J. Crew's New Place in a Crowd

The retail landscape may be getting a bit more populated, especially when it comes to clothing American youth. J. Crew plans to launch a concept called Madewell onto the scene. Although this concept is still in its (very) early stages (you might call it the cocoon stage, since there isn't even a Madewell store as of yet), my first thought was how this development could theoretically affect other retailers, most notably Gap (NYSE: GPS  ) , the company that made J. Crew's CEO, Mickey Drexler, so well-known in retail.

According to an article by the Associated Press, J. Crew plans to start opening Madewell stores this year, with its first in Dallas, its second in Los Angeles, and possibly a third in an undetermined location. Intriguinglyt, J. Crew has licensed the Madewell trademark from Drexler himself.

The AP said that Madewell won't compete with existing J. Crew stores; it will offer clothes for a younger clientele, at prices about 20% to 30% lower than J. Crew merchandise. Its major items will be jeans, chinos, T-shirts, and fleece tops.

The description of the items Madewell plans to distribute caused me to take particular note of this new concept, even in its infancy. It's entering an extremely competitive segment of retail, and I was struck by the similarities I saw to information I gleaned while writing my bear argument for a recent Foolish duel on Gap. In a recent conference call, Gap management said that "key big ideas" for its concepts this year include making its T-shirts, hoodies, and denim as popular as they used to be, while Banana Republic would focus on chinos in its lineup. Sound familiar?

For now, those of us who watch retail stocks are well aware of the crowd that hopes to attract this demographic. Given the description of Madewell's wares -- who knows? They might even change by August -- one can certainly see how it might compete with Abercrombie & Fitch (NYSE: ANF  ) (which offers the Hollister concept for younger shoppers) as well as American Eagle Outfitters (Nasdaq: AEOS  ) . Other retailers that appeal to the youth market include Urban Outfitters (Nasdaq: URBN  ) and the private company American Apparel, which provides cotton separates for hip, urban youngsters.

Yep, it's a crowded arena, with plenty of companies hoping to lure carefree kids' dollars. J. Crew's newest retail concept is certainly not anything to worry about yet, with only three stores slated to launch this year (and those aren't even scheduled to occur until August). And it's an interesting time for J. Crew to embark on this mission -- it postponed the IPO it contemplated last year, with plans to revisit the idea this year. However, one can imagine that for some of these retailers, the debut of Madewell -- especially if it becomes a success and is earmarked for expansion -- wouldn't be a welcome development.

Gap has been recommended by bothMotley Fool Stock Advisorand Inside Value.

Alyce Lomax owns shares of Urban Outfitters, but none of the other companies mentioned.


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