J. Crew Group Inc. Chief Executive Officer Mickey Drexler thought about jumping into the athletic trend in apparel and decided to sit it out.
Drexler said the company considered making sports and yoga clothing, similar to gear made popular by Under Armour Inc. and Lululemon Athletica Inc. The clothing, which is increasingly being worn by Americans more on the street than in the gym, is propelling sales for some retailers with others rushing to add workout clothing to their stores.
“Where we thought about being in was the active, professional kind of business, but we’re not getting in because we don’t have the expertise to do that,” Drexler said in an interview with Stephanie Ruhle on Bloomberg Television yesterday. “We’re pretty satisfied with the breadth of our product, and now it’s about correct expansion, correct design and quality.”
With shoppers gravitating toward sweatpants and sneakers over jeans and brown shoes, the decision could represent a missed opportunity for J. Crew, considering trends in the broader industry. While total U.S. apparel sales rose 1 percent in the 12 months ended in June, activewear increased 7 percent, according to market research firm NPD Group Inc. Companies have taken notice, with chains ranging from Macy’s Inc. to Urban Outfitters Inc. working to expand their athletic assortments.
J. Crew, known for more pricey basics, had to use promotions to clear seasonal inventory last quarter, hurting profit margins. While sales at stores open at least a year and online rose 4.4 percent last quarter from the same period a year earlier, gross margins slipped to 37.7 percent from 41.1 percent, J. Crew said in a Sept. 4 filing.
This squeeze comes at a challenging time for the industry that’s facing competition from fast-fashion and online-only players. Mall traffic declined 3.1 percent in September from a year earlier, according to researcher ShopperTrak. Drexler said he’s noticed fewer people in malls in the past year, with those who do shop in stores hunting for the lowest prices. To reverse the trend of falling foot traffic, malls need to be more exciting, he said.
“We don’t have too many stores, so I’m pretty happy, but it is a challenge,” Drexler said. “The mall needs to be more compelling and exciting. Where is it different in product?”
Since Jan. 29, 2011, a few months before private-equity firms TPG Capital and Leonard Green & Partners LP took the retailer private, J. Crew has opened 134 stores as of Aug. 2, many located in malls.