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Sweater snafus unravel J.Crew’s quarterly earnings

Gigi Douban Jun 5, 2015
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The slump isn’t over for fashion retailer J.Crew, which continues to struggle with disappointing sales. The company reported first quarter earnings yesterday. Sales were off by more than 5 percent from the previous period last year.

What’s behind the drop in sales? 

Things started unraveling because of a sweater. As in the cardigan that customers complained didn’t fit well. And two other sweaters — one it bought too much of, one it ran out of. Now you might be thinking, “They’re sweaters. What gives?”

“To their customers, it’s a big deal, it’s a staple,” says Ken Morris, founder of Boston Retail Partners. Staples are what J.Crew built its success on, so the sweater fiasco turned into huge losses. 

“I think that J.Crew has had a lot of bad customer moments,” Morris says.

Like when it stopped selling its classic ballet flat, a favorite among shoppers. They’ve since brought it back. But it’s not clear those customers will come back. Dale Achabal, the executive director of the Retail Management Institute at Santa Clara University, says consumers have a lot of choice when it comes to shopping.

“They don’t have long-term loyalty, and that’s a big challenge,” Achabal says.

Another challenge has been some very un-J.Crew-like offerings. Case in point: the leopard print baseball cap. Marshal Cohen, chief retail analyst with the NPD Group, says consumers like change, but not too much, and that’s especially true of J.Crew customers.

“They’ll buy on impulse some of the new things, but they still have to find their tried-and-true product,” Cohen says.

The good news? He says customers will forgive a bad season or two. To get things started, J.Crew stores today offered 40 percent off items already on sale. And to sweeten the deal, they gave out free donuts this morning. It is, after all, National Donut Day.

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