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Crew’s New Captain: Can Drexler Reverse Ailing Brand’s Drift?

NEW YORK — Texas Pacific Group may have finally found its J. Crew exit strategy in Millard Drexler.The investment group Monday named former...

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NEW YORK — Texas Pacific Group may have finally found its J. Crew exit strategy in Millard Drexler.

The investment group Monday named former Gap ceo Drexler the new chairman and ceo of J. Crew, succeeding as ceo his former Gap colleague Ken Pilot, who had been in the job for only five months. Emily Woods, who remains on the board, had been chairman.

TPG hopes Drexler can sharpen J. Crew’s image, maximize its brand potential, and, eventually, allow it to cash out of its flagging investment. The TPG investor group bought J. Crew in 1997 for $560 million and intended to take the company public in spring 2001, but backed off after the market turned volatile and Crew’s performance weakened. Reportedly, TPG has also tried to sell J. Crew and approached several potential buyers. According to one source, "A few years ago, TPG could have doubled its money, but they probably thought they could get more."

Now, the company that was worth almost $1 billion six years ago when TPG bought it is worth less than half that, brought down by a revolving door of ceos and senior managers who were brought in to turn around the operation but failed.

TPG’s style has been to get in and out of investments fast, holding companies typically for two to three years, five years at most. With J. Crew, the plan was missed. TPG owns about 60 percent; 20 percent is owned by Emily Woods, the daughter of the company’s founder, and the remaining 20 percent is held by other, unnamed investors. Other TPG holdings include Bally, Petco, Punch Taverns in the U.K., Ducati, Beringer Wines, Hotwire travel Web site and a stake in America West. It purchased Burger King in December and also made a run at U.S. Airways when the airline hit financial difficulties.

As part of his arrival, Drexler bought a 3 percent stake in J. Crew for $10 million and probably got a low entry price so there’s more incentive for him to take the company public. He also could lure other investors, thereby reducing TPG’s stake.

Drexler was ousted at Gap last fall, after years of eroding sales and declining market share, and was replaced by former Walt Disney Co. executive Paul Pressler. About the same time, the chain began to show a sales rebound as a result of a return to basic and classic styles, largely due to Drexler’s final fall push. He still commands credibility in the marketplace as a great merchant, despite struggling for years to turn around Gap.
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