J.Crew has gotten a lot of flack from customers for how pricey much of its merchandise has gotten in the last few years.
So to remedy that, the fashion retailer will open the first location in a new chain of lower-priced stores called J.Crew Mercantile later this month, the company announced on Friday. The first store, to open in a shopping center in Dallas in late July, will feature the same products specifically designed for and sold at J. Crew’s factory locations.
“J.Crew Mercantile stores will feature a collection of value-driven merchandise with classic J.Crew style for women, men and children,” the company said in a statement.
The move comes as J.Crew’s sales have fallen sharply for several quarters in a row, in part because of fashion misses, but also in part because the retailer has gone too high end, sometimes stepping into outright luxury, a strategy that has alienated its legions of women shoppers that turn to it for well-made, stylish basics. Last month, J.Crew announced 175 layoffs, or 10% of jobs at its New York headquarters, and reported comparable sales at its flagship brand fell 10% in its most recent quarter. It has also taken $1 billion in write downs in the last year to reflect the erosion of its namesake brand. (Its smaller Madewell chain, in contrast, is growing by leaps and bounds.)
But J.Crew will be stepping into very competitive waters. Gap Inc’s (GPS) Old Navy brand, a $6 billion a year division in the U.S., has been outperforming the rest of that company, while retailers like Target (TGT) and Kohl’s (KSS) are moving to improve their low-priced apparel offerings.
It will also be competing against itself: though J.Crew CEO Mickey Drexler last month again bemoaned shoppers unending appetite for discounts, the company is planning to add 21 factory outlets, which sell J.Crew clothes at lower prices, to its current fleet of 139 discount locations this year. It is not immediately obvious what Mercantile will offer that shoppers can’t already get at the outlets. The company has not said how many stores the Mercantile chain will grow to.
Still, J.Crew CEO Mickey Drexler has overseen the launch of a discount brand before. As a top executive at Gap in 1994, he launched Old Navy with 40 stores: it now has more than 1,000 locations.