This graph from a Goldman Sachs report on J Crew compared to other players in the industry outlines a representation of J Crew’s outperformance against not only the S&P 500 but also Specialty Softlines which include companies like Ann Taylor and Gap. While the recession had a clear on the entire industry, J Crew was able to come out of the 2007 acquisition and recession to recognize above average growth.
After the first 3 years of the turnaround the company has 451 stores and about $2.4 billion in annual sales, J. Crew may fetch a valuation of as much as $5 billion
When TPG returned to take J Crew private a second time with Leonard Green there were some issues regarding Mickey Drexler and the shareholders receiving a fair price but the deal landed on $43.50 a share, equating to about $3bn. As before, Drexler would be at the forefront of operations and retain a significant portion of equity.
Rumours have described the potential for an IPO occurring as soon as 2014. Given that the average PE fund life is five years, it would make sense that TPG would want to use a 2014 IPO as an exit.
The timing of the IPO would be critical as TPG allows the market to determine the valuation of the company. With revenue increasing steadily, net income seems to be suffering and that could be a hindrance to performing well after an IPO. After a poor holiday season it could be expected to see declining numbers but talks for the IPO to occur towards the end of the year are still in progress.
There have also been talks regardi...
... middle of paper ...
...yout. Bringing Mickey Drexler on board to revitalize the brand and focus its strategy was fundamental to creating a sustainable business model that could compete against much bigger players like LL Bean and Talbots.
Quality, style, scarcity, and creativity were the cornerstones to Drexler’s turnaround. Redefining each of these tenets allowed J Crew to brand itself as a higher end fashion line that concentrated on attracting a very particular segment of consumers. And so as not to dilute that pool, J Crew has managed expansion through new geographies and a limited number of additional lines of clothing.
The turnaround was a chance for Drexler to redeem himself from the poor performance of the Gap during his tenure as CEO. Through the various initiatives he managed to build J Crew into a $5 billion company, recognizing significant returns for himself as well as TPG.
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