J.Crew Considers IPO for Madewell; Names Interim CEO

J.Crew Group Inc. is considering bringing its Madewell business to the public markets in the wake of rival Levi Strauss & Co.’s own $623 million offering. Madewell, the denim focused starlet of the J.Crew family, could go public as soon as the second half of this year, the company announced Thursday. Struggling parent company J.Crew also named Michael Nicholson as interim chief executive officer after months with no one in the post. Madewell, popular with millennial shoppers, has been growing steadily. Its revenue climbed 26 percent last quarter, compared with a 4 percent decline at the namesake J. Crew brand. The apparel brand opened four new stores already this year and is planning about six more by February 2020, even as sister line J. Crew shuttered dozens of locations.

Total Retail's Take: Much like Gap Inc.'s recent decision to split Old Navy from the parent company, J.Crew Group Inc. is mulling an IPO for its fast-growing Madewell brand to deleverage some of its hefty balance sheet. Madewell has connected with younger shoppers in a way that the parent brand, J.Crew, has been unable to do, and thus has made itself an attractive target for potential investors. By spinning off the Madewell brand, J.Crew Group Inc. can "improve the capital structure and better position the company to address its debt,” said Raya Sokolyanska, a ratings analyst at Moody’s Investors Service. As for new CEO Nicholson, he inherits a challenged business, but one that has shown recent signs of promise — total revenues increased 3 percent in its most recent quarter, with same-store sales posting a 9 percent increase.