Tuesday, November 25, 2008

Highlights of J.Crew 3rd Quarter Fiscal 2008 Results

J.Crew released today their third quarter fiscal results (click here), the following are some interesting financial figures :
  • Revenues increased 9% to $363.1 million.
  • Store sales (retail and factory) increased 7% to $250.9 million, with comparable store sales decreasing 3%.
  • Direct sales (Internet and Phone) rose by 13% to $101.8 million. (Direct sales increased 36% in the third quarter of fiscal 2007.
  • Gross margin decreased to 41.6% of revenues from 45.6% of revenues in the third quarter of fiscal 2007.
  • Operating income decreased 32% to $32.5 million, or 9.0% of revenues, compared to $47.7 million, or 14.3% of revenues, in the third quarter of fiscal 2007. Operating income in the third quarter of fiscal 2008 includes approximately $6 million of costs related to Direct channel systems upgrades.
  • Net income was $19.0 million, or $0.30 per diluted share, compared to a net income of $26.8 million, or $0.42 per diluted share, in the third quarter of fiscal 2007.
I listened to the conference call today (although I missed the first half an hour). There were some highlights that I thought were interesting to share:
  • Some stores were offering deep discounted prices (e.g. 50% off sales, 75% off original price), which did devalue the brand a bit
  • Mickey recognized that customers (both loyal and not) are not buying at full price- even stating "why trust it won't be on sale next week"
  • In order to reposition J.Crew as a full priced brand ("when customers will trust prices again" as Mickey stated), they will need to look at inventory management and quality of goods
  • Mickey got slightly defensive when an analyst questioned J.Crew's inventory issues
    (this was interesting, because I have not seen or heard him lose his cool before)
  • J.Crew has been driving traffic to the web, not constraining it
    (which makes sense considering all those email promotions they have been sending lately)
  • There are still great sellers at J.Crew: the ruffle blouse, graphic tees with "fabulous embellishments", matchstick denim, cashmere cardigans. Also, customers are still responding to color. :)
  • Mickey is finding that differentiation of product is more important than ever, especially since customers aren't buying an item in 10 different colors anymore
  • Mickey briefly mentioned how Michelle Obama helped with their image, but didn't get specific (in figures)
  • Future J.Crew catalogs and website will include more definitions to better educate customers about fabrics and materials
  • According to Mickey, J.Crew's core prices are not that high
  • 85% of their goods are under $100 ($18-78 totals are the largest share of making money)
UPDATE: "Thanks!" to Naomi who let us know that the transcript of the call is available (click here to read).

If you listened to the conference call, what else did you find interesting? Did I miss something, if so please share. :) What are your thoughts on the above points? What do you think J.Crew should do next?

102 comments:

  1. “A sea-change has occurred with the consumer,” declared J. Crew chair and CEO Millard Drexler in the company’s press release. “In the near term we are not immune to the significant challenges we are all facing in retail in these unprecedented times.”

    I thought this phrase from Barron's online was interesting. At least he has come to recognize that J Crew is not immune in the economic downturn.

    J Crew stock was down in after hours trading- 10.01

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  2. Anon at 5:59PM: I thought that quote was a good one too! :) It is definitely true too, every business is impacted by the current economic recession.

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  3. Thanks for sharing this Alexis. I wonder what their plans are to address this proposed issue of customers not purchasing an item at full price because they assume it will go on sale. Will they change the way they do their sales? I also find it interesting that a 50% discount is considered a devaluing of their merchandise. I think when you need to move your merchandise and a chunk of your customers are hit by tough economic times, steeper sale prices are not a devaluing as much as they are a smart business move.

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  4. According to Mickey, J.Crew's core prices are not that high & 85% of their goods are under $100 ($18-78 totals is the largest share of making money.

    While I agree that this is true, I think that $38 is a little steep for a ribbon belt. Merino sweaters IMO were priced high as well- $88 for the rose chiffon cardi was insane to me. It's merino wool not cashmere and it is thin!

    Just b/c there are many items priced under $100 doesn't mean much to me if the item is overpriced to begin with.

    A $100 is a lot of money for some people and I take insult to the fact that Mickey said this.

    Sorry to be so neagtive but sometimes JCrew makes me mad.

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  5. Like Nikki, I find it interesting that marking an item down 50% is devaluing their merchandise. If anything I would think it would make it more attractive. I don't think I have ever said, "JCrew marked that velvet ecole down 50% and now I think it's worthless b/c it's on sale."

    Thanks for posting the info about the earnings call Alexis!

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  6. i agree it's hurting the brand when EVERYTHING goes to sale. i used to buy full price but won't now only because I know it will go on sale in a week.

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  7. Totally OT...this is a question about sizing. I wear a size 0 or 2 in skirts and pants, but a medium in sweaters. If you wear these sizes what do you order in outerwear? Thanks in advance!

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  8. I really do not like the implication that these wonderful 50% sales will cease to be- though in this climate I'm sure they'll have to be marking down whether they like it or not.

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  9. Alexis: thanks for posting this as I don't have time to tune into these things.

    I agree alot of the items within the $100 range are many times over-priced. Think about the high priced t-shirts, belts, shoes, bags, sweaters,etc.

    I hope JCrew will continue the uniqueness and quality of their brand. All these other stores had discounts and I did not find anything that appealed to me. JCrew has the Turkey promo and I'm all over it.

    I hope they don't stop sales as I would rather sit and wait for a sale item from JCrew than buy something I don't love from another store.

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  10. Wes: wouldn't you order the outerwear to fit your shoulders and/or upperhalf? I would think so since it sounds like you are smaller on the bottom half.

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  11. I believe the comment was that significant markdowns of 50+% devalued the BRAND (not the merchandise) meaning that J.Crew would come to represent a discount retailer rather than a retailer of of quality, high-designed merchandise at affordable (vs. high-end retailers i.e. Saks) prices.

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  12. Wes: You are probably a four or a six. My jacket is a 4 and I have a lot of medium sweaters.

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  13. Am I the only one that's going to make the joke that the increased revenue is "shipping." Because you know it doesn't cost as much as they charge to send a lot of their merchandise.

