Bloated brands are looking to spin-offs to save themselves

DIGIDAY – J.Crew Group Inc. confirmed last week that it is considering taking its denim brand Madewell public as a separate company, potentially during the second half of the year. The news comes after J.Crew announced last week that it was appointing Madewell president Libby Wadle as the brand’s first CEO. And in February, Gap Inc. announced that it would spin off Old Navy as a separate brand.

The respective parent companies of Old Navy and Madewell have used the growth of their crown jewels to buoy otherwise unimpressive results for a few years now. Last quarter, Madewell posted a 32% growth in sales, while J. Crew’s sales fell by 4%. Madewell generated more than $500 million in revenue last year, accounting for about a fourth of J. Crew Group’s sales, but has seen its sales grow faster than its parent retailer since 2014.

“Old Navy’s growth will depend on continuing to introduce new trendy, low-priced clothes for its core target audience to retain their loyal customers,” Ken Morris, principal at BRP consulting said in an email. He added that “many people may identify and associate the Old Navy brand synonymously with Gap, and that the key for Old Navy will be “to clearly distance itself from Gap during the spin-off.”

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