, Bloomberg News reported that Drexler, through the buyout and more typical CEO payments like options awards and bonuses, has reaped an estimated $380 million from his involvement with the company.
J.Crew had 5,700 full-time employees and 9,900 part-time workers as of Jan. 31, according to regulatory filings.
A Bloomberg News story estimating Drexler's income from J.Crew was published June 2014. An earlier version of this article said it was published this month.
Sapna Maheshwari is a business reporter for BuzzFeed News and is based in New York. Maheshwari reports on retail and e-commerce.
Contact Sapna Maheshwari at email@example.com.
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