Losses widen at J Crew as new chief says turnaround is underway
J Crew's new CEO Jim Brett says the US retailer is making "solid progress" with its turnaround plan as second quarter losses widened and revenues dipped.
Q2 net losses increased to $20.7m compared to $8.6m in the same period last year, however the figure does include transformation costs of $14m and transaction costs of $13.7m. Operating income was down to $2.6m, compared to $6.7m last year.
Total revenues decreased 2% to $560.9m while comparable company sales decreased 5%. Sales at the J Crew Brand were down 7% to $443.1m and down 8% on a comparable basis. Sister brand Madewell, however, provided a bright spot in the figures with sales up 19% to $93.1m and up 11% on a comparable basis.
Brett, who joined the business in July this year taking the CEO reins from Millard "Mickey" Drexler who remains as chairman, pointed to the improvement in gross margin (up to 38.6% from 35.7%) and adjusted EBITDA (up 65% to $63.1m) as evidence the business' turnaround plan was beginning to take effect.
"Since joining J Crew in July, I've come to a better understanding of how these iconic American brands can be made to play a more meaningful role in our lives. Overall, I am optimistic about the opportunities that lie ahead, particularly when reviewing the strong talent, capabilities and commitment within the organisation," he said.
"The team delivered solid progress on our transformation plan during the second quarter, highlighted by expansion in gross margin and reduced expenses that drove an increase in adjusted EBITDA. And I am confident about evolving our brand strategy to drive long term profitable growth," Brett added.
Brett, who joined J Crew from the home furnishings arm of Williams-Sonoma West Elm, was just one of a number of major appointments made at the business this year. Long standing president and creative director Jenna Lyons left the business in March of this year and Somsack Sikhounmuong, formerly of Madewell, was appointed as Chief Design Officer, effectively replacing her.
In April Michael J Nicholson, president, chief operating officer and chief financial officer of J Crew Group, Inc assumed responsibility for the J Crew Brand, while Lisa Greenwald was named chief merchandising officer of the J Crew Brand. Greenwald was previously senior vice president of merchandising for Madewell. Libby Wadle was named president of the Madewell Brand having previously served as president of the J Crew Brand.
At the same time the company said it would be cutting 250 jobs from its headquarters, 100 of which were open positions that would not be filled, a move it said would save $30m annually.