J. Crew on Tuesday reported that total second quarter revenues rose 3% year over year to $587.6 million as comparable company sales rose 5%, after a 5% decline in the year-ago quarter.
By brand, Madewell sales rose 29% to $121.7 million as comparable sales rose 28%, and J.Crew sales fell 5% to $428.9 million as comparable sales rose 1%, according to a company press release.
The company's net loss narrowed to $6.1 million from $18.5 million last year. Adjusted earnings before interest, tax, depreciation and amortization fell to $54.2 million from $65.3 million in the same quarter last year. Gross margin rose to 38.5% from 38.2% and operating income was $33.3 million, up from $4.8 million a year ago.
With CEO James Brett at the helm for a year, J. Crew appears to be righting the ship, leaning on its Madewell denim brand and preparing major changes for its flagship this fall.
"The product and omnichannel investment in the J. Crew brand has started paying off, and the upcoming brand relaunch will be another key step to watch," Moody's Vice President and Senior Analyst Raya Sokolyanska said in comments emailed to Retail Dive. "Meanwhile, Madewell's outsized growth continues to be driven by digital marketing and product execution. The company's next investment phase is a bet on achieving sales acceleration."
Whether that materializes depends on many factors, including how quickly the company can scale better-performing Madewell and how well-received its J. Crew changes are.
The first is well on its way, though Madewell remains too small to support the company the way, say, Old Navy does for Gap Inc. Last year, the company opened eight Madewell stores, one J. Crew location and one J. Crew factory store as it shuttered 51 units. Chief Financial Officer Vincent Zanna in a conference call on Tuesday said this year's plans are to open 10 Madewell stores and one J. Crew store, while closing 30 stores — more than the previously announced 20.
It's not clear, though, that J. Crew can recapture the esteem it once held among fashion mavens who looked to the label for its high quality and its interpretation of classic designs. Under former CEO Mickey Drexler, the brand suffered from quality and fit issues that had fans complaining vociferously.
On Tuesday, Brett said that those loyal customers can indeed expect a return to quality and style. "Instead of chasing fast, disposable fashion, our focus is classic enduring American style, reflected through a few key aesthetics," he said on the call. "We will convey these through the use of new sub-brands in addition to the relaunch of existing ones."
Sub-brands J. Crew, J. Crew Always and J. Crew Ludlow will sport "the refinement and bright color of New England prep," he said, while Point Sir and J. Crew jeans will reflect "the relaxed nature and soft muted colors of the West Coast," he said. "Color will return along with a breadth of fit, sizes and proportions as well as a range of good, better and best price points with great value and, most importantly, the quality you expect from J Crew."
He faces some skepticism from those who have been disappointed in the recent past. "Count me as unimpressed," men's fashion blogger Derek Guy wrote this week on Put This On. "Most of these changes are aimed at courting female customers since the brand still mostly makes their money off womenswear. But menswear will have to follow, and it seems like J. Crew will be losing its voice."