    I know some anon told people to stop complaining about this and were throwing out business terms, but I have another one for them: price elasticity. If they effectively lowered the price of the item by waving shipping then they would sell more product and move more inventory, which would likely increase, not decrease, their profits.

    Thanks for posting this info, Alexis.

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  14. Exactly Anon 6:44. Markdowns can be a very smart business move, but uh, devaluation is a technical term... if J Crew reports inventory and profit margin in terms of retail price, then a markdown is a actual "devaluation" that shows up on their books...

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  15. Haha, love it Ameilia. One time when I was on the J.Crew site I got a link to a survey they wanted me to take. Literally I wrote one sentence in the additional comments section about shipping being too high and got a 4 paragraph email in response from CS. All about how we don't understand that its not just mailing costs but warehouses etc. Very defensive email. I thought it was funny and didn't expect anything else from J.Crew. They sure do love their shipping fees...

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  16. Big discounts are everywhere, not just at J.Crew. Everyone is scared, and rightfully so. J.Crew's discounts are in keeping with the current climate. It doesn't devalue the brand to me, the loyal customer, to see the store keep pace with other retailers--I want to shop at J.Crew, and the discounts make the merchandise more available to me, so I'll go there rather than somewhere else. I know 50% sales can't last forever. But it sure is nice to get a bargain in these tough times.

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  17. I really like this post and am very interested in how a company like J.Crew positions itself in the market.

    Like so many I enjoy getting a swinging deal, but when something is on sale too often what's the point of full pop? Many of my favorite items are ones that I paid full pop for and then sold out never to go on sale. Is there a connection? Or is ti simply all in one's mind.

    J.Crew needs to be seen in the consumer mind as a brand to pay full pop for since it doesn't go on sale and items usually sell out at full price.

    Lower inventories will be common soon along with better quality. Or J.Crew will be the next Gap or Old Navy.

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  18. The discounts in my b&m were insane today--I got a pair of moccasins, two cardigans (dream and glass button), a sherpa hoodie, a pair of wool gloves (with leather palms), and a secret wash man's plaid shirt for $93.00. What was kind of scary was that it should've been bedlam with those kinds of prices, but it wasn't at all. I hope Black Friday brings out more shoppers.

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  19. I think one of the biggest issues I have with JCrew is their shipping prices. They have to be the only online retailer that doesnt offer their card members free or reduced shipping always without a coupon. Plus their shipping prices are outragous. Some of us (including myself) do not live close to a store so I have to shop online or through the catalog.

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  20. Are you a manager, Alexis?

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  21. J Crew has always had good sales at the end of the year. It doesn't make me think less of them. I tend to buy more when things are on sale. I have been shopping with J Crew for several years and 99% of the time, I always wait for the item to go on sale. The economy is really bad this year so it makes sense that they need to do deep discounts.

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  22. Well, Mickey can think they're not gonna 'devalue' their stuff, but, the reality is, consumers will shop where their $$ goes the farthest, and JC merchandise is not that different than Banana Republic or Ann Taylor, etc. ~ so, as a retailer, you need to do what you need to do, mark it down pronto.

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  23. I admit to not being a full-price buyer and don't have a problem with it. I use JCG as a top, shoe and accessory emporium, so I can wait for the sales. A sale does not devalue the brand for me; we are not talking Hermes, which is one of the top luxe brands out there.

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  24. What a great post, Alexis. Very interesting!

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  25. Actually, Ameilia, you can't make a blanket statement like that. The concept of price elasticity of demand only relates to how demand changes when price changes and it allows for range of possibilities - from highly inelastic to highly elastic. Price elasticity does not address cost and thus gives you no information about the impact on profits.

    Interesting that J. Crew's revenue from the direct division grew faster than that from stores during 3Q despite the website issues. Perhaps the problems were not as widespread as perceived.

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  26. Great post Alexis. Before I started reading your blog, I had no idea what was going on at the corporate level. Seriously interesting!

    As for sales, I'll buy full price if an item is released with limited inventory (although I always try to hold out for some kind of discount -- free shipping, 20% private sale, something). But if I see an item has at least 99 available, I'm happy to wait for a sale. That way I'm not kicking myself if the price drops 2 weeks later.

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  27. I couldn't agree more about "quality control" to be a full priced brand.

    Also, I do hope that CS people will become more knowledgeable about their own fabric. Sometimes, they are not as knowledgeable as myself, and make phone conversations pretty useless.

    In particular, I think CS people should know the difference between the last year's products and this year's comparable products. -- The difference in terms of size, in terms of material etc.

    Even if a garment is made of supposedly the same material, I do notice changes each year. For instance, wool-cashmere coats feel lighter and thinner than the last year's. Also, Dream yarns feel rougher and coarser than the last year's.

    Anyway, I received a stadium-cloth coat today, and I couldn't believe how it is actually even thinner than my double-cloth coat WITHOUT thinsulate from last year. How is it that stadium-cloth is the warmest material at JCrew?

    I have a JCrew coat from some 7 years ago, and that coat is at least twice thicker and more substantial than this year's stadium-cloth coats. Yes, perhaps thin material will make me look slimmer, but I will freeze to death in NY weather.

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  28. Anon @ 8:19 - you can look at free shipping as a price reduction, and it will increase demand. We are talking about elastic demand when we talk about J.Crew - clothing itself is inelastic but the J.Crew brand is not. So, reducing price will increase demand, and by what I see on here it definitely will. I know I would buy more online for free or more reasonable shipping. It makes the price less to me. You are talking about "cost" as though you are in the industry or work for the company. I am talking about "price" because I am a consumer and I factor in shipping for the "price" of the item.

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  29. anon @ 8:55 - I agree completely. But, sometimes it works out the other way. The cords I just bought are actually thicker and appear to be better quality than the ones I bought a couple of years ago. But, I have cashmere tees from various years and their quality is not always better year over year. So, I quit buying as much cashmere since I have to do it online and cannot feel it first in the store.

