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Mickey Drexler’s Redemption

Millard “Mickey” Drexler has spent most of his adult life choosing clothes to put in stores, then waiting for the sound of cash registers to ring. But the irrepressible 60-year-old son of a garment-district button buyer has never faced a challenge like the one he’s facing now. Four months after he left the Gap (he’s also worked at Abraham & Straus, Ann Taylor, Bloomingdale’s, and Macy’s), Drexler embarked on what may be the boldest experiment of his 36-year career. After cashing in $157 million in stock options, and forgoing a multi-million-dollar severance payment from the Gap by refusing to sign a noncompete agreement, Drexler uprooted himself from San Francisco and returned to his hometown of Manhattan to take over the flagging J.Crew chain. Now, with the holiday shopping season a Thanksgiving dinner away—the first holiday season in which Drexler’s redesigned J.Crew clothes will be in the stores—the question is: Can the “merchant prince,” as Wall Street has dubbed him, do it again?

It’s difficult enough to capture the fashion Zeitgeist once, let alone twice, and J.Crew has lately been a declining brand competing in an increasingly crowded field. The preppy label was satirized earlier this year as the symbolic embodiment of try-too-hard suburban life in Tom Perrotta’s best-selling novel Little Children. After co-founder Emily Woods left the helm in 1997, when the private investment firm Texas Pacific bought a majority interest in J.Crew for $560 million, the clothes became drab and uninspired. Lyons, who joined J.Crew in 1991, says that in recent years, she had been told to create clothing primarily on the basis of price. “We’d get a list—X amount of styles, six $55 pants, seven $70 pants. We’d be picking fabrics and designing into boxes of criteria. It completely stifled creativity.” After posting an $11 million loss in 2001, J.Crew lost $40 million in 2002.

In the months after he was fired from the Gap, Drexler temporarily set up shop in office space in San Francisco offered by Bowes, who runs an equity buyout firm there. “Mickey’s fun, but he was making so much noise we had to close the doors,” says Bowes. “He yells and screams, whether he’s running a business or his houses or various situations he was looking into.” Drexler met with a series of well-known retailers—Ralph Lauren and Tommy Hilfiger were mentioned in press reports—as well as venture capitalists eager to fund him in a new enterprise, but he wasn’t that enthused about anything until Texas Pacific came calling. J.Crew appealed to Drexler because it reminded him of his previous turnaround experiences—an underperforming company with stores in good locations and a strong brand name. “Ann Taylor—great name, great real estate, shitty business,” he says. “Gap—great name, great real estate, declining business. J.Crew—Hellooo?—great name, better fashion image than the Gap.” With $700 million in annual sales, J.Crew is less than one twentieth the size of the Gap, but, says Drexler, “I fell in love with the possibility.”

Last summer, an eye doctor told Drexler he had never seen a patient respond so rapidly to external movement and stimuli. “I spot detail quickly,” Drexler says.

Ever since Texas Pacific bought J.Crew, the executive suite had been a revolving door, with three CEOs in five years. Ironically, the most recent CEO, Ken Pilot, had been lured away from the Gap in August, and spent less than five months at J.Crew before he was bought out in favor of Drexler. Still, Texas Pacific has a reputation for giving its CEOs a relatively free hand, which was appealing to a man who had just come from battling a hostile board. It was also a relief to take over a privately held company and avoid daily Wall Street scrutiny. Insisting upon equity, Drexler invested $10 million of his own money for a 22 percent share of J.Crew. “You have no idea how much it’s costing me to run this company,” he says, only half-joking. If J.Crew eventually goes public, he’ll cash in. For now, he’s earning $700,000 a year in salary, bonus, and expense reimbursements (compared to $7.8 million in compensation plus perks and options at the Gap at the high point). With no company plane, Drexler, who travels frequently to visit stores, bought his own Gulfstream, and until recently paid for his own Mercedes and driver. Jim Coulter, partner and co-founder of Texas Pacific, admits that he initially wondered whether someone who was already so wealthy still had the fire for tackling a turnaround. “I worried for about two and a half minutes before I saw Mickey go to it,” says Coulter, “does he have the energy and passion? He loves it. I call him up, and he’ll be worried about 48 things, and then I’ll ask how he’s doing and he says, ‘I’m having so much fun.’ ”

Drexler says revenge was not a factor in his decision to join J.Crew, but he keeps an eye on his former employer. On one of his many visits to one of J.Crew’s Manhattan branches, the store at Fifth Avenue and 17th Street, Drexler suggests a compare-and-contrast side trip to the Gap, across the street, and Banana Republic, a block away. Drexler is accompanied by Jeff Pfeifle, the new president of J.Crew, who was Drexler’s right-hand man at Banana Republic and helped him found Old Navy (both Gap brands). Sarah Jessica Parker’s photo is plastered on the Gap’s windows; Drexler has been gleefully telling his staff that the Gap pitchwoman recently stocked up on J.Crew cashmere sweaters, a psychic victory for the home team (Parker’s spokeswoman says she bought them as gifts, then returned them). Today, Drexler seems both vindicated and sad as he scans the racks of merchandise, marked down early in the season. It’s as if a child has gone astray and he can’t do anything. The reconnaissance mission is interrupted when an alert salesman gives Drexler a nod. Drexler remains a familiar figure in the far-flung Gap empire. Pfeifle grins: “We’re busted.”

Drexler’s office is on the twelfth floor of the J.Crew headquarters—it’s really more like a conference table in a large corner cubicle, albeit with sweeping views of Greenwich Village. But he spends most of his time on his feet, sticking his head into cubicles (“What’s happening?”) and running off to visit stores. Just as he did in his early days at the Gap, Drexler has immersed himself in every part of J.Crew’s business. He’s a visionary and a control freak: He insists on vetting every new employee, choosing the models for the catalogues, reviewing customer complaints, and signing off on window displays. He even compulsively tweaks press releases, insisting that a formal announced be changed to a more conversational said.

In the J.Crew warehouses, Drexler discovered the fashion ghosts of seasons past, extensive inventory that was as much as five years old. He outlined for the board what he’d have to do: slash prices to get rid of the old merchandise, cancel already-placed orders for goods that he found unappealing, and fire and then hire staff, which meant paying off contracts and underwriting moving costs for newcomers. Selecting and manufacturing new merchandise would take time. Drexler told the board that he’d expect things to improve in eighteen months—by fall 2004.