The steep decline of the J.Crew brand, quantified

J.Crew’s brand value is shrinking.
J.Crew’s brand value is shrinking.
Image: Reuters/Mike Segar
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J.Crew reported its third-quarter results yesterday (Dec. 3), and the news just keeps getting worse. Revenue for the company overall declined 6% to $619.4 million, while sales at J.Crew specifically—its flagship brand—dropped 9%. Perhaps more telling, however, was the plunge in goodwill value that J.Crew reported.

Goodwill is the premium paid for a brand when it’s acquired, beyond its physical assets. It’s an “intangible asset” that represents the value of the brand image, and, according to J.Crew, its own goodwill is effectively spent.

“There is no remaining goodwill attributable to the J.Crew reporting unit,” the company stated. The company’s overall goodwill value of $107.9 million is entirely related to Madewell, the company’s denim-obsessed subsidiary.

As Bloomberg reported, that value is down from the $1.7 billion J.Crew measured in April 2011, when TPG Capital and Leonard Green & Partners acquired the company. Most of that loss has taken place this year.

That’s not to say the J.Crew trade name is totally worthless—the company said the book value on the “intangible asset for the J.Crew trade name” was $380 million at the end of October. But even that figure had fallen from $550 million the previous quarter.

This quarter marks the first time that J.Crew valued the goodwill of its more rugged and laid-back Madewell brand higher than its own. Despite troubles at its parent company, Madewell’s sales have been steadily on the rise. Earlier this year, J.Crew even fired its head women’s designer and installed Madewell’s head designer, Somsack Sikhounmuong, whose first designs for the brand are slated to debut in February. Though as of this quarter, even growth of Madewell’s comparable sales has slowed.