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  30. Anon 8:55, you make a good point - I saw a Shipley coat in my B&M a few weeks ago and was suprised at how thin it was compared to last winter's stadium cloth toggle coats. However, the double-serge of the Maggie jacket is comparable (and probably better) than last year's double-faced Lexington jackets.

    Very interesting topic, Alexis - I can definitely see why loyal customers are now not paying full price with prices dropping so rapidly. The merino Lilli cardigan went from $110 to $59 in what, two weeks?

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  31. This is a bit OT for this thread, but what has been your experience with the sizing of the Cashmere Henley? Does it run TTS like the cashmere turtlenecks and tees or smaller like some of the cardigans have been running lately?

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  32. I love hearing this discussion, as I am new to Aficionada.. and Im going to put in my 2 cents!

    Regarding devaluation of the brand--I think JCrew needs to offer discounts in order to keep customers--when the economy isn't doing so well, they would & will lose customers if they don't offer reasonable discounts. BR and Ann Taylor are offering *much* steeper discounters, IMO, so I dont see the current sales as likely to devalue the brand at all. In addition, JC is gaining money on shipping, which is another whole topic:

    I know I, and others, would spend much more if shipping was at least reasonable (flat rate, under $10 in general, like BR)-- $20 shipping for a $150 order is outrageous. And, it keeps me from ordering if there's just 1 or 2 things I want.. better to ride it out until the shipping charges become "worth it" for more items. As many JC items are overpriced for the quality ($90 for merino that is practically see-through! $38 tissue Ts that only last 1 season!), lowering the shipping *a bit* would *not* do any harm. I would not see JC as a less worthy brand if it lowered their shipping.

    And one more gripe, while Im at it:

    The uneven customer service. Ive been told that you can get free shipping via the red phone. My PS has told me this. The SA I was talking to today told me this too. And I hear about it all the time.
    BUT, today, I was unable to get free shipping *or* use my student discount. Now, I understand policy, but what is absolutely frustrating me is that sometimes you can get away with it and sometimes not! I understand this business tactic from a behavioral perspective: It's intermittent reinforcement: if you're not sure you'll get the "reward" (free shipping, student/ed discount), you're more likely to try anyways by placing the order...and once you're on the phone and have gone through placing an order, you're less likely to back out. I honestly think this is a pretty dirty trick. Let us combine discounts or not. Don't offer it for some and not others, on an arbitrary basis.

    (*hides and waits for flames*)


    I say all this, in part, because I was not raised rich--neither of my parents have bachelors' degrees and both worked full time at blue-collar jobs to provide me with necessities...I am luckily to have a good job and no one to support, and can buy nice things. But not everybody out there is rich and can shrug their shoulders at $20 shipping charges, esp not these days. I mean, come on folks, VA is not Siberia!!

    OK, rant done.

    I *do* adore JCrew's styles: Ive spent more than Id care to mention in the past few months, especially since Ive been sucked into this blog! : )

    And, I still placed my red phone order for 2 sweaters (with $17 shipping....)..sigh.

    OK, flame away..

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  34. guess what? for all of you jcrew lovers who only way for a great sale until you actually buy the merchandise? you're not the customer jcrew is after anyway....couldn't agree more with jcrew guy....I buy what I have to have at full price and it never seems to last until sale.....I'm happy about the purchase and couldn't care less about final sale...why? because even at full price I feel the value is there for the FP item that I bought.

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  35. Amelia: great point about cashmere. The store in downtown San Francisco is their "main" store in the Bay area yet it still has such a limited selection of cashmere (compared to their online selection)....I like to try things on before I buy them.

    I also don't understand their pricing-items get reduced to 1/3 of their original cost in no time (Taffeta a-line skirts are $59.99 with additional 50% off from their original price $138 for example). Also, some item prices are different in the catalog vs online (Thompson totes are above $198, which is their price online). I don't like them to think I'll buy whatever they offer me at any price just because it's "JCrew" and I happen to be a big fan.

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  36. Please stoppppppp the incessant complaining about shipping....if you can't afford it then you shouldn't be shopping right? The last time I checked J Crew was a company, publicly held stock, right....that means they need to post a profit...honestly, who doesn't expect a shipping fee if they are shopping on line....

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  37. P.S. forgot to say-thanks for updating us Alexis, it was an enjoyable read :)

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  38. we should be buying j.crew because we love the style, fit, and quality. waiting for it to go on sale only devalues the brand. lets not make j.crew the sad story that gap inc. has become!

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  39. Yea, I ordered the shipley coat and had to return it...so glad that I did as the price has been marked down so much. I returned it because it didnt feel like a $350 coat, imo. I had an old jcrew coat from 2000 and it was alot heavier--and cheaper at that time! I decided to settle on the Sibley coat with thinsulate...so atleast I can get some kind of comfort out in the cold.
    I pretty much agree with the overall sentiments---these are the sign of the times---discounts and promotions--they are trying to attract consumers. If BR, old navy, and the gap can have 30% off discounts AND offer free shipping to its cardholders (let me add that shipping is only $7.95 w/o a card), then the least we can get are some regular promotions.

    I just got back from the local store and took advantage of ordering from the red phone.

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  40. Alexis, just curious as to what specifically re: inventory Mickey got defensive about? Did the investor ask why inventory levels weren't made lower?

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  41. Why is it that everyone who wants us to stop complaining about shipping is an "anon?" Oh and by the way, it ain't gonna happen, and I'd bet money J.Crew would turn a bigger profit with free shipping with a certain minimum. Oh, and there are plenty of upscale stores that do this so it would not "devalue" the brand.

    OT - My chocolate almond cake did not turn out - now I have to go back to the drawing board on a second dessert for Thanksgiving :(

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  42. P.S. Anon @ 10:15 - just because someone can afford something does not mean they necessarily will pay it if they see it as unreasonable charge.

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  43. This is a bit off topic, but has anyone purchased the Italian Calfskin Jamie bag? I'm after the tulip color, which is marked down to $249 and with the 30% off, it is finally affordable for me. I'm mostly wondering if the long strap is good for wearing it as a cross body bag - I'm going on vacation and want a bag that I don't have to carry around sightseeing in my hands or on my shoulder.

