MAKE ROOM

Madewell’s outsized growth shows it’s the new J. Crew for cool kids

Obsession
Fashion
Obsession
Fashion

J.Crew has been having a hard time lately. At the end of last year, the company posted a steep loss in its third quarter thanks to what CEO and Chairman Mickey Drexler called “a significant slowdown” in its women’s business. Foot traffic was down in J.Crew’s brick-and-mortar stores, and the company was suffering from the constant markdowns it offered to get customers to shop.

At the same time, you can hardly go a block in Manhattan these days without spotting a leather tote bag or pair of artfully ripped jeans by Madewell, the increasingly popular purveyor of women’s distressed denim, leather ankle boots, and cotton cable sweaters. Madewell is a subsidiary of J.Crew, but lately the brand has been excelling where its parent company has fallen short.

J.Crew today announced its financial results for the 2014 fiscal year, and while J.Crew comparable sales declined 2% (compared to an increase of 3% the year before), Madewell’s sales continued to shoot up. The sister brand’s comparable sales increased 14%, topping last year’s 9% growth. Overall sales jumped 35% to $245.3 million due to strong performance at existing stores and the opening of 20 new locations, making the brand the bright spot in J. Crew’s finances.

“J.Crew and now Madewell are much-loved brands,” Drexler said on an earnings call today, emphasizing that the time it took to build the Madewell business (it launched as part of J. Crew in 2006) is now paying off. J.Crew has even changed its operating segments and now reports Madewell’s sales separately from those of J.Crew. At least symbolically, the company is standing on its own.

Madewell sales still account for a small portion of J. Crew’s overall revenue (roughly 9%). But the company is betting big on Madewell’s continued growth. Of the 52 new stores J.Crew plans to open in 2015, 20 will be Madewell’s. Nordstrom recently added Madewell products to their offerings, as did Net-a-Porter, making the brand available overseas. Madewell.com will also begin shipping internationally this year.

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