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J. Crew Heads Overseas

By David Moin
From WWD 08/08/2011

J. Crew, after years of holding back on the international front and watching competitors cross borders, is taking some big steps of its own.

The first J. Crew store in Canada is set to open Aug. 18 in the Yorkdale Shopping Centre in Toronto, and ultimately a fleet of 25 to 30 units is anticipated. The team is scouring upscale malls and street locations in Canada for additional sites, some of which are expected to be unveiled soon, but the company declined to specify any others besides Yorkdale. There are reports that Robson Street, Vancouver’s most famous shopping venue, Toronto’s Eaton Centre and the West Edmonton Mall are high priorities.

Currently, J. Crew does not operate stores outside the U.S., although it used to have licensed J. Crew stores in Japan, which were closed years ago. A return to Japan is likely, as is entry into China for the first time in the near future.

“We are exploring partnerships in China, and we are also exploring some Japanese relationships,” Millard “Mickey” Drexler, chairman and chief executive officer of J. Crew Group, told said in an exclusive interview.

J. Crew is also considering stores in the U.K., with up to nine units in the next several years, though Drexler said getting the desired real estate without paying through-the-roof rents is difficult. “If there is a landlord in the U.K. willing to give us an extremely attractive lease in a very desirable location, we are ready to chat,” Drexler said, half-joking.

J. Crew online will expand internationally faster than J. Crew stores, and will launch in late August in the U.K. Later this fall, J. Crew online will launch in France, Germany, Italy and Ireland, and down the road in Australia. J. Crew already ships to online customers in Canada and Japan.

“Are we late? I don’t know if we are late or not,” said Drexler, addressing the issue of J. Crew as a Johnny-come-lately to global growth. “It’s clear J. Crew is a worldwide demanded brand. Now it’s time to strategically manage the business that way and expand beyond America’s borders.”

When Drexler joined J. Crew in 2003, after heading up Gap Inc., he played down the international potential. Last week he explained why. “There was so much to do in America in terms of building our products, our quality, our culture, the right store designs. Then we had start-ups, Madewell, Crewcuts, online. We had to focus there before we had the time and the people to go beyond our borders. I didn’t want to compromise what we were doing in America. You can’t just be rushing out and distracting the team. We also knew from past experiences [referring to J. Crew in Japan] it’s not just a matter of going out and opening a store. You have to have the right real estate, the right partners and an organization to take on the work. We did not have the critical mass or the team to do that.”

In 2011, it’s a different story. “We are ready to leverage the organization,” Drexler said. “We are ready to leverage our products.…We know there is pent-up demand.” He said that’s evident from J. Crew’s “huge international clientele” in New York, south Florida and California, and from Canadians who shop J. Crew in Buffalo, N.Y. Results from the direct businesses already operating — and from J. Crew selling on Net-a-porter .com since June 2010 and more recently on Mr. Porter, the men’s version of Net-a-porter — are also fueling the optimism. There are no plans yet to take Madewell abroad.

Asked if the international rollout will be aggressive, Drexler replied: “We want to grow profitably and with the right integrity. We are not trying to do it fast or formulaically. We are still in the fashion business. We know we don’t have a logo that people will buy immediately. But now all indications are that customers want us.”

In March, TPG Capital and Leonard Green & Partners took J. Crew private in a $3 billion deal. Yet the decision to accelerate overseas growth was “independent” of the ownership change, Drexler said. “We were planning it before, whether we were private or public,” though he did say it’s better to make these kinds of investments as a private company “so you’re not being second-guessed by Wall Street every day.”

At one point years ago, there were 65 J. Crew stores operating in Japan. As the stores faltered, they were closed, and by spring of 2009, after the licensing agreement expired, the remaining stores were shuttered. “We had a licensed deal that was so poorly managed. The stores were embarrassing, and there was too much else to do in America,” Drexler said.

The Canadian move is more calculated, in a well-trafficked mall and a very affluent area. The 5,000-square-foot unit will sell women’s only since there’s not enough room for men’s. The Canada store, like the U.S. ones, will take the head-to-toe wardrobing approach for weekend, work, day and evening attire that the company has been honing while working to strengthen its key categories and items, such as cashmere, the work wear collection, capri pants and Italian ballet flats. The Collection, the retailer’s limited edition, high-fashion line designed with special details, will also be sold at Yorkdale, and there will be personal shoppers.

“We know the mall. We have friends who have stores there. From all the reports, it was a very easy decision,” Drexler said.