J. Crew discontinues budget line, calling Amazon deal into question

J. Crew will discontinue its budget clothing line Mercantile a little less than three months after the company had announced it was opening a dedicated storefront for the brand on Amazon.

The news was first reported by the Wall Street Journal. A spokesperson for J. Crew confirmed the decision to CNBC. The company informed employees of the news in an internal memo Thursday, which was seen by the Journal.

The end of the Mercantile line raises questions about J. Crew’s deal with Amazon, which has been selling the budget line since September. J. Crew had originally resisted selling its products through Amazon to maintain control of pricing and marketing.

The Amazon deal was made under former CEO James Brett, who left the company earlier this month.

In the memo,the company told employees its priorities are to “return the J.Crew brand to profitable growth” and “more diligently manage our balance of investments and expenses,” the Journal reported. The company will focus on growing its lower-cost “factory” business online and in stores.

“We believe that a ‘good’ price tier opportunity is better served by the J.Crew label,” the memo says, according to the Journal.

The memo also said the Nevereven brand will be shut down. A spokesperson confirmed to CNBC that the brand, which was a part of J. Crew Group, will close.

J. Crew reported its third-quarter results on Thursday, which showed a 10 percent revenue increase to $622.2 million. Its net loss for the third quarter was $5.7 million, compared to losses of $18.4 million in the third quarter last year.

Comparable company sales increased 8 percent. In the third quarter last year, those sales decreased 9 percent.

Read the full report in The Wall Street Journal.

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