J.Crew's Madewell Taking Off

According to The Associated Press, J. Crew CFO Jim Scully spoke about the company's nascent Madewell concept at the Wachovia Nantucket Equity Conference. The retailer will reach a "'go or no go' decision" on Madewell in the second half of this year, and Scully vowed that the concept won't lose $15 million a year going forward. (That's the amount J. Crew will lose in fiscal 2008 as it invests in Madewell stores and its new e-commerce site.) If it's a "go," Scully said, a ramp-up of Madewell wouldn't occur until 2010, given real estate issues.

Madewell was launched in 2006, and it's thus far had a conservative rollout, remaining firmly in R&D territory. According to last quarter's J. Crew conference call, it caters to hip younger women, although some teens shop there, too.

There were eight total Madewell stores last quarter, and J. Crew plans two new ones in 2008. Madewell offers lower price points than its J. Crew concept, which might spell trouble for companies like Gap, Abercrombie & Fitch, and American Eagle Outfitters if J. Crew pursues an expansion. The new e-commerce site could theoretically threaten rivals, too, since its reach extends beyond a mere geographical footprint.

Some rivals may hope Madewell's growth will be a "no go," but I doubt they'll be so lucky. After all, last quarter J. Crew said it was pleased with the concept's performance. Management also mentioned that it's particularly happy with Madewell's performance in the $100 jeans business, even though that hardly seems like an ideal pursuit at present.


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