Comprehensive M&A data with integrated detailed company information

J. Crew is trying on potential flotation of Madewell
Posted on Friday, 12 April 2019 10:17
J. Crew, a US retailer known for its preppy products, is weighing options to bring in capital, including a possible initial public offering (IPO) of its leading denim brand Madewell.

The company announced the strategic review as it also named president Michael Nicholson as its interim chief executive.

A flotation, should one take place, could be completed in the second half of 2019 and would bring in some much-needed capital to slim down debt that J. Crew is due to pay in 2021.

The news comes just one month after jean-making giant Levi Strauss completed its own IPO, raising USD 623.00 million in the process.

Madewell is a fast-growing brand and is considered to be one of J. Crew’s leading businesses; however, the potential flotation comes as the holding company is struggling with its balance sheet and the consumer shift to online shopping.

With retailers such as Amazon changing the way people shop, the group, among other brick and mortar firms, have been trying to keep up.

In addition to the shift to online, consumers, particularly in the US, are choosing activewear, or more comfortable clothing, rather than the once go-to pair of jeans worn for everyday uses.

As a result, a number of companies in the denim market have been exploring options to bring back buyers, Gap recently spun off Old Navy, both of which are big players in the sector, while VF Corp is planning to offload its Kontoor Brands jeans business into a standalone group later this year.

Bloomberg reported that imports of elastic knit pants surpassed denim for the first time in 2017.

Chad Leat, chairman of J. Crew, said the company views the spinoff of Madewell as a chance to give both groups “long-term growth potential, which we believe will further enhance our financial flexibility to support a turnaround”.

Nicholson added the potential deal “could unlock significant value and generate meaningful proceeds that would strengthen our balance sheet and increase our overall financial flexibility to address our 2021 debt maturities”.

Madewell, according to the new chief executive, had another record year of performance in 2018, generating net sales of USD 529.13 million, which accounts for around 30.0 per cent of total sales at J. Crew for year (USD 1.78 billion).

© Zephus Ltd