J.Crew is 'rearranging deck chairs on the Titanic' as sales plummet
The company said Monday that sales dropped 6.3% in the most recent quarter, fueled by a 12% decline in same-store sales.
At the same time, operating losses widened to $153 million from a little over $7 million last year.
J.Crew "appears to be financially broken," according to Neil Saunders, managing director of retail consulting firm GlobalData Retail.
"We believe the company is in a parlous state," Saunders wrote in a note to clients Monday. "In this context, recent management changes appear to be little more than rearranging deck chairs on the Titanic."
The company revealed last week that its chief executive and chairman Mickey Drexler would be leaving his position as CEO after 14 years in the role. Drexler will be succeeded by West Elm CEO Jim Brett.
J.Crew also recently parted ways with its longtime creative director, Jenna Lyons.
Saunders said the company's plans to cut costs, improve its clothing designs, and respond faster to customer demands will do little to stem the tide of falling sales.
"Issues like poor value perception linger," Saunders wrote. "Many consumers still see the full price offer as bad value for money - which is why J. Crew constantly has to resort to discounting to sell products."
Many shoppers also still view the company's clothing as too "basic" and complain that quality has declined, he wrote.
In a news release announcing the sales results, Drexler said, "While we are disappointed with our first quarter earnings, we are optimistic regarding the work we have underway to improve our business. We have a clear vision and action plan in place to meet our customers' needs - wherever and however they choose to shop."
J.Crew's issues aren't new: sales have been plunging for years.
Last year, the retailer's total sales fell 6%, to $2 billion, and same-store sales dropped 8% after decreasing 10% the year before. The company has more than $1.5 billion in debt and less than $105 million in cash.
In a recent interview with The Wall Street Journal, Drexler said the retailer's biggest mistake over the last several years is that it jacked up its prices at a time when customers were increasingly cost-conscious.
"We gave a perception of being a higher-priced company than we were - in our catalog, online, and in our general presentation," Drexler told The Journal. "Very big mistake."