Discussions about the fashion industry thread

[ter1413]

How Menswear Maestro Umit Benan Became One of Milan’s Most Exciting Designers

A tastemaker to tastemakers, the Turkish designer seems increasingly disinterested in the notion of “fashion.”

www.yahoo.com

 

[jah786]

another article about J.Crew
https://www.newyorker.com/magazine/2023/03/27/j-crew-and-the-paradoxes-of-prep
I didn't really know the early history of J.Crew, so that was interesting.

So did accessibility ruin J.Crew?

Or maybe a leveraged buy out with crushing payments and 40% off perpetually ruined J.Crew.

 

[JohnAAG]

another article about J.Crew
https://www.newyorker.com/magazine/2023/03/27/j-crew-and-the-paradoxes-of-prep
I didn't really know the early history of J.Crew, so that was interesting.

So did accessibility ruin J.Crew?

Or maybe a leveraged buy out with crushing payments and 40% off perpetually ruined J.Crew.

I just finished the book that article discusses. It's a fun read. The article highlights most of the key points, but there are some interesting stories about the early years and especially the influence of Emily Cinader/Scott on the brand. Bullock's conclusion is J.Crew's problems were a combination of crushing debt and the rise of fast fashion but also a failure to find leadership in the late 90s/early 00s and after Drexler/Lyons that meshed with the "J.Crew brand attitude" and the legacy employees that instinctively knew what that was.

 

[sftiger]

I just finished the book that article discusses. It's a fun read.

It's next up on my list. Looks really interesting, thanks!

 

[Epaulet]

another article about J.Crew
https://www.newyorker.com/magazine/2023/03/27/j-crew-and-the-paradoxes-of-prep
I didn't really know the early history of J.Crew, so that was interesting.

So did accessibility ruin J.Crew?

Or maybe a leveraged buy out with crushing payments and 40% off perpetually ruined J.Crew.

I think ignoring every single trend in womenswear and refusing to properly market to 70% of their audience didn't help either.

They had the dream team of Lyons doing womens and Partners & Spade / Frank Muytjens doing mens in the first Obama term, but rested on their laurels and squandered it. It's insane that brands like Everlane were so effectively able to eat their lunch as a resource for simple, business-ready womenwear.

So many articles focus on their menswear design, which has been decent and reliable. I think it's something that J.Crew always did pretty well. But womens is what keeps the lights on, and that has been super neglected since Lyons' exit. They always blame it on the "rise of athleisure," but Madewell functions just fine as a women's business and it's not athleisure. It's just a bureaucratic team that figured they'd sell endlessly growing numbers of bland cardigans and unremarkable slacks.

 

[JohnAAG]

I think ignoring every single trend in womenswear and refusing to properly market to 70% of their audience didn't help either.

They had the dream team of Lyons doing womens and Partners & Spade / Frank Muytjens doing mens in the first Obama term, but rested on their laurels and squandered it. It's insane that brands like Everlane were so effectively able to eat their lunch as a resource for simple, business-ready womenwear.

So many articles focus on their menswear design, which has been decent and reliable. I think it's something that J.Crew always did pretty well. But womens is what keeps the lights on, and that has been super neglected since Lyons' exit. They always blame it on the "rise of athleisure," but Madewell functions just fine as a women's business and it's not athleisure. It's just a bureaucratic team that figured they'd sell endlessly growing numbers of bland cardigans and unremarkable slacks.

I don't know if you read the book, but one of the more interesting parts goes into more depth about why that happened and the impact the leveraged buyouts had on decision making about the product (both post Cinader and Drexler/Lyons). There's also some exploration of how Lyons became a sort of liability for the company (J.Crew product designs became so invested in the cult of personality that surrounded her that as soon as she "fell out of fashion" the brand also fell). It also addresses your point about a failure to properly market to their core female market (there's a fair amount of info about the growing disappointment among oinline J.Crew-fan groups and the effect of their disillusionment).

I think the biggest take away for me was just how challenging it is to preserve the core of what made a brand successful (and maintain the internal culture of creativity that lead to that success) while also trying to grow, answer to different stakeholders and avoid going stale. At the low points, the leadership forgot that J.Crew was created in 1983 to sell a carefully curated lifestyle (that vision was baked into the brand from day 1) and instead decided they just wanted to sell as many clothes as possible.

 

[jah786]

I don't know if you read the book, but one of the more interesting parts goes into more depth about why that happened and the impact the leveraged buyouts had on decision making about the product (both post Cinader and Drexler/Lyons). There's also some exploration of how Lyons became a sort of liability for the company (J.Crew product designs became so invested in the cult of personality that surrounded her that as soon as she "fell out of fashion" the brand also fell). It also addresses your point about a failure to properly market to their core female market (there's a fair amount of info about the growing disappointment among oinline J.Crew-fan groups and the effect of their disillusionment).

I think the biggest take away for me was just how challenging it is to preserve the core of what made a brand successful (and maintain the internal culture of creativity that lead to that success) while also trying to grow, answer to different stakeholders and avoid going stale. At the low points, the leadership forgot that J.Crew was created in 1983 to sell a carefully curated lifestyle (that vision was baked into the brand from day 1) and instead decided they just wanted to sell as many clothes as possible.

interesting. I'm going to read the book. looks like many calamities all at once with no room or time to maneuver because of the leveraged buyout.