    Thanks for any help!

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  44. Thanks so much for posting this, Alexis! It's so interesting to learn about the inner corporate workings of J.Crew.

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  45. As posters have mentioned the quality of many JCrew items is questionable. Things ar not as well made as even a few years ago.

    JCrew does make a HUGE profit on shipping. It is a money making thing to them. I read an article last year and I showed their shipping profit from the previous year and it was HUGE. JCrew is making large amounts of money off of us with their high shipping rates.

    Right now, I want a skirt from them but not interested in paying shipping...who cares if I get 30% off when I pay $20 for shipping...Can I afford it? Yes. Do I want to pay that? No.

    If I shop online, do I expect to pay shipping...No, b/c all my other store creidt cards offer me free shipping.

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  46. Hi Ameilia,

    I think you are missing my point. I have no problem with your premise that reducing price will result in increased demand and thus increased revenue. In your first post, you introduced the concept of price elasticity and jumped from there to increased profits. I think you are confusing revenue with profit.

    What I am saying is that price elasticity doesn't tell you how a price change affects profits. Price elasticity deals with price and demand (units of stuff). Units times price = REVENUE. Increased revenue DOES NOT necessarily translate to increased profits. To calculate profit you have to factor in COST - cost of goods sold (COGS) and selling, general and administrative costs (SG&A). Offering free shipping may increase demand, but it also drives up SG&A. The question is, does the increased revenue sufficiently offset the increased costs?

    You and FFM, etc. are entitled to an opinion and can speculate all you want, but J. Crew actually has the data on the change in revenue and the change in cost associated with all their historical promotions. For whatever reason, they have decided that no minimum free shipping and/or free shipping combined with % off promotions isn't in their best interests. They DO offer free shipping on a regular basis and presumably they have set minimum purchase levels that they feel work best for their business.

    I recently attended a presentation on the 4Q retail sales outlook for the US. The speaker mentioned free shipping as a very attractive promotion to consumers, but cautioned retailers that costs must be tightly managed for it to yield a benefit.

    I am not in the retail industry and I do not work for J. Crew. I talk about cost because I have an MBA from an Ivy League school and they would take it away in a heartbeat if I omitted a consideration of cost in any kind of profit analysis. :-)

    Things change...it's a fact of life. The promotions and policies of today may not be the promotions and policies of tomorrow. No one is "entitled" to free shipping or an educator's discount or what have you. Enjoy it while it lasts and when the product and/or price is no longer attractive to you, shop somewhere else. As you have pointed out, demand is more elastic when there are many other options for consumers.

    Feel free to disparage anything I have written just because it is not accompanied by a fake name. :-)

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  47. One correction: J. Crew includes shipping in their cost of goods sold so free shipping drives up COGS, not SG&A:

    Gross profit is equal to our revenues minus our cost of goods sold. Cost of goods sold includes the direct cost of purchased merchandise, freight, design, buying and production costs, occupancy costs related to store operations (such as rent and utilities) and all shipping costs associated with our Direct business.

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  48. Hey anon @ 12:28 - Congrats on the MBA from an Ivy League university. It is quite an accomplishment. I have an MBA as well. Therefore, I don't confuse revenue with profit. I used to look at an income statement on a regular basis and I know how they are constructed. You've got your revenue at the top, your expenses in the middle, your non-op expenses, taxes, and maybe a few other sections. Profit is that thing at the bottom. Hence, the bottom line. My MBA is not from an ivy league school but I am pretty happy with it. Obviously I am speculating about the profit since I don't have the numbers. I am calling BS that their costs are so high they need to charge ridiculous shipping. If they are, then they need to look at why their costs are so high and try to lower them. Of course, I would love to get my hands on their numbers, especially how they charge out shipping.
    Some people are saying they make a profit on it - or at least one person did. I would wager they make a profit on it as well, and they are not in the shipping business.
    What's really weird is that I started to type something about demand elasticity and how demand is more elastic the more one has available substitutes, but I deleted it before I submitted my post. So, this is the first time I am mentioning it.
    I am not trying to argue with you, really. I am sure you have way more info than me. But, knowledge is power and it doesn't necessarily break the bank to give the consumer either: 1) A reasonable price on shipping or 2) An explanation as to why a price seems unreasonable but is. Otherwise, I am going to speculate and it won't be for the positive.
    I know that you must consider cost when determining profit. It's a very simple equation and I would wager that anyone with a business undergrad from any school much less a person with an MBA doesn't forget that very simple formula. However, I really do question their model for charging out shipping as it feels arbitrary to me. Customers want rationale behind a price (e.g. charging based on weight.) If they are charging for something else I don't understand why they don't reflect that in the price of the clothing rather than shipping. To me, shipping should be just shipping.
    But, if they feel they are increasing profit by never letting customers stack codes they are entitled to do what they will, but we are entitled to our opinions if we don't feel it is reasonable. I just wish they would change and/or better explain their shipping model (if it cannot/should not be changed less they lose their shorts,) but hey, I am just a customer.
    I am not trying to get into a pi$$ing contest over economics. I am sure you are way smarter than I am and so on and so on...I am in fact speculating over the shipping thing. I am calling BS and it is just a speculation. Get it? I don't have the data at my fingertips (and I am pretty handy with Excel) to do an analysis.
    I am sure you know analysis as well. One person takes some numbers and says one thing, someone else takes them and says another. I could go on and on, but my basic points are:
    1) Yes, I am speculating. I obviously don't have their operating expenses and financial data.
    2) Please don't insult my education or look down on people who didn't get an ivy league education. I may not be as smart as you are but I don't need explanations with words in CAPITAL LETTERS. I am a level II CFA candidate and I have at least 20 books on finance, econ, and business management books in my living room to look up things like "REVENUE," "COST," or "PROFIT" should my tiny little brain forget about them.

    P.S. What's up with the "fake name" comment? I don't get it. I know my name is real, do you mean other people?

