Wendy Sherman peered into the J. Crew store at The Mall at Short Hills, and frowned.
“It’s all really boxy. Not really flattering,” Sherman, a literary agent from nearby Livingston, New Jersey, said on a recent afternoon. One mannequin jauntily wore a bright pink jacquard shell over a pair of blue ikat-patterned shorts while another paired an oversize bright blue sweater with a blue-and-white horizontal striped skirt. “I mean, would you wear it?” she asked.
These days, Sherman’s glum assessment pretty much sums up many of the problems facing the retailer. Boxy styles. Strange sizing. And customers who loathe paying full price when many items are either quickly discounted or can be bought online for less.
On Wednesday, the reckoning began amid reports that J. Crew was laying off 10 percent of its staff. The announcement of the reductions came just days after the J. Crew Group reported another quarter of bad news. Same-store sales for its flagship chain fell 10 percent from a year ago. Profit margins are shrinking. Because of more than $1 billion of various charges and write-downs in recent months, losses are swelling and executives are warning that things are not expected to improve anytime soon.
Just last week, as J. Crew was posting its bad numbers, the Council of Fashion Designers of America celebrated the company’s chief executive, Millard S. Drexler, honoring him with a special industry award at Lincoln Center. Called “the Merchant Prince,” Drexler, 70, known as Mickey, has seen many a leopard print come and go in more than four decades in the business.
But J. Crew’s problems run deeper than a bad sweater or two. Thanks to a leveraged buyout of J. Crew that Drexler and two private equity firms orchestrated more than four years ago, the company has $1.5 billion in debt on its books.
“He’s got all of the challenges that you get with running a troubled retail business. Now he has a troubled retail business with lots of debt,” said Howard Davidowitz, a longtime retail consultant.
J. Crew has lots of company. Abercrombie & Fitch has been hit by slumping sales and its stock is trading at six-year lows. Same-store sales are down at Gap Inc. Aéropostale fights to survive.
Behind the downswing in fashion retailing are two trends that analysts say J. Crew either missed or is playing catch-up on.
The retailer has completely lost out on the growth in so-called athleisure wear. Retailers including Lululemon, Ann Taylor and Old Navy have introduced yoga-pants-as-weekend-wear lines. Not J. Crew.
But the bigger challenge afoot is that the rise of fast-fashion chains like H&M and Zara has improved the quality of low-priced goods, making J. Crew’s more expensive clothes less appealing.