 

[LA Guy]

I just finished the book that article discusses. It's a fun read. The article highlights most of the key points, but there are some interesting stories about the early years and especially the influence of Emily Cinader/Scott on the brand. Bullock's conclusion is J.Crew's problems were a combination of crushing debt and the rise of fast fashion but also a failure to find leadership in the late 90s/early 00s and after Drexler/Lyons that meshed with the "J.Crew brand attitude" and the legacy employees that instinctively knew what that was.

Lyons brought a very distinctive vision, but it got old, and it's hard to go from one hotness to another. This happens to other ghbrands as well, but in larger comglomerates, say, LVMH, brands seem to cycle through various brands being hot, and some not, and in the meantime, the not hot brands go into a completely new direction under a new creative director, and come back hot again. JCrew doesn't have the luxury of that type of cycling.

And of course, as previously mentioned, the continuous discounting made necessarily by their debt obligations is an equal if not greater contributor to their rolling disaster as a company. Not sure why hostile takeovers and leverage buyouts are even allowed. What is the fraction of those cases that turns out well?

 

[Texasmade]

Not sure why hostile takeovers and leverage buyouts are even allowed. What is the fraction of those cases that turns out well?

0.0

 

[jah786]

0.0

"Not sure why hostile takeovers and leverage buyouts are even allowed. What is the fraction of those cases that turns out well?"

a good question posed by @LA Guy and answered by @Texasmade. agree with the statement 0.0.

 

[sushijerk]

Throw @LA Guy in front of congress with the tik tok ceo because we obviously have a commie over here.

 

[gdl203]

Not sure why hostile takeovers and leverage buyouts are even allowed. What is the fraction of those cases that turns out well?

Those are two separate things. Hostile takeovers are inherently more expensive and harder to integrate (culture clashes, misaligned incentives...). They can be successful, of course, depending on how you define it.

LBOs on the other hand are, on average, excellent returns for shareholders. Some of them go bust, of course - it is a higher risk investment, but not only as a result of leverage. But, on average, PE returns vastly outperform public equity AND are on aggregate less volatile. There is usually a strong alignment of interest between management and sponsors, as management typically has a significant chunk of equity. LBOs do typically turn out well, they accelerate growth and optimize company margins. It's like having experts in every aspect of your company from manufacturing to logistics, to sales and marketing, provide consulting services (for free) for 5 years.

Or maybe you meant something different by "turn out well"?

Corporate mergers, on the other hand, rarely add shareholder value.

I'm wondering why you think either of those things should not be allowed.

 

[Texasmade]

Those are two separate things. Hostile takeovers are inherently more expensive and harder to integrate (culture clashes, misaligned incentives...). They can be successful, of course, depending on how you define it.

LBOs on the other hand are, on average, excellent returns for shareholders. Some of them go bust, of course - it is a higher risk investment, but not only as a result of leverage. But, on average, PE returns vastly outperform public equity AND are on aggregate less volatile. There is usually a strong alignment of interest between management and sponsors, as management typically has a significant chunk of equity. LBOs do typically turn out well, they accelerate growth and optimize company margins. It's like having experts in every aspect of your company from manufacturing to logistics, to sales and marketing, provide consulting services (for free) for 5 years.

Or maybe you meant something different by "turn out well"?

Corporate mergers, on the other hand, rarely add shareholder value.

I'm wondering why you think either of those things should not be allowed.

LBO's are great for shareholders as they get paid out and the buyer as they do nothing but extract money from the company. They're normally bad for the company and employees because all the money is extracted.

I work for a company that was part of a LBO from a PE firm back in the day. We got free of the PE firm in 2018 and are systems are forever fvcked because the PE firm didn't do anything but suck our cash by charging us management fees.

 

[JohnAAG]

And of course, as previously mentioned, the continuous discounting made necessarily by their debt obligations is an equal if not greater contributor to their rolling disaster as a company. Not sure why hostile takeovers and leverage buyouts are even allowed. What is the fraction of those cases that turns out well?

But, on average, PE returns vastly outperform public equity AND are on aggregate less volatile. There is usually a strong alignment of interest between management and sponsors, as management typically has a significant chunk of equity. LBOs do typically turn out well, they accelerate growth and optimize company margins. It's like having experts in every aspect of your company from manufacturing to logistics, to sales and marketing, provide consulting services (for free) for 5 years.

Specific to J.Crew, I think the reasons why the company took on outside financing circa 1997 are interesting. The book makes it pretty clear that Emily Cinader was highly motivated to find a way to buy out her father so he'd retire and she could take control of the company. Of course that didn't work out exactly as planned, since the guidance of the TPG experts (who charged huge management fees and definitely weren't free) clashed with the company culture Cinader had created. Seems like there was a lot of ego and conflicting priorities at play. I'm not sure how rare that is in situations like this where founders are involved.

 

[gdl203]

LBO's are great for shareholders as they get paid out and the buyer as they do nothing but extract money from the company. They're normally bad for the company and employees because all the money is extracted.

I work for a company that was part of a LBO from a PE firm back in the day. We got free of the PE firm in 2018 and are systems are forever fvcked because the PE firm didn't do anything but suck our cash by charging us management fees.

Your anecdotal evidence nonetheless, if what you are saying was universally true (or even on average, true), there would be no possible successful exit for those sponsors. You surely know that PE firms do not make their return on management fees but on their exit. If a company is left in worse shape than at the time of the buyout, who will line up to buy it? the sale or IPO would be greatly jeopardized.

So, yes, the sponsor will tend to maximize cash flow for the purpose of debt service and shareholder returns, but that does not necessarily mean it fvcks the company. Even if you feel that is what happened to yours (and many many others, for sure). A return-oriented management team at a private or even public company would maximize cash flows too.