More J. Crew Closures to Follow the Company’s Poor Third-Quarter Results
J. Crew Group, Inc., a privately held retailer, announced plans to close 39 additional stores by the end of January as its sales figures continue to plunge and its corporate debt tops $1.7 billion.
The 39 planned store closures represent about six percent of the company’s total number of stores, and they are double the number of closures that J. Crew had previously announced.
After the markets closed on Tuesday, J. Crew announced its third-quarter results, for the period ended September 30. The company announced that third-quarter revenue fell five percent to $566.7 million. Sales at the company’s flagship brand J. Crew tumbled 12% to $430.4 million.
Same-store sales at J. Crew were down 12% in the 2017 third quarter, compared to just a nine percent decline in the 2016 third quarter. More broadly, comparable company sales fell nine percent, compared to an eight percent decline in the same period last year.
The company reported a third-quarter net loss of $17.6 million, which is a significantly larger loss compared to the $7.9 million recorded in the third quarter of 2016. Total debt at the end of the third quarter was $1.7 billion, compared to $1.5 billion in the same period last year.
In the first nine months of 2017, total revenue was down four percent, at less than $1.7 billion. J. Crew lost $161.6 million in the first nine months of the year, compared to $24.6 million in the first nine months of last year.
Also in the first nine months, comparable company sales decreased by eight percent, following a seven percent decrease in the first nine months of 2016.
J. Crew Group to Enact New Strategy
The company said it expects 50 store closures in 2017. This represents an almost-67% increase in the number closures over the previously forecasted 30.
In an effort to sound positive, CEO Jim Brett said, “Our goal is to reinvigorate the J. Crew Brand to reflect the America of today and to continue to drive strong momentum in the Madewell Brand.” Brett added, “As we solidify longer term strategies, we will continue to leverage our strong brand equity and unique capabilities to expand our reach, accelerate growth and maximize profitability.”
CFO Mike Nicholson said J. Crew is evolving from a traditional brick-and-mortar specialty retailer to a “digital-first” business. The store closures are simply part of that plan. Will this be enough to reinvigorate the J. Crew brand, or will it follow the same path as countless other one-time retail giants into oblivion?
To that end, Neil Saunders, the Managing Director at GlobalData Retail, said, “There is always an argument for change, but change by itself is neither a strategy nor a solution — it needs to be accompanied by a blueprint for reinventing the business.”
Saunders added, “While J. Crew has some rudimentary plans for change, we do not believe these are advanced enough to show on the shop-floor or to create a step change in business performance.”
Despite the U.S. economy being relatively strong, with unemployment at its lowest levels in 17 years, 2017 has set a record for the number of retail stores closing down. Since the start of 2017, U.S. retailers have shuttered more than 6,700 stores—a 235% year-over-year increase of store closures. That momentum is expected to continue into 2018.
“J.Crew Group, Inc. Announces Third Quarter Fiscal 2017 Results,” J. Crew Group, Inc., November 21, 2017.
“J. Crew will close dozens of stores by the end of January,” CNN, November 22, 2017.
“J. Crew to close 50 stores as sales plunge, again,” RetailDive, November 22, 2017.
“Weekly Store Openings and Closures Tracker #33,” Fung Global Retail & Tech, last accessed November 22, 2017.