When J. Crew started opening Madewell stores in 2006, the company declared that its new brand would deliver “real, honest women’s clothes” for hip 20- and 30-somethings. “Not too trendy, not too girly, just cool clothes infused with a modern upbeat attitude,” it said in a release at the time, promoting the worn-in feel of the retailer’s T-shirts, jeans and chinos.
The idea worked better, perhaps, than the company expected.
Madewell has since become a shining retail star, one that filed for an initial public offering on Friday at the same time that the once-popular J. Crew brand struggles to regain relevance in an increasingly online environment. The fortunes of the chains have diverged so much that Madewell’s I.P.O. will help raise much-needed capital for its parent, J. Crew, which will remain private.
While Madewell is only about one-third the size of J. Crew, the brand has taken off in recent years thanks to a retail strategy better suited to today’s shopping landscape and a broader shift to more casual clothing in the United States. Madewell said in its filing that it believed a substantial portion of the population anchored its wardrobes to denim — and not just on weekends “but also increasingly for work and social occasions.”
“There’s a real blurring now between what people are wearing on the weekend and what they’re wearing for work, and that blurring is working really well for brands such as Madewell,” said Sarah Willersdorf, a partner at Boston Consulting Group who specializes in fashion and luxury. Jeans are a particular beneficiary of the “casualization” trend among men and women, which has also fueled growth in athleisure and streetwear, she said.
While the trend toward casualization in America started in the 1990s with the technology revolution on the West Coast, it has “intensified” in the years since the recession and is now even extending to traditionally conservative workplaces like Goldman Sachs, said Marie Driscoll, a managing director who covers fashion and luxury at Coresight Research.
Madewell said that denim accounted for 29 percent of its $614 million in sales last year, while “everything you wear with jeans” made up 52 percent of revenue. (The rest of its merchandise includes items like dresses and swimsuits.) While most of its jeans cost between $100 and $150 a pair, the brand said it had expanded its reach with a recent $75 style, and believes it can ultimately grow denim into a $500 million business.
“Simply put: We’re on a mission to get more butts in our jeans,” Libby Wadle, the chief executive of Madewell, said in a letter as part of the I.P.O. filing.
Madewell’s success stands in contrast to a protracted downturn for J. Crew, which was taken private in a $3 billion deal in 2011 and has more than $1.5 billion of debt. The deal took place when the brand’s colorful workwear was far more popular and being worn by the likes of Michelle Obama. Within a few years, that began to change. Revenue from the J. Crew brand shrank to $1.8 billion last year from $2.3 billion five years earlier.
“They were too fashion forward for their customer, prices were too high and they’re not as relevant as they used to be as a preppy or classic brand,” said Shawn Grain Carter, an associate professor of fashion business management at the Fashion Institute of Technology. She noted that other classic, preppy brands like Ann Taylor and Talbots have also been struggling.
“That’s what baby boomers bought, that’s what Generation X bought, but that’s not what millennials are interested in and not what Generation Z is interested in,” Ms. Grain Carter said.
Madewell was originally a New Bedford, Mass., workwear company — as in bib overalls, not patterned cardigans — that was founded in 1937. Mickey Drexler, the former chief executive of J. Crew, acquired the trademark just before he joined the retailer in the early 2000s. He used the history of Madewell to lend a sheen of authenticity and heritage to the brand.
Mr. Drexler told The New York Times in 2015 that he wanted Madewell’s jeans “to be the Levi’s of its generation.” (Levi’s is also trying to be the Levi’s of this generation, and had a successful I.P.O. in March.)
The brand’s jeans stand out because “it’s denim the way a young woman wants it today,” Ms. Driscoll said, pointing to its e-commerce business and messaging around inclusive sizing and recycling. “It was made in the age of digital, social, mobile and resonates with that consumer.”
Madewell sought to highlight its digital savvy, customer relationships and sustainability efforts in its picture-filled I.P.O. filing. The brand said that it received feedback from a 4,400-customer panel called the “Madewell Group Chat,” which is closed to outsiders. It has seen millions of engagements with the hashtag #everydaymadewell on Instagram. It held more than 2,500 events at its stores last year. Twelve percent of in-store jean sales last year could be attributed to its denim recycling program, which gives customers who donate any brand of jeans at their stores a $20 discount on new Madewell jeans.
Its distribution strategy is also better suited to retail in 2019 — and to selling merchandise at, or close to, full ticket prices.
“It has a diversified business model to begin with,” Ms. Grain Carter said, pointing to Madewell’s report that 40 percent of its direct sales were from e-commerce in the first half of the year.
Unlike J. Crew, Madewell is not spread across many American outlet malls. The retailer said it had 132 stores in the United States as of last month, mostly in so-called Class A upscale malls, street locations and lifestyle centers. The stores, according to the filing, generated $1,100 in sales per selling square foot last year. That compares with the $1,579 in sales per square foot brought in by Lululemon, the high-end athleisure brand currently considered one of the most successful apparel retailers.
The brand also brings in more than 10 percent of its revenue from wholesale relationships, mostly from Nordstrom, though it also has partnerships with Shopbop and Stitch Fix. (The wholesale revenue bumped up Madewell’s overall sales from the reported figures in J. Crew’s annual report last year.)
Madewell has broad ambitions as it becomes a publicly traded company, including a foray into men’s wear that will be accompanied by a “dual gender marketing campaign” this fall. It also aims to open 10 to 15 more stores per year for the foreseeable future.
The company will have to be careful to protect its appeal as it continues to grow, Ms. Willersdorf said.
“It feels to a consumer, smaller, more personalized, part of a community,” she said. “They’ve done an amazing job, but it’s easier to feel special and unique when you’re a certain size. Doing that at scale is more challenging.”
