J. CREW QUITS ON CW

May 01, 1999 9:30 PM  By

A last-minute buyer saved J. Peterman from shutting its catalog doors for good, but Clifford & Wills (CW) wasn’t so lucky. Having put CW up for sale nearly two years ago, J. Crew, the $834 million parent company, said it will phase out the women’s apparel and accessories catalog over the next two years. A company spokesperson declined to say exactly how J. Crew would phase out the catalog, however.

Observers say the $74 million CW has been struggling ever since its disastrous repositioning attempt in 1994. Hoping to bring in new customers, CW changed its design and merchandising from a suburban, feminine style to an urban, hard-edged look. But rather than attract younger, fashion-forward buyers, CW alienated its existing customer base of middle-of-the-road career women.

“In the mid-’90s, apparel catalogers faced a slowdown. CW wanted to push the creative envelope to bring in new customers,” says Glenda Shasho Jones, president of catalog agency Shasho Jones Direct, “but it pushed too far.” Shasho Jones Direct was hired by J. Crew in 1996 to steer the book back toward its classic yet contemporary positioning.

But though CW tried to get its core customer back by modifying its merchandise and using more approachable models, “CW couldn’t get back to where it was before the repositioning,” says Susan McIntyre, president of McIntyre Direct, a Portland, OR-based catalog consultancy. “It seems like it couldn’t decide who or where its market was.”

Neither McIntyre nor Shasho Jones believes, however, that CW was in dire straits. “I have to believe that the decision was made for larger financial reasons than just CW’s poor sales performance,” Shasho Jones says.

One of those “larger financial reasons” may be the company’s long-term debt, which Crain’s New York Business puts at $305.9 million. And for the nine months ended Oct. 31, 1998, J. Crew lost $21 million; third-quarter catalog sales fell 9.5%.

What’s more, some analysts contend that Texas Pacific Group (TPG), a Fort Worth, TX-based private investment firm, paid too much for its 85% stake in J. Crew, which it bought in October 1997 for $560 million. (J. Crew chairman Emily Woods holds the remaining 15% of the company.) And several observers believe that TPG wants to take J. Crew public. In either case, TPG may be trying to cut its losses and return the company to profitability by selling or closing J. Crew’s auxiliary brands. Last year, J. Crew sold its $180 million Popular Club Plan general merchandise catalog to Fingerhut Cos. for $43 million.

In a statement released March 3, Woods said, “The decision [to fold CW] is consistent with our efforts to continue to focus the company’s management and financial resources on growing the J. Crew brand.” These efforts include an aggressive retail expansion: J. Crew plans to add 60 stores by 2000. Retail already contributes more than 50% of the J. Crew brand’s sales. Divesting the auxiliary titles could raise more money to fund the retail expansion.