Drexler's J. Crew departure marks the end of an era
Mickey Drexler, who stepped down as J. Crew’s CEO on Monday, is being hailed by analysts as one of the top American merchants in history, despite the apparel retailer’s struggles with sales and debt in recent years.
His successor, former West Elm President James Brett, is also a merchant, who (in addition to his more than seven years at West Elm) spent more than two years as chief merchandising officer at Urban Outfitters and four years as divisional merchandise manager at Urban Outfitters brand Anthropologie’s home unit, according to his LinkedIn page.
Meanwhile, Willams-Sonoma on Monday announced the return of Alex Bellos, the head of the company’s Rejuvenation and Mark and Graham brands, to succeed Brett as president of the West Elm brand, according to a Williams-Sonoma press release.
J. Crew has floundered in recent years in a tough apparel market and under a heavy debt load as it alienated customers over the fit and quality of its clothing and largely abandoned its classic styles for the quirkier approach favored by executive creative director Jenna Lyons, who is leaving once her contract ends in December. But Drexler was likely confounded not just by challenges in fashion, but also major financial obstacles presented by J. Crew’s private equity owners.
“I would say that Mickey Drexler is the second greatest apparel chain merchant in the history of the United States,” Howard Davidowitz, chairman of New York City-based retail consulting and investment banking firm Davidowitz & Associates Inc., told Retail Dive on Tuesday. “No. 1 is [L Brands founder / CEO] Les Wexner. And it’s interesting, how Les Wexner, the genius in the apparel business, got out. He diversified, got into lingerie and fragrances.”
Drexler was the merchant who transformed Gap into the world’s biggest apparel chain, by making private label T-shirts and jeans both must-have and ubiquitous, like buying milk at the corner store, says Lee Peterson, executive vice president of brand, strategy and design at WD Partners, a global retail design firm.
“Drexler is the guy who took Gap from nothing to a wonderful concept. I’m sure there’s some neuroscience behind it,” Peterson told Retail Dive. “What he did for casual — he made casual apparel what it is — the whole category and all those people that came after him owe him that. They all should tip their hat to Mickey Drexler. He had a quarter-century run of doing really beautiful things. Being able to produce great creative product for the masses is an art form in itself and he ruled the earth for 25 years.”
That includes his development of Old Navy, which continues to buoy Gap Inc., and the similarly lower-priced brand at J. Crew, Madewell, which, though successful, isn’t big enough to lift J. Crew in the same way.
But the original beautiful thing that Drexler did for J. Crew was to disrupt department stores by creating well made items that —compared to the goods at upscale department stores with high-end brands that cost thousands of dollars —were a great value, even at what consumers today see as hefty prices, Davidowitz said.
“He was competing with the department stores with these fancy brands, and in his mind he offered much greater value than they do. I mean, $2,500 cashmere and it has very little cashmere,” he told Retail Dive. “He said ‘My cashmere is better weight, it’s private label and I’m selling it for $800. Why wouldn’t they want it?’ He saw that department stores offer the least value — nobody offers poorer value than the department stores, they have the highest overhead and the highest price structures and they have to. Drexler thought he could pull that off, and for years, he did.”
Customers for years did appreciate the approach, until fast-fashion players (and now Amazon) introduced similar sweaters at rock-bottom prices and TJ Maxx and other off-price players scooped up the department stores' leftover brand-name cashmere sweaters to sell for $100, Davidowitz said.
Add to that the fact that today’s retail environment has shoppers walking malls with devices in their hands that allow for constant price checking. And the advent of voice-activated assistants means that Google and Amazon will price check and choose purchases for shoppers sitting at home, Peterson notes. That will be a challenge for Brett, who faces a different set of competing forces that are still swiftly evolving.
“Retail is going to be such a different animal in another 10 years,” he told Retail Dive. “The AI thing — he’s going to have to think about that — his competition is going to be an algorithm sitting on your kitchen table. It’s ‘Jeff Bezos thinking,’ kind of like ‘ bend it like Beckham.’ It’s not about profitability any more, it’s about growth.”
The fact that Drexler remains on the board could present a challenge for Brett, much like Ralph Lauren’s continued presence at his company may have posed a problem for Stefan Larsson, who left the CEO post after little more than a year, Mark Cohen, director of retail studies at Columbia University's Graduate School of Business, told Retail Dive. Peterson, however, believes Brett’s experience as a merchant may have been a Drexler preference, and sees the two men working well together. “It’s smart in my book to have a merchant there and strong financial people working for him because, at the end of the day, you have to be a merchant more than a banker,” he said. “But you need a banker to beat you up sometimes.”
The financial side, in the form of private equity firms, however, may have beaten J. Crew up a bit too much, by Davidowitz’s estimation. Drexler may have been able to turn J. Crew around, but for its private equity owners squeezing the retailer and leaving it little cash or time for the job, he says. Instead, J. Crew is loaded with debt, and suppliers are likely looking for stiffer terms due to the escalating risk, Davidowitz said.
“If this were a normal company, with cash in the bank, I 100% believe that three years from now J. Crew would be rolling. But what supplier is going to deal with him in a normal way? Private equity, the first thing they do is put you on the edge. And when you’re an apparel chain, living on the edge is deadly because you can’t fix a business in two years. They borrow billions, they have 80,000 lawyers and now they’re trying — although the court will decide this — to extract from the lenders the only value that will be there, which is the intellectual property of J. Crew and Madewell.
"For J. Crew, in my opinion, it’s over, because there is no way to deal with the debt," Davidowitz added. "It’s impossible.”
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