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J.Crew sales decrease as Madewell soars in FY17

By Vivian Hendriksz

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Business

London - J.Crew Group, Inc. ended its fiscal year 2017 with a decline sales, in spite of a strong performance from Madewell. Total revenues for fiscal year 2017 for the group declined 2 percent to 2.3 billion US dollars, which includes 28.6 million US dollars made in the 14th week which ended February 3, 2018.

The drop in revenues was linked to a decrease in sales at the J.Crew brand, which reported a sales decrease of 8 percent to 1.84 billion US dollars for FY17. However, Madewell sales increased 23 percent to 421.1 million US dollars during the same period, as the sister brand continues to be a key driver for the US apparel company. Nevertheless, Madewell’s strong performance was not enough to counter J.Crew’s decline sales.

J.Crew sales falter as demand for Madewell continues

Operating loss for the fiscal year was 120 million US dollars, with an operational income of 49 million US dollars last year. However, gross margin increased to 37.6 percent, up from 36.1 percent last year. Nevertheless, net loss hit 125 million US dollars during FY17, in comparison to 23.5 million US dollars of net loss during the previous year. Adjusted EBITDA increased 18 percent, equal to 33.7 million US dollars to 222.2 million US dollars.

Despite its tough year, J.Crew managed to end the year on a stronger note, as net income increased to 36.6 million US dollars during the fourth quarter, up from 1.1 million US dollars during the same period a year ago. The group’s fourth quarter, which ended February 3, 2018, was also impacted by 18.7 million US dollars in transformation costs, as well as 4.3 million in non-cash impairment charges, 1.3 million US dollars in transaction costs and 1.3 million US dollars. in severance costs

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2017 has been highlighted as a transformation year for J.Crew, according to CEO Jim Brett. "With our transformation strategy underway, we delivered gross margin expansion and double-digit adjusted EBITDA growth in the fourth quarter and the full year. While we are only at the very beginning of our evolution of the J.Crew brand, meaningful change is happening and we are already seeing results in our most important business – women's apparel – signaling that our strategy is working.”

J.Crew has undergone a significant period of change. Last April it announced that its creative director, Jenna Lyons, would be exiting the brand after 26 years. This announcement was followed by a major dismissal round, in which 250 employees were out of a job. Then Mickey Drexler announced that James Brett was set to succeed him CEO in June, which was followed by the departure of Somsack Sikhounmuong, who had been promoted to Head of Design following Lyons exit in September. Sikhounmuong has worked for the group for 16 years at the time of his sudden exit.

Despite the numerous changes, Brett is confident the group will be able to grow next year. “With the right strategy and leadership in place, we are uniquely prepared to respond to the growing customer preference for a more personalized experience. We will scale Madewell more rapidly, building upon its proven and consistent record of growth, through strategic investments with highly profitable returns. We are a house of American brands, J.Crew our most iconic, all with significant opportunity to expand and enhance our product range while engaging our customers in more meaningful ways."

Photo: Madewell Facebook

J CREW
Madewell
MULTIMEDIA