J.Crew will discontinue the Mercantile budget clothing line and shut down the Nevereven brand, according to an internal memo, as reported by The Wall Street Journal (WSJ). The moves are a reversal of some of the changes spearheaded by former CEO James Brett, who departed suddenly on Nov. 19.
The retailer currently sells Mercantile products through an Amazon storefront, and the elimination of the brand could potentially end the relationship between the two companies. The change would be a return to J.Crew’s previous standoff with Amazon: former J.Crew CEO Mickey Drexler had said he wouldn’t sell J.Crew products on Amazon during the New York Times’ DealBook conference in November 2017.
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Drexler, who is still Chairman of the Board, had disagreed with Brett’s plans for the company, which included launching new brands and further expanding Mercantile in a bid to attract new customers. The retailer’s latest approach seeks to “more diligently manage our balance of investments and expenses,” according to the memo mentioned in the WSJ article.
J.Crew will now focus on growing its lower-priced outlet business, including both brick-and-mortar stores and the web site. Eliminating the Mercantile brand will free up staff to concentrate on the retailer’s 175 outlet locations, which currently include 42 Mercantile stores.
The retailer also plans to exit the home goods business and phase out some of its sub-brands “in the interest of creating greater clarity for consumers,” according to the memo. The changes include a leadership shakeup as well: J.Crew will hire a new head of the outlet business; while Aaron Rose, Chief of Emerging and Value Brands, and Geren Lockhart, Head of Emerging Brands, will leave the company.
What remains to be seen is how the changes will affect the retailer’s current turnaround effort. J.Crew reported an 8% same-store sales increase in Q3 2018, up 17% from a 9% decrease in Q3 2017. Additionally, while the company experienced a net loss of $5.7 million in its latest quarter, this was an improvement over the $18.4 million loss recorded during the same period in the previous year.
