The Story Of How J.Crew Became The $3 Billion Dollar Company Everyone Was Fighting Over


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The growth journey of retail powerhouse J.Crew is inspiring.But equally amazing is that shareholders almost rejected a private buyout of the company by TPG Capital and Leonard Green & Partners worth $2.86 billion because they were upset with CEO Mickey Drexler and thought they could push for more share worth.

Everyone is fighting over the preppy retailer, known for its reliable sizes and bright colours, because it came through the recession successfully unlike many of its competitors and has driven a massive brand expansion in the past five years with the launch of multiple new lines.

Drexler said “It’s about product, it’s about quality, it’s about design, it’s about service, it’s about creativity.”


The popular store started off as a low-priced women's outfitter that made sales door to door

It grew from a door-to-door clothing operation called the Popular Sale Club founded by Mitchell Cinader and Saul Charles in 1947 to a company valued at $2.78 billion with total revenues of $1.57 billion in 2009.

It jumped on the booming 80's catalogue retail market and established a loyal brand following

In 1983 the first J.Crew catalogue was mailed. The 80's were a very profitable time for catalogue retailers like Lands' End and L.L. Bean and the owners of the Popular Club Plan wanted a slice of the sales.

They changed the name to J.Crew in an attempt to be preppier. The catalogues were 100 pages and were sent four times a year.

Customers loved that the brand hit upon that oh-so-popular 80's preppy, yuppie aesthetic but at more of a bargain than Ralph Lauren. The catalogue usually featured pictures of 20-something aged friends gathering for a house party in Waspy setting like Maine or Nantucket which perfectly appealed to its upper middle class customer base.

Sales increased from $3 million to $100 million in the 1980's and customers growth spread like wildfire

With the success of the first catalogue, J.Crew launched a second catalogue called Clifford & Wills that featured cheaper women's clothing.

Despite the company losing two executives who went off to start a rival competitor the company had annual sales of $100 million by 1988.

When the catalogue industry slowed the company regrouped and expanded into retail stores

It already had an established following from its catalogue business and it would now be able to reach customers that did not shop by mail.

The company set up the retail store operations as a separate unit, J.Crew Retail, from its catalogue sales. It brought in Arnold Cohen of Gucci to run the new stores. It made about 60-70% of its merchandise offered in the stores not available in the catalogues to give J.Crew Retail a head start.

In 1989 the first store opened in South Street Seaport in New York and then expanded into Massachusetts and California.

J.Crew had $70 million in retail sales by 1992.

When sales slowed in the late 90's the company ramped up its e-commerce and entered a leveraged buy-out deal

In 1997 Texas Pacific Group invested about $560 million in the company and helped give the company more exposure.

The company has been commended for its reliable sizes that allow customers to easily shop online.

By 2000 Texas Pacific had a 62% per cent stake in the firm, J.Crew management had 10% and Emily Cinader Woods, chairman and founder with her farther Arthur Cinader, had the rest.

In 2003 J.Crew brought on dynamic CEO Mickey Drexler who pushed for expansion and new partnerships

Under Drexler, dubbed the 'merchant prince', J.Crew started working with global fabric mills and craftsmen as well as brands such as Jack Purcell, Timex, Thomas Mason and Red Wing.

It launched new lines including crewcuts for kids, J.Crew Weddings & Parties and J.Crew Collection which features exclusive and limited-edition items.

He also brought in pricier items to give the brand more high-brow appeal.

In the past few years the company has opened specialty boutiques such as The Liquor Store and The Men's Shop which feature men's clothing and No.1035 on Madison Avenue.

It also opened the edgier Madewell store in 2006. I It targets women ages 18 to 40 and it launched its web site, last summer. DJ Alexa Chung is the company's spokeswoman.

In 2006 the company went public and its stock doubled in two years

It was one of the strongest IPOs of the year jumping 28% on its first day.

TPG sold its majority stake when the company went public.

It's international expansion has been slow but steady

The company started marketing itself to Canada back in 1991 but it only opened its first store in Ontario last year.

The company has catalogue customers in Asia and Europe but has not yet opened an outlet in these regions.

Drexler is rumoured to be planning a big international expansion over the next few years. It just partnered with Web site Net-A-Porter which distributes fashion in 170 countries.

It has a cult-like following and celebrity fans including First Lady Michelle Obama

There are multiple blogs devoted to J.Crewaholics as they are called to let them know about celebrities who shop there as well and promotions.

J.Crew has taken on a cultural status that connotes a classier lifestyle and when Michelle Obama wore it to her husband's inauguration sales for that month more than doubled.

Celebrities such as Katie Holmes and Lauren Hutton have also endorsed the brand.

J.Crew's shareholders almost rejected the buyout but going private is expected to help growth strategies

The planned sale of the company, announced in November, led to several shareholder lawsuits over the share price and CEO Mickey Drexler's missteps. Drexler had been in talk with potential bidders for almost two months before telling the board.

Shareholders, including Paulson & Company, Fidelity Management and BlackRock, were being advised by Institutional Shareholder Services to push for a better share price but they agreed on $43.50 per share in cash.

McMillan Consultancy analyst Neil Stern said 'We would expect to see more clarity around growth strategies, particularly around multichannel and determining future growth formats.'

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