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  49. Anonymous said...
    One correction: J. Crew includes shipping in their cost of goods sold so free shipping drives up COGS, not SG&A:

    Gross profit is equal to our revenues minus our cost of goods sold. Cost of goods sold includes the direct cost of purchased merchandise, freight, design, buying and production costs, occupancy costs related to store operations (such as rent and utilities) and all shipping costs associated with our Direct business.

    November 26, 2008 12:53 AM


    anon- What's with the use of "our?" You said you didn't work for J.Crew. Also, there are two components of shipping, here, right? There is the shipping paid by the customer to J.Crew and the shipping paid by J.Crew to the vendor (e.g. UPS.) They should be assigning the cost they pay to UPS to COGS but how are they treating the shipping received from the customer? And, the important question is: are they making a profit - taking in from the customer more than they are paying to the vendor? They aren't in the shipping business, so I question whether they should profit from shipping (if they do as one person said.)

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  50. P.S. Good night everyone I am going to bed. My dog is making noises at me because I am up so late. And, yes, she pretty much is the boss of me.

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  51. It’s completely OT, but I wore the Favorite-fit checked academy pant which was sitting in my closet for a while today and found it runs very big at the waist! I should have sized down:((( Also I tried couple of skirts at a J.Crew shop and found that most of wool skirts are TTS, but skirts made of silk tend to run small for me.

    Favorite-fit checked academy pant: runs big
    Double serge skirt: TTS
    Sparkle plaid tweed pencil skirt: TTS
    Felted wool mini: TTS
    Francie skirt: TTS
    Taffeta A-line skirt: almost TTS, but slightly runs small
    Pembridge-dot pencil skirt: runs very small

    Everyone has a different opinion about sizing, but I hope this helps!

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  52. Anon @10:11 PM

    Guess what? Even Mickey acknowledged today that customers do not buy at full price these days.

    Your beloved full-price purchasers are in reality, just too slim, and not substantial enough to feed and nurture JCrew.

    That is, whether JCrew likes it or not, JCrew today is extremely dependent upon sale shoppers. Sadly, that's just the reality. Denial is not a solution here.

    And I have a confession to make. Even though I am a sale shopper at JCrew, I am often a full-price shopper for other (often more expensive) brands. I love JCrew, but not enough to pay full price for the quality.

    It is only laughable that some of the JCrew associates would dare to speak so lowly of sale shoppers, while they cannot sustain full price anyways. If you are so disgusted by sale shoppers, why not just burn off your overstock? It would certainly keep your very few number of full-price shoppers happy while maintaining your full-priced-ness-brand image.

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  53. Cords dropped $10 overnight (the trouser cords actually dropped $20 to $49.99 plus disct %).

    Anyhow, just venting a little here. I was looking at the new arrivals. I know it's too early to start looking at flip flops but every year without fail I get at least 3 pairs of the grosgrain flip flops (usually a pair w/the cute dots on the grosgrain), anyhow, I'm noticing that the regular price these are offered at is $36.50! Seriously, $36.50 for grosgrain flip flops? I love them and they are cute but come on. They'd already increased to $29.50 in 2008 (I remember prior to, they'd been introduced at $24.50 or so). These must be one of the so called affordable items they were talking about in the conf. call. I'll just have to wait til these go on promo to get my flip flops this year.

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  54. I wish I could find the article I read...I know for a FACT that JCrew makes a profit off of their shipping charges...It was a pretty substantial amount too...

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  55. Like a big dummy, I ordered the wrong pair of cords last night (meant to get the faded cement bootcut, but somehow clicked on the trouser cords instead). Just now realizing my mistake, I called cust. service. Although I was told it was too late to do an exchange (even though the order has not yet been processed), the lady on the phone could not have been nicer or more helpful and we were able to come to a resolution. So even in the midst of the craziness....it was nice to see that they are still focused on customer service. I'd like to think this is the norm and not the exception to the rule.

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  56. Geezus Amelia, smoke some pot, have some sex and relax already...that was so long, it hurt my wrist to scroll through all of your typing...we get it. You is smart!

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  57. My MBA is from an online university. However, this stuff was never covered in my online class.

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  58. This comment has been removed by the author.

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  59. Anon 2:47 AM

    FYI: Please click "Investor relation" of J.Crew web site and you can see all materials, though they did not disclose the amount of shipping costs.

    http://www.jcrew.com/AST/FooterNavigation/investorrelations.jsp

    Also, 8K is available at "SEC filing". Gross profit margin dropped 410bps at 3Q. As you can see, inventories are heavy: inventories increased 18.7% yoy, while sales grew 7.4% yoy compared with last 3Q. Heavy inventories indicate further future markdown.

    http://www.jcrew.com/AST/FooterNavigation/investorrelations.jsp

    Also, Bloomberg reports quick summary of 3Q results, saying that drop in same store sales lowered gross profit margin.

    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ax0ip1Ci.jlk

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  60. Alexis,
    I do hope the post that insults housewives is deleted. Thanks.

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  61. I am a housewife who had to put my career on hold to move with my husband for his job. I actually made more than him at one time but chose to stay home with a sick child. What a jerk to post an insult to housewives. Best to ignore. If I came across "him" (as it most likely is) I would ignore him in public as well. LOL

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  62. The term is Deflation, and it is happening everywhere, J Crew has to lower their prices in order to move their stock. Their buyers over-purchased.

    What I did find interesting is the quality issue, it has to improve, their cashmere is poor quality, seams coming undone after 1 wear. Thin tees and sweaters.

    Next year the buyers will not buy as much.

    I choose not to spend even if it a good price I don't need another sweater, and I don't want to put up with the hassles of ordering online during the holidays. I much rather put it towards paying down debt, and saving.

