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Fate of J.Crew during/after COVID-19

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    Fate of J.Crew during/after COVID-19

    Knowing J.Crew is already struggling with sluggish sales and a mountain of debt, how do you think they will come out of the outbreak?

    I'm worried that this just might be the killing blow for them. People are already cutting spending on non-essential items, like clothing. If the economy falls into a longer term recession, I can see a lot of people more permanently downgrading their clothing budget from J.Crew to Old Navy.
    Other upscale/semi-luxury brands like BR and Bonobos will suffer too, but I don't think they are as vulnerable as J.Crew.

    #2
    I read an article somewhere that said they projected j crew to be out business before this is over

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      #3
      You are right to be worried. They have a $4 million debt payment due at the end of the month and $1.3 billion due by 2022. They'd planned to sell Madewell but asset sales aren't the best proposition right now. Their best bet might be to stop paying rent in the hope that the government will throw retail a lifeline in order to protect the commercial mortgage backed securities market. If they go bankrupt now, they can't even have a liquidation sale. I'd look to cash in my gift cards.

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        #4
        What are the odds J. Crew actually disappears, though? It seems that the brand and associated IP are too good/valuable to simply disappear. Isn't more likely that they declare bankruptcy, after which a creditor or someone else acquires the brand and runs with it, minus the debt currently dragging them down?

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          #5
          I feel like I've spent the past 10 years reading stories about how J Crew is going out of business, and yet somehow they are still around. If I had to guess, I'm sure they'll still be here after all of this is over too.

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            #6
            Originally posted by facelessghost View Post
            What are the odds J. Crew actually disappears, though? It seems that the brand and associated IP are too good/valuable to simply disappear. Isn't more likely that they declare bankruptcy, after which a creditor or someone else acquires the brand and runs with it, minus the debt currently dragging them down?
            I second this. This is certainly the most realistic scenario.

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              #7
              ^^ i agree. I cant see a brand with that much recognition just vanishing.

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                #8
                Anyone wanna go in and start a Go Fund Me? lol

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                  #9
                  Consider Toys'R'Us (relaunch in 2019 consisted of two stores), Modell's Sporting Goods (opened in 1889, closed all 115 US stores this March), Circuit City (rights to the name were sold at one point for $14 million, used only online to drive business to Tiger Direct).

                  In almost every buyout case that isn't mostly a real-estate play (buy the chain to get the store locations), even if the bankruptcy and sale frees the company of the crippling debt the resulting entity bears little to no resemblance to the original operation.

                  J.Crew doesn't have a good real estate portfolio, and its presence is largely in malls or frontages with shrinking demand for space. If it were purchased out of bankruptcy I'd expect it would end up like Kenmore or American Apparel (bought by Gildan for $88 million without any stores) a relatively cheap name to put on products being sold by someone else.

                  J.Crew doesn't really compare to Forever 21, which has a deal in place to sell itself to its landlords for $81 million that is waiting approval. Forever 21 is still owned by its founders, so isn't drowning in debt from being purchased by a third-party. Bankruptcy in this case was a way to get out of hundred of unprofitable markets (it exited most countries entirely) and renegotiate leases where it was still making money (some of the US, Mexico and Latin America).

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                    #10
                    I'd be sorry to see them go but it's tough out there for everyone right now. I've been shopping J Crew since roughly 1988...so three decades and counting. Mostly it was casual clothing in the late '80s and early '90s. Then I kind of ignored them for about a half decade - basically when Frank Muytjens turned them into a menswear powerhouse with reasonably affordable well constructed suiting and a great casual wear line. I could maybe see the brand surviving as a boutique online menswear brand, kind of like Flint and Tinder or some of the other labels sold by places like Huckberry and Stag Provisions. The weak link for the past decade has been their women's line. They could stand to adjust their constant discount code strategy but their menswear is still pretty Dappered wheelhouse. I realize a lot of guys here have moved on to SS and S&M for suiting, but one needs more than suits and sportcoats, and SS (at least the Napoli fit) just doesn't suit my frame the way J Crew suits do. Have not tried S&M yet because I'm pretty well set on suits and sport coats, but will give them a shot when next I'm in need. I still hit J Crew for casual wear.

