J. Crew: Private Equity Ruins Retailing (A and B)

Founded in 1947 as an affordable women's retailer, J. Crew launched a highly successful catalogue in 1983. J. Crew's brick and mortar operations and catalogue sales experienced healthy growth through the 1990s. Seeking a cash injection to further growth, and to compete with larger catalogue retailers, the company's founders sold a majority stake in 1997 to Texas Pacific Group. A controversial second private equity buyout in 2011 put the company in the hands of a subsidiary of Chinos Holdings, Inc.—a deal made at a time when there were signs that J. Crew was failing to adapt to changing customer trends. A series of debt restructurings dug an even deeper financial hole for the company—leading to J. Crew becoming the first retailer to file for bankruptcy during the COVID-19 pandemic of 2020. In Case A students will learn of the retail trends and private equity-guided deals that led to J. Crew's distress. This case asks students to consider whether private equity firms, despite the cash infusions originally promised, benefit or complicate a retailer's chances for financial success—and ultimately for survival. The B case takes a closer look at the impact of the COVID-19 pandemic and the revenue losses that ensued for the company. Taken together, these cases ask students to consider whether private equity firms, despite the cash infusions originally promised, benefit or complicate a retailer's chances for survival.