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  63. I've been buying J.Crew for years and years, and have noticed a definite upswing in prices and downswing in quality. Before, there was quality, but it was never trumpeted like it is now, with all the hullabaloo about Italian cashmere and Japanese beads or whatever. It was understated--you knew the stuff was good, you could feel it in the fabric and see it in the workmanship and classic styling. I have kept and worn items from J.Crew for 10+ years, while recent items have not stood the test of time. The prices, while above the Gap and other mid-market brands, used to be relatively reasonable for what you were getting. I love the recent design trends, but like other contributors, have had trouble with pilling cashmere, tearing fabric, no extra thread with my sweaters (a pet peeve), poorly sewn seams and generally deteriorating workmanship. So yeah, there's a real disconnect as to what Mickey Drexler perceives to be luxury and what the product actually is--smoke and mirrors, PT Barnum come to mind. If you want consumers to pay a (highish) full price, then provide the quality. I'll pay it if it's there (when the economy rights itself, anyway).

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  64. More markdowns:

    Quinn cami - $59.50
    Maisie ruffle blouse - $49.99
    Cashmere scarf down to $75.00
    Faux-topaz, Jet star, Caribbean star pin - $29.99
    Patent-leather Serengeti clutch - $49.99
    Caroline square-jeweled high heels - $140.00
    Dana coat - $229.99
    Puffer vest - $69.99
    Mohair muffler scarf - $29.50
    Leather opera gloves - $78.00

    Not only are the bug pins NOT on sale, one of them is actually on backorder! Who knew? ;)

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  65. More:

    Primrose garden necklace - $115.00, bracelet $65.00
    Double-strand elephant necklace - $100.00

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  66. Thanks for the info, silver_lining: I purchased the Serengeti Clutch off of Ebay for that same price a few weeks ago...it's super cute, but IS small...not worth full price *IMHO*, but not bad for $50. :) Love it with my new Juliet Safari Midheels (also purchased off of Ebay)...yes, I DO like my bag and shoes to coordinate. ;)

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  67. Hello everyone! I really enjoyed reading everyone's comments (and I am still going through them) on J.Crew's current strategy & financial position. It can't be easy for J.Crew, who is also trying to change their image as a luxury goods provider at a great value during these economic times.

    Anon at 7:48PM: I am not a manager. However, I am a doctoral student in the field of management. :)

    Anon at 10:22PM: That is a good question about the inventory. Essentially what happen was J.Crew still had inventory issues carried over. The analyst was surprised when Mickey & upper echelons made it sound like the issue of inventory was just determined in October (even though it had been going on before then). So Mickey got defensive and said "unless you're in our business I'm not sure you understand how it works", which prompted the analyst to say "weren't you the guy who told us there was a recession back in January", which then got Mickey really riled up.

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  68. What I learned on the call -- since Q1 and Q2 2009 inventory was purchased before the sales declines in Oct. (and thus based on a rosier forecast), there will likely be excess supply in Q1 and Q2 which means the deep discounts will continue through the 1st half of 2009! Good news for us J.Crew lovers, hopefully our pocketbooks won't be hurtig too much in the coming months to be able to take advantages of the impending sales (or promotions or whatever j.crew wants to call them) :-)

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  69. Just read the transcript over the past 20 min. Very interesting...sounds like JCrew has already over bought the spring line so we should have no problems getting good deals on the spring line....next 6 months of goods in 2009. Yeah for us consumers:)

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  70. OT: Ralph Lauren is offering FREE SHIPPING WITH NO MINIMUM on all orders through the Holiday Weekend. Plus their sale section is filled with merchandise marked up to 50% off with NO COUPON CODE required. :)

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  71. maryw2062, I couldn't have said it better myself. The *biggest* reason for why I refuse to pay full price at JCrew is quality. Quality has dipped dramatically in the last few years at JCrew. Bring that quality back up to acceptable standards and I'd gladly pay full price.

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  72. FFM:
    That is great! JCrew should do the same! Now that would be a sale and I might actually buy from them even though I said NO WAY over the holidays b/c of possible shipping problems.

    Ralph Lauren is higher end than JCrew.

    JCrew is so full of BS with this image thing. Really annoying to read about. Who cares about where their fabric and cashmere are made if it falls apart and pills.

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  73. Exactly. They're trying to sell an "exoticness of Italian Cashmere and rare prints" and justify their steep prices that way, but the if the quality isn't there, then THEY'RE the ones devaluing their brand. In addition to being "taught" that we don't have to pay FP right now, we're also learning not to trust their brand promises because they're not delivering on them!

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  74. "Future J.Crew catalogs and website will include more definitions to better educate customers about fabrics and materials"

    Isn't this code for "if we tell our customers that our fabrics come from a famous Italian company or a Japanese mill that's a century old, maybe we can keep up this J. Crew = premium quality charade to justify our ridiculous price point"? Does this mean we'll be getting more patronizing advertising campaigns like "If you only knew" to convince us that the quality is there when it's pretty obvious that it isn't anymore?


    This blog is full of tales from long-time shoppers lamenting the decreasing quality of J.Crew clothes, and I've got one to add. Today I'm wearing a pair of Super 120s wool suit pants. They're unlined (who doesn't line wool pants? they're itchy!) and the fabric is thin and wrinkles really easily. Despite all their crowing about the supposed premium quality of Super 120s, they are not even in the same league as the J. Crew suit pants I got a few years ago (for $19.99!), made in Japan of a really nice wool twill, fully lined in satin. I used to hold their suiting in high regard, but these pants really feel like something you'd get at Express or The Limited. They would've gone back if they weren't final sale.

    PS - I do recall earnings reports in the past where shipping was specifically mentioned as a large contributor to profits for the catalog/online division. It makes sense: their shipping charges have to exceed the actual cost of UPS shipping in the majority of cases (think of all those cashmere sweaters that can't weigh more than a pound that they charge $15-18 to ship), and the shipping charges are never refunded in the event of a return - so in most cases, they will profit even if you don't keep the stuff.

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  75. I wonder if the shipping price is higher because they are not effective in warehouse and packaging?

    The packaging is excessive - other vendors will ship the flat blouses/tee in a plastic bag, but for some reason J Crew is in love with the heavy cardboard boxes.

    I appreciate the gift boxes with the collection pieces, but I think it's just vanity packaging and they may as well just wrap them in tissue and save the excess weight.

