J. Crew, a brand that is one of Michelle Obama’s favorites, a brand that is defined by utility; contemporary style and an essence of preppiness has been rumored to be in talks with financial giants, such as Bank of America and Goldman Sachs, to refinance their debt and possibly become a publicly traded company, once again. Just several years ago, J. Crew went private in a $3 billion deal with investment partners, TPG Capital and Leonard Green & Partners. The reason being for such a departure from the trading floor was a decrease in sales. During that year’s third quarter, net income had fallen by 14% due to weaker women’s clothing sales (J. Crew must certainly be grateful for our First Lady’s endorsement). Moreover, stores that were open for at least one year saw their revenue fall by 1%. In terms of the financial sector of the retail industry, J. Crew has been inconsistent; perhaps this is due to the constant shuffling of chairs in the New York based offices.
However, with the revitalization of J. Crew by CEO Millard Drexler and President Jenna Lyons, we are seeing an increase in sales and popularity. Sales last year rose 9%, which was more than publicly traded brands, like Gap and Ralph Lauren. I believe more time is necessary to see the true growth of J. Crew, but if it were to go public, the company would look to mirror the successes of similar brands that are ruling pop culture, such as Michael Kors (trading at $98) and Vince, a newcomer to the public market in 2013 seeing its stock rise 43% in its debut.
Further indicators of a public offering shall be debated with news surfacing about Japan based Fast Retailing Company’s Tadashi Yanai (chairman, president and CEO) wanting to acquire the J. Crew brand. This would align Uniqlo, one of Japan’s largest clothing purveyors and one of my personal favorite shops, and J. Crew under one umbrella, making it an immediate giant in the fashion industry. The $5 billion deal would enable the ambitious Yanai to attract more customers in the U.S. market to the rapidly expanding Uniqlo stores. As J. Crew weighs the option of an IPO, stay tuned for more news on this potential acquisition.
As a prospective investor, pay attention to companies such as these, as their audience is global and quickly growing. I’m certainly a novice when it comes to the financial sector, but I would suggest to invest in what you know. Why would you financially concern yourself with corporations that you yourself are not personally involved with? I love clothing. J. Crew is a staple in my wardrobe and when I walk around my campus I can see its increased popularity. If I were to invest in such a company, I wouldn’t just monitor its daily position in the market. Since J. Crew is a part of my wardrobe, because I like to shop there and because the college style is very much catered to the J. Crew look, I would be able to observe my investment in a much more profound way. Much like the clothing brands I mentioned above, J. Crew is a chic, urban brand while remaining relatively affordable for their followers. I find this especially important for the college crowd, which is why J. Crew’s audience has room to expand. Whether J. Crew is actually seeking to release an initial public offering remains to be seen. The company may not even be a suitable long-term investment option, but for new, young investors and short-term stock options, J. Crew may be viable.