J. Crew Company

J. Crew Company

Clothing industry is one of the world’s fastest growing industries today. This can be attributed to the continuous demand for the clothing products due to the rise in population. Many organizations have, therefore, appeared in this industry in order to exploit this profit making opportunity. However, this has also led to increased competition among the companies which strive to outdo each other. These include: Banana republic, Ann Taylor Loft, Ralph Lauren Corporation, and J. Crew. This write up is focused on J. Crew Company and its core business activities. The company’s current financial performance, analysts’ views, competitors, problems, and opportunities shall be discussed in this paper.

According to Spencer and Rose (2010), J. Crew is an American multi-brand and multi-channel company that is based in New York, USA. It is a nationally recognized apparel and accessories retailer that is known for stylish products, good quality, and proper customer service. The products which it offers range from those for women and men to children clothing. These clothing include swimwear, outwear, belts, and loungewear. Apart from the clothing, it also offers bags and even hair accessories. It was started in 1989 by opening its first retail outlet in the south street seaport in Manhattan. Today, the company has more than 330retail stores throughout the U.S. with about 13,100 employees. Due to its diversified products, this company falls in various industries, which include the clothing stores, retail sector, shoe stores, non-store retail, internet, and mail order retail industries.

General Focus and Other Anecdotal Information

The company’s general focus has been to create product lines with high quality design, fabrics, and craftsmanship. It has done this by continuously researching into the market and providing what the consumers need. Additionally, it has creatively made unique products which are appealing to the consumers. The company has also tried expanding the sales of its products to as many places as possible. Finally, it has strived to be a great competitor in the industries in which it operates. For instance, in 1991, the company adopted a new marketing development strategy and expanded its operations into Canada, which boosted its sales since the consumers’ response was good. In 1992, it also intensified the expansion to the international markets by hiring a vice president, whose work was oriented on the international development. And this was also successful since the company was able to send catalogues via e-mails to customers in Japan and Europe (Spencer & Rose, 2010).

J. Crew’s expansion efforts have continued even up to the recent times when competition is becoming very high in the clothing industries. For instance, in the year 2011, the company opened its first international store in Toronto, in Yorkdale Shopping Centre. And in 2012, it further expanded in Canada by opening new locations, which included Edmonton, Vancouver, and Toronto. It is also important to note that the company has always created various different products so as to enable it keep and entice more consumers (Spencer & Rose, 2010).

Current Financial Performance and an Overview of their Core Business

Even though the company focuses on the provision of quality products to the consumers, it is a profit making institution and one of its key purposes is to make profits. Therefore, its financial analysis is of great interest to its stakeholders. According to the latest financial reports of the second quarter of the fiscal year 2012, the company posted the following results in its financial statements. Its total revenues rose by 21% as compared to the previous year’s quarter, while the sales rose by 14%. Its gross margin was reported to have increased to 45.1% from 36.5% in the second quarter of the previous year. However, its selling and administration expenses rose to $174.7 million as compared to 2011 comparable period when it was $ 146.4 million. This was due to its increased income generating and expansion activities. On the other hand, its operating income rose from $ 49.8 million in the last year’s second quarter to $ 62.1 million in 2012. However, it is noted that the operating income of the last year was negatively impacted by the amortization of inventory step-up and other litigation costs which are related to the business transactions (Newswire, 2012).

On the balance sheet highlights, it is noted that its cash and equivalents were $ 213.4 million as compared to 2011 second quarter which had $ 1588 million. The inventories for 2012 quarter were $ 282.8 million, and in 2011, it was $ 260.1 million. It can, therefore, be generally noted that the company’s financial performance was in constant increase between 2011 and 2012 second quarter. This can be attributed to its commitment to reaching more people internationally by doing a thorough online marketing and by creating more unique products which compete favorably in the market.

The core business of the company is to sell the clothing to the consumers; some of which they design and make, while others they get directly from the manufactures and then stock in their premises, which are established throughout America and other places outside America (Newswire, 2012). From the constant analysis of the company, Jon Springer noted that J. Crew was one of the fashion industry’s biggest success stories growing a multichannel operation valued at $ 1 billion. However, there was even a doubt whether it would celebrate its 21^st birthday. Yet, with the appointment of former Gap CEO Drexler, there are hopes that the company will continue to expand.

Competitor Posing Threat to J. Crew

According to Hoskisson, Ireland, and Hitt (2009), J. Crew as a company has very many competitors in the industries within which it operates. It competes primarily with specialty retailers, higher-end department stores, and catalog retailers that provide substitute goods to its products. These competitors include the Banana republic, Ann Taylor Loft, Ralph Lauren Corporation, and so on. Pride, Hughes and Kapoor (2008) further state that Ralph Lauren is one of its greatest competitors, which is also located in the United States, New York. It is a lifestyle company and fashion retailer that started in 1967 and focuses on high-end clothes for men and women, accessories, footwear, bedding, towels, and also runs line restaurants. This company has also expanded its business internationally and has got about 630 stores internationally.

It, therefore, poses a lot of competition threat to J. Crew since it has more branches internationally, which means that it can reach much more people than J. Crew can. Another threat is that it realizes more returns from the other restaurant business, which can be used to boost the clothing business, unlike J. Crew, which greatly depends on the clothing business for income. Lastly, it is already known by the consumers more than J. Crew, which was started after it, and therefore, J. Crew has to work better in order to acquire brand loyalty.

Core Problem and Opportunity of J. Crew

Based on my research, the major problem facing J. Crew is competition. Competition is very high in these industries since there are many local and international companies and small retail businesses that offer substitute products to the ones which it offers. It is a problem since it reduces the number of customers which can be captured by J. Crew, and hence lowering the sales of the company. On the other hand, J. Crew has a great opportunity of expanding its business worldwide. This is because there is an ever growing need for clothing products and some areas still lack sufficient distributors.

Conclusion

In conclusion, J. Crew is a company which has a great potentiality of growing since it has varied products which target different groups of consumers. It is also doing well financially since it showed improvement in its 2012 fiscal year’s second quarter. However, it has to make more efforts in order to outdo its competitors.