J.Crew lays off 10 percent of staff and hints structural changes

After months of declining sales, J.Crew leadership has decided to face the ugly and make some tough decisions. The preppy hipster brand will eliminate 175 jobs, look into alternative funding and pass the creative reigns of the namesake’s brand to former head of design at Madewell.

Wednesday J. Crew Group Inc. took the industry by storm when announced that 10 percent of its staff will be made redundant. Additionally, the fashion retailer named Somsack Sikhounmuong head of women’s design for its flagship brand.

The nomination of Sikhounmuong is seen by many in the trade as a wake-up call for quite a few quarters of shrinking sales and declining profits. Sikhounmuong, who was head of design for the company’s Madewell brand for the last two years, will continue to report to Jenna Lyons, executive creative director of J. Crew Group, announced the company in a statement.

Changes were made public barely a week after the company reported disappointing first-quarter results, recalls Bloomberg. Sales at its J. Crew brand fell 5.2 percent to 508.7 million dollars in the period, hurt by problems in its women’s business. Likewise, sales excluding newly opened stores fell 10 percent.

”Meaningful and strategic changes” to rescue ailing business

In this regard, chief executive officer Mickey Drexler explained that they are “making meaningful and strategic changes” across the organisation “to better position us for future growth.”

Drexler recognised as well that “While many of these decisions were difficult, they are necessary.” The 175 job cuts will mostly come from positions at its corporate headquarters, the company said.

The company said in a statement Wednesday that "other strategic and organisational changes are being made across the company in areas including store operations, production, sourcing, and merchandising," though it did not provide details about those changes.

Earlier this month, Drexler told Wall Street analysts during a conference call, “We recognise there is work to be done and we are on it,” revealing that J.Crew’s earnings before interest, taxes, depreciation and amortisation fell 31 percent in the quarter, to 44.8 million dollars. Revenue fell 2 percent, to 581.8 million dollars.

As per the cause of the latest debacle, industry experts point out that the firm has strayed too far from its roots, making the case in point its pricey Collection line.

J.Crew’s more recent problems resulted from miscalculations, according to the retailer’s CEO. “We didn’t have the right cardigan,” Drexler said, adding that “it didn’t fit that well and we didn’t buy enough of the perfect crew. We’ve become a T-shirt destination.”

J.Crew’s chief executive officer promised that the company would be investing in the classics — including cardigans, pencil skirts and suits. But he said the turnaround would take the rest of the year. “Judging by their guidance for 2015, their problems are pretty big,” said Richard Church, managing director of Discern Investment Analytics, reports the ‘New York Post’.

On the bright side, its sister brand, Madewell posted a 33 percent sales increase, to 62 million dollars.