J.Crew has been having a rough few years. Sales have declined, stores have closed, and after an unsuccessful rebrand toward cheaper, trendier clothing didn’t sit well with shoppers or the company’s board of executives, its newly appointed CEO stepped down.
Its sister brand Madewell has had a completely opposite trajectory. Sales are soaring, to the point that J.Crew even started putting Madewell boutiques inside its own existing stores to attract customers. The company recently appointed a CEO of its own to lead Madewell, as opposed to relying on J.Crew leadership.
Now, J.Crew might decide to spin off Madewell as its own company.
In a statement released Thursday, parent company J.Crew Group announced it is considering an initial public offering for Madewell. By separating its more successful brand from its struggling one, the company would be able to use the IPO money to pay off J.Crew’s nearly $2 billion in debt.
”We believe a potential IPO of Madewell, which had another record year of performance in 2018, could unlock significant value and generate meaningful proceeds that would strengthen our balance sheet,” said Michael Nicholson, the company’s interim CEO.
Vox reached out to J.Crew for comment and did not immediately hear back.
J.Crew wouldn’t be the only company to be outshined by another brand in its parent company’s portfolio. Earlier this year, Gap announced it would split in two, spinning Old Navy off as its own company. (Gap, and other brands like Athleta and Banana Republic will remain a different company, currently referred to as NewCo.)
Similarly to J.Crew, the Gap brand has been facing declining profits as a result of customer disinterest and the high cost of operating too many stores. Meanwhile, Old Navy has risen as the strongest brand in the Gap Inc. portfolio because of its sharp focus on targeting shoppers on a budget, per CNBC.
Madewell has also found success by focusing on a very specific type of shopper — the type that loves denim, boho dresses, and minimalist footwear. Its catalog of “tomboyish, Francoise Hardy-feeling closet staples,” as its style was aptly described by Fashionista, has been winning the attention (and wallets) of shoppers for years now. As former head designer Somsack Sikhounmuong told Racked back in 2015, Madewell makes the “kinds of things you’d save and wear as you got older.”
Madewell, to be sure, is much smaller than J.Crew. It has 120 stores, and is also sold in Nordstrom. (J.Crew has more than 500 stores, although it’s been quietly closing locations.) But Madewell is slowly catching up, sales-wise, and might eventually surpass J.Crew. Madewell made $529 million last year, per the New York Times, while J.Crew earned $1.8 billion in revenue last year — in a shrinking sales trend, as it made $2.2 billion four years earlier.
While Madewell has been leaning into its success, launching its first menswear line in September, J.Crew has spent years struggling with an existential crisis. The company was once treasured as a classic American brand, but isolated many shoppers when former creative director Jenna Lyons took a trendier (and higher-end) approach. In 2017, former J.Crew CEO Mickey Drexler admitted to the Wall Street Journal that it “became a little too elitist in our attitude. We gave a perception of being a higher-priced company than we were — in our catalog, online, and in our general presentation. … Very big mistake.”
In its most recent attempt at a relaunch, J.Crew tried to focus less on prep and more on lowering prices. But sales are still shrinking, and the deadline to pay back its debt is slowly approaching. Spinning off Madewell might be its only viable option. As critics have noted in the past, saving J.Crew might be too difficult at this point.
This might be good news for Madewell fans: that the beloved brand could turn into a company of its own, as opposed to being overshadowed by a sister brand saddled with debt, means Madewell might get more focus and attention. Bring on the boyfriend denim and clunky mules.
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