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  76. To follow up, here is some specific data about their profits from Shipping and Handling. According to their most recent 10-K (available at sec.gov). Note that all amounts are in thousands (so the revenues from shipping and handling in 2007 are about $38 million).

    13. Other Revenues

    Other revenues consist of the following:

    Shipping and handling fees
    2005: $26,430
    2006: $31,319
    2007: $37,958

    From elsewhere in the report: "Other revenues increased by $7.5 million due primarily to an increase in shipping and handling fees of $6.6 million from $31.3 million in fiscal 2006 to $37.9 million in fiscal 2007."

    Note that these are simply the amount of shipping and handling charges collected from shoppers, not their net profit on it. The amount they pay out to shippers is included in Cost of Goods Sold, but that figure is not broken out into its various components, so we may not ever know how much they do or don't profit off their ridiculous shipping charges.

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  77. It may annoy some that it is constantly brought up on the blog but Jcrew would be very wise to start listening to customers who are screaming: lower your ship and I will give you more of my money!

    I know some think the blog readers are not an accurate sample of the average Jcrew customer but in the case of shipping, I think we very much are representative of what customers want. If shipping fees were not important to consumers, you would not see SO many retailers offering cheap or free ship.

    Unlike 10 years ago, there is a computer and internet in almost every home and people know how to use them. Most shoppers are very educated about prices and they are willing to do a little research to find where they can get the most for their dollar. Ex: the huge drop off if black Friday profits because shoppers are not willing to throw their money at any business with a Sale sign when they know they can get a better deal online every day of the week.

    Revolve, shopbop, nordies, saks, barneys, banana republic, and ann taylor ALL charge less shipping than Jcrew. Many of them offer free shipping. Stubborn businesses lose money and go extinct. JCrew needs to lower their shipping COST and pass that saving onto the customer to remain competitive with other retailers.

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  78. maryw2062 well-put
    Oooh-Laura--good point and I agree.

    Anon re: packaging-I have gone off (in another post) about the excessive amount of plastic wrap and the choice of HUGE boxes that are crushed upon receipt as the contents inside is bouncing around aimlessly.

    J Crew, if you are reading..please make better size selections when you go to choose a box to ship me my goods.
    I am so proud that you use recyclable shopping bags, gift boxes and occasionally choose a nice recyclable brown flat envelope to ship my flat items (do this more please).
    I am not proud of the excessive plastic wrapping, bubble wrap, foam wrap, tissue paper etc. included around the items and in the boxes. I have two giant plastic bags of this plastic stuff in my house the size of Pee Wee Herman's giant foil ball.

    Some people will shake their heads as they are unaware. I am sure there are folks at J Crew thinking, "Damned if you do, damned if you don't. People will complain about not enough." But there are ways if you care to address it.

    I hope you can pare down on all the plastic/paper packaging and ultimately consider ways to reduce the costs involved in shipping.

    In this area you are environmentally unconscious.

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  79. I will give them credit for no longer shipping a catalog with every single order. That was ridiculously wasteful.

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  80. Anon @ 135pm: Agreed! :) But now I don't get any catalogs through the mail, so I almost wish they'd tuck one into a package they send me.

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  81. I have to say that I find it hard to believe that someone other than a J.Crew employee would actually try to justify the price that J.Crew charges for shipping.

    I really wish J.Crew WOULD clarify the reason behind their high cost of shipping. There just CANNOT be any reasonable explanation as to why just about every other retailer on the planet can offer free or flat rate shipping, yet J.Crew cannot, unless they somehow pissed off UPS and FedEx, and cannot get a good deal. Other than that, the only other reasons it could be are their own inefficiency in the warehouse which is increasing their overall shipping costs, or plain price gouging their customers. Even my UPS driver has commented about how much of a profit they must be making knowing quite well what it actually costs them to ship packages with UPS.

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  82. I've been buying J Crew for decades (God, I feel old!). Before Mickey took over and the company was privately held, the majority of their items were well made and held up for years. I had wool crepe suits that were timeless and literally, lasted 10 years before the lining started to shred.

    I would gladly pay full price if they brought back the quality of the old J Crew. Now I wait until products are extremely discounted.
    Who cares if the fabric from their sweaters are from Italy, if it is of poor quality and pills? I'd pay $200 if I knew it would last for years and not fall apart after a few wears.

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  83. Anon @ 2:27, I agree! I started buying JCrew in the late 80's, when the quality was good. While the styles have really evolved over the years, the quality has gone downhill. For example, the Cambridge Cable sweaters -- they're so thin, you can see right through them! And didn't their sweaters used to have ALOT more wool? It's too bad 'cause the colors are fantastic and the styles are really cute!

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  84. Cov5, I just BURST out laughing when you mentioned Pee-Wee's foil ball! Ah, how I loved that show...

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  85. Yes. The sweaters used to be heavier and thicker. While I understand they have to watch the bottom line, shoppers will eventually be turned off by J Crew prices if J Crew quality = H&M.

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  86. I blame the lack of quality on the manufacturing being done outside the US, even Lands End quality is not the same as 10 years ago, I tried on an outdoor jacket and the zipper split in half, and it was flimsy.

    Some of J Crew's cotton products i.e yoga line and lounge pants are still a high quality, but I will no longer purchase their cashmere at any price the quality is very poor.

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  87. Covert5,
    FYI:)I reuse all the tissue that JCrew wraps around items in their shipping boxes...I haven't bought tissue in years...I use it to stuff and store my purses and for immediate family gifts. I love the "free" tissue.:)RRR (reduce, reuse, recycle)

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  88. Seriously, hasn't JCrew's clothes ALWAYS gone on sale? I remember a few stores had 50% off in 2005 and 2006 in the summer. I just don't get it??? I have been shopping with them since 2000 and they even used to have sale catalogs. Whatever...still don't get it???

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  89. ffm: I don't justify the shipping costs rather I accept them. No one like paying these rates, I accept it because there is nothing I can do to change them. I can see by reading your post that you will feel strongly about this, why don't you send an email off to Mickey and see what type of response that you get back. Might be interesting!

