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J.Crew Says Madewell on Its Way to Becoming a Billion-Dollar Brand

November 30, 2018, 4:34 PM UTC

J.Crew Group executives must be telling themselves, ‘Thank heavens for Madewell.’

The company, in the midst of much sturm und drang lately with the departure this month of a CEO after barely more than a year, reported comparable sales as its sister brand rose 22% in the third fiscal quarter. Those stellar results prompted J.Crew Group’s operations chief, Mike Nicholson, to tell Wall Street analysts on call that Madewell was well on its way to becoming a billion-dollar brand and a source of relief, given the namesake brand’s ongoing problems.

In the first nine months of the current fiscal year, total Madewell sales hit $371.2 million, up 31% over the same period. The hip denim-oriented brand has found favor with shoppers that has eluded namesake brand J.Crew. With the holiday quarter the busiest, that means Madewell will almost certainly cross the half-billion dollar threshold this year.

Despite the turmoil around J.Crew, with the company beginning to undo some of the initiatives of the recently departed CEO Jim Brett, results have finally started to tick up. Comparable sales rose 4%, a sign that J.Crew is beginning to rebound after years of big declines. And the strength of that improvement was put into relief by The Gap, (part of Gap Inc) a similarly struggling apparel brand, recently reporting another awful quarter.

But that doesn’t mean the company will stick to Brett’s approach. On the contrary. Brett left a few weeks ago after a disagreement over the long-term strategy to fix J.Crew, which included launching lower-priced lines. One such business, a budget line called Mercantile, is being dropped. And J.Crew’s plan to sell clothes on Amazon is also in question now.

Still, there were green shoots in the quarter, specifically in J.Crew’s women’s apparel, its biggest business. J.Crew as a brand is three times larger in sales volume than Madewell, meaning the company can’t just bank on Madewell.