                    Most of my suits and sportcoats are still from J Crew, I just wait for a code. The half canvass construction + generally great fabrics + a decent discount make them a really good buy, and I don't have to worry much about tailoring since I know they'll fit me with basically just sleeve length adjustments.
                    “Clothes make the man. Naked people have little or no influence on society.” – Mark Twain

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                      #11
                      I'd be sad to see JC go. Besides The Gap, JC is a staple of my wardrobe.

                      I don't think they'll go away completely though. As as stated above, the IP associated with JC is too valuable to let slide into nothingness. If JC does slide in to bankruptcy, I can see someone investment firm or equity capital firm purchase the name and then bring the store back. Either as an online only play or a boutique type brand or something else.

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                        #12
                        Originally posted by Galcobar View Post
                        Consider Toys'R'Us (relaunch in 2019 consisted of two stores), Modell's Sporting Goods (opened in 1889, closed all 115 US stores this March), Circuit City (rights to the name were sold at one point for $14 million, used only online to drive business to Tiger Direct).

                        In almost every buyout case that isn't mostly a real-estate play (buy the chain to get the store locations), even if the bankruptcy and sale frees the company of the crippling debt the resulting entity bears little to no resemblance to the original operation.

                        J.Crew doesn't have a good real estate portfolio, and its presence is largely in malls or frontages with shrinking demand for space. If it were purchased out of bankruptcy I'd expect it would end up like Kenmore or American Apparel (bought by Gildan for $88 million without any stores) a relatively cheap name to put on products being sold by someone else.

                        J.Crew doesn't really compare to Forever 21, which has a deal in place to sell itself to its landlords for $81 million that is waiting approval. Forever 21 is still owned by its founders, so isn't drowning in debt from being purchased by a third-party. Bankruptcy in this case was a way to get out of hundred of unprofitable markets (it exited most countries entirely) and renegotiate leases where it was still making money (some of the US, Mexico and Latin America).
                        Yes, but J. Crew is very different from Circuit City or Toys'R'Us (and I'm assuming Modell's, though I'm not familiar with that chain)--those are/were primarily resellers of third-party products. Without them, the same products are still made and sold. J. Crew's value is in its designs, and I just don't see that disappearing without someone picking it up. J. Crew is even different from Forever 21 - their value is in being the fastest to copy designs and sell them cheap.

                        Someone will find a way to make the J. Crew brand profitable. Perhaps just on a different scale or in a different format than it currently operates (as [MENTION=13399]DocDave[/MENTION] mentioned).

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                          #13
                          I don’t understand how the same threads that were apocalyptic about the sale of Allen Edmonds and incredulous about Walmart buying Bonobos seem to think JCrew will find a new owner and just carry on.

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                            #14
                            Originally posted by DrewCPA View Post
                            I don’t understand how the same threads that were apocalyptic about the sale of Allen Edmonds and incredulous about Walmart buying Bonobos seem to think JCrew will find a new owner and just carry on.
                            We are many, as are our opinions.

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                              #15
                              So you can think about the different pieces of the business. They have retail stores, a pretty decent design team (even with Frank Muytgens gone, I kinda like their stuff and still buy it), a supply chain, and an internet operation. I go to their stores, including to their dedicated menswear ones, but I buy most of my JCrew stuff online. I wonder what fraction of their sales are online vs in-store.

                              One way to go would be to file for Chapter whatever, close many/most of the mall stores, but preserve the designers and internet side of the house. There is going to be so much turmoil caused by current events that, who knows, maybe they'll get off easy. After all, where else are investors going to put their $$$?
                              Mark

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