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  90. Great idea casual-crew! I've emailed my suggestions, compliments, complaints, and praise...YES, even praise to Mickey before, so why not one more time to try to get an answer about the ridiculous cost of shipping? I'll let you know if I get a response. :)

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  91. FFM: Did you ever get an reply back at all? ( I am kinda assuming no by your reply that you did not) I don't want to start anything here I was just wondering that is all.

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  92. casual-crew: I don't mind sharing at all. First, I just sent my letter to Mickey regarding the shipping rates, and will let you know when/if I get a response. Second, I have indeed gotten a couple of responses previously after emailing Mickey...the first was when I wrote my concerns and issues I had with all of my orders during the website fiasco. He actually responded within a couple of minutes that one of his associates would contact me, which she did the next day and helped to remedy a couple of the issues...I was very surprised and pleased...the customer service was AMAZING then!

    The next time I wrote him with my suggestions about site to store shipping, returning the sale section to the way it was *pre-upgrade*, the return of freeship/no minimum and coupon stacking, etc...he replied that he was thankful for the feedback and would pass it on to his team.

    Then I sent him a quick email when they actually DID change the look of the sale section a few months ago saying how much better it was and to keep up the good work. He responded immediately saying *Thank you for the email! What a great start to my day!*

    I have also emailed him praising the store director, managers, and SA's at my store, and he responded once again: *Great to hear! Will share this with my team!* I actually found out later that he praised my store's team on their morning conference call! I could hardly believe it, but he DOES actually read the emails and take action.

    So, that's it...I haven't emailed again until just a few minutes ago about the shipping. Hopefully I'll get an answer, but it could be delayed with the Thanksgiving Holiday. I'll let you know if I get a response. :)

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  93. ffm: Thank-you for sharing with me, it was very informative, it is good to know that he does read the emails. I will look forward hearing back from you regarding his response, I live in Canada and I am at JC mercy if I want their clothes I have to pay the shipping costs, however I am surprised how much you are charged in the US.

    Happy Thanksgiving!

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  94. We should start a petition about the shipping...

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  95. Wow this is a great thread. I am glad that a lot of people have noticed the same quality drops as I did. So it's not just me!

    I appreciate the quality of JCrew cotton items in general (tees, chinos, cords), and some wool items (merino, wool crepe).

    However, I am unhappy with the following material:

    -Dream yarn: itchy and pills. can it be worse?

    -Cashmere: ok, but not great. definitely not even half as good as real loro piona cashmere.

    -Super 120 suits: itchy and BAD!

    -Wool-cashmere coats: cashmere is only 10%, and the feel is really rough and ratty.

    And I wish JCrew brought back 100% silk sweaters! JCrew used to make 100% silk cardigans that would run smoothly over crispy button down shirts.

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  96. Guilty as charged: I don't pay their ridiculous shipping charges. I love JCrew but I don't order unless I get free shipping. Can I afford their shipping charges? Definitely. Does that mean I will pay? Nope. As many have said already: Ralph Lauren offers a flat rate of $10 and free shipping with a min $195 purchase; not to mention all "free shipping" flying around from every other retailer...

    FFM: I have no business/finance background but my fiancé does. He read majority of these comments with me and said something like "forget all the comments made by people with an MBA degree, her voice is the voice of reason"(for your post @2:16) Hopefully Mr. Drexler himself will think the same. Let us know how it goes if you get a chance :)

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  97. Sanfranciscoca : passing judgement on other peoples posts is tacky. Everyone is entitled to their opinion.

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  98. Anony@6:13.

    Her post her fine. THere is nothing wrong with it.

    Your post; now that's not needed (i.e. tacky:)

    cece

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  99. OT Anon 4:35 Reusing Tissue~I LOVE to hear that! I reuse all the packaging and the plastic...I cannot physically bring myself to throw out a piece of plastic:0) Thus, my large Pee Wee Herman size bags of plastic,tissue, bubble wrap etc. I recycle all plastic whenever possible and of course every J Crew box and brown flat ship bag.
    R, R, R--my 3 favorite words
    I am not good (obviously) at reducing my clothing purchases but honestly, I do not generally rid of these investment pieces. Hoping to hand down some of the amazing pieces to my daughter. Just hope the quality will not diminish to the point where things don't have the long life they used to.

    Regarding quality~I just realized I DID buy 2 dream sweaters last year--the popovers. When I answered the sweater post--I wasn't sure I had any. Well, I forgot until I pulled the brown one out the other day (I recall wearing it one time as I got it late in the season). It has balls all over it!! It looks really bad. Really~they do need to improve the Dream fabric as many have mentioned.

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  100. Covert5: I also have a problem with throwing away plastic packaging. Everytime I receive any bubble wrap, I pack it away in the attic. Our local recycling does NOT take the stuff, so my stash continues to grow. I keep telling myself "someday I'll use this". I even have two HUGE pieces from when we purchased two kayaks from LLBean a couple of years ago. I neatly rolled them up and put them up there, and it looks like I'm trying to hide two dead bodies!

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  101. Anon at 6:13: It was actually my fiancé's comment that I posted (the part about shipping charges is mine, I always complain about it).

    He's the one who gets Barrons and Economist delivered to our door. I pointed out I didn't have any background in finances. I agree, he can be tacky but he's really good at what he does, he works for an investment bank. He actually started reading these comments on my laptop while I was reading them, I didn't try to involve him in anything JCrew related because he's "fashion illiterate" :)

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  102. Just had to comment on the shipping/packaging issue. Placed a fairly large order early last week. Got home from work to find FOUR J Crew boxes on my doorstep; one large and three small. Part of my order was 3 pairs of wool socks. J Crew shipped each pair of socks in a separate box with a separate invoice. Talk about wasteful!

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Dear J.Crew Aficionadas & Aficionados: Please feel free (and encouraged) to share your thoughts and opinions. :) However, please note that this is still a personal blog. So comments that are considered inappropriate (e.g. obscene, racist, homophobic, personal attacks, rude, and just plain mean) will be removed.

And now back to J.Crew! :)