J. Crew announces layoffs, other cost-cutting moves
Despite a frenzy of attention after Michelle Obama and her daughters donned J. Crew items at last month’s presidential inauguration, the preppy retailer said Friday that it would reduce its workforce and cut other costs.
J. Crew Group Inc. said it would eliminate 95 positions, primarily in its New York offices and in its field and distribution centers. The cuts represent about a 10% reduction in staffing for the affected departments.
The New York-based company also said it would suspend 401(k) company matching contributions and would eliminate merit-based pay increases for its entire workforce this year.
Those moves, plus cost reductions in its store operations and other areas, are expected to reduce annual expenses by about $40 million.
“As we are all aware, we are operating in a very tough economic environment,” Chief Executive Millard Drexler said. “This has required us to make some difficult decisions, which we do not take lightly but feel are necessary.”
Shares of J. Crew rose 98 cents, or 9.5%, to $11.26. The company operated 226 retail and 74 factory outlet stores at the end of last month.
Betty Chen, an analyst at Wedbush Morgan Securities, called the cuts “a pretty comprehensive reduction program of expenses in multiple categories” that exceeded her expectations.
In recent weeks, retailers in many sectors -- including department store giant Macy’s Inc., home furnishings seller Williams-Sonoma Inc. and teen specialty retailer Pacific Sunwear of California Inc. -- have announced plans to cut costs as consumers continue to spend thriftily.
Companywide cost-cutting will help merchants save money now but could also lead to a stronger retail recovery when the economy improves, Chen said.
“At the end of the day, what retailers and what all of us have no visibility into is consumer spending,” she said. “What is within the control of these management teams is cost. So to set themselves up to be more nimble, we’re seeing J. Crew and all those companies reduce expenses as much as they can to be better positioned.”
J. Crew found itself in the spotlight at the presidential inauguration, when Michelle Obama accessorized her outfit with cashmere-lined green leather J. Crew gloves and daughters Malia and Sasha were dressed almost entirely in custom-made fashions from the retailer.
The company said clothes similar to those worn by the girls that day would be in its fall collection.