"It’s an extraordinary opportunity for Drexler and J. Crew," said Hal Reiter, ceo of Herbert Mines Associates executive search. "If anybody can blow out J. Crew, it’s Mickey Drexler. Nobody knows the customer better than him."
In the third quarter ended Nov. 2, J. Crew said waning sales conspired with gross margin erosion resulting in a net loss of $700,000. That compares with the year-ago quarter when the company realized profits of $300,000. Sales for the period declined 2.9 percent to $189.9 million from $195.6 million last year, as comparable-store sales plunged 11 percent and sales at J. Crew’s direct business decreased 8.7 percent. While privately held, J. Crew reports results because the company has public debt. Crew has annual sales of about $800 million.
Officially, TPG contends it’s not lost patience with J. Crew. As a TPG spokesman said Monday: "It is fair to say that TPG is committed as ever to J. Crew. We’re looking forward to working with Mickey to create shareholder value. This is a firm commitment by J. Crew’s majority shareholder and one of the leading retail executives in the U.S. to regrow the J. Crew business. We view it as a terrific opportunity."
But growing J. Crew won’t be easy. Problems stem from a string of management upheavals in the past several years, which caused the brand image to fade. Each regime had "too many cooks in the broth," as one source said. Past ceos had to contend with TPG getting more involved as the company’s business weakened, as well as with Woods.
With such a range of opinions on offer, look for Drexler to try to solidify power fast, and a changing board complexion with some Drexler allies. For one, he’s already brought in Jeff Pfeifle, former executive vice president of Gap’s Old Navy division, as president. The board includes TPG’s David Bonderman, Richard W. Boyce and James G. Coulter, as well as Gregory D. Brenneman, ceo of Turnworks Inc. equity firm; retail consultant and former Federated executive John W. Burden 3rd; David M. Schwarz, ceo of Architectural Services Inc.; Thomas W. Scott, founding partner of Nantucket Allserve beverage supplier; Brian T. Swette, an eBay senior executive; Josh S. Weston, a former chairman and ceo of Automatic Data Processing; Woods, and Drexler.