J Crew Group has announced the sudden departure of CEO, James Brett, after less than 18 months in the post – a move described by one analyst as "worrying" as it leaves the US fashion retailer leaderless at a time when it desperately needs a focused effort to rebuild sales and reconnect with consumers.

In a statement at the weekend, J Crew said Brett would step down with immediate effect. He led the group since June of last year, when he took over from J Crew owner and CEO, Millard Drexler.

The company's operations will now be managed by an 'office of the CEO' while the board works to establish a permanent management structure. The office of the CEO is comprised of four senior JCrew executives: Michael Nicholson, president and COO; Adam Brotman, president and chief experience officer; Lynda Markoe, chief administrative officer; and Libby Wadle, president of Madewell Brand. 

"Returning J Crew to its iconic status required reinventing the brand to reflect the America of today with a more expansive, more inclusive fashion concept," Brett said. "However, despite the recent brand relaunch already showing positive results, the board and I were unable to bridge our beliefs on how to continue to evolve all aspects of the company."

In its most recent second quarter results, the company said its restructuring was starting to pay off. Comparable sales growth accelerated to 5%, as the company reached "a watershed moment" by returning to positive comparable growth in its J Crew brand for the first time in four years. It also reported a "continued stellar performance" at Madewell with 28% comparable sales growth – putting Madewell on a path to becoming a $1bn brand.

A "worrying" move

The suddenness of Brett's exit "suggests there is a tussle over how to develop the brand among the various senior stakeholders," says Neil Saunders, managing director of analyst GlobalData Retail. "Given that J Crew has made a net loss of US$18.5bn so far this fiscal year, and that it has a $1.7bn long-term debt pile, it does not have the luxury of switching lanes as it tries to find the best route to recovery."

Under Brett, the retailer started offering more competitive price points and refocusing the product, expanding the low-priced basics selection, as well as introducing plus sizes to help widen its audience. The company also added wholesale relationships with several large retail partners (including Amazon), and invested in its digital capabilities and supply chain optimisation initiatives aiming to cut costs and shorten product lead times.

"However, the brand is nowhere near back to full strength and the sales results, while going in the right direction, are still fairly soft. More time, and effort, is required for the strategy to come to fruition," Saunders says.

Another damaging problem before Brett arrived was the attitude of management, Saunders says, who "were not sufficiently humble about the brand's status and were rather divorced from the realities of the retail marketplace. 

"If the departure of Jim Brett hails the return of these unrealistic attitudes, J Crew is going to slip back and undo all of the progress made to date. Given the precariousness of its financial position, this is a mistake it cannot afford to make."

Meanwhile, analysts at Moody's Investors Service have described the CEO exit as "credit negative because it leaves the company without key leadership at a time of critical transformation and creates some level of uncertainty around JCrew's go-forward strategy."

In a note, they agree that Brett has introduced numerous changes to the J Crew brand, along with continued growth at Madewell. But they add: "J Crew needs strategic focus, continued investment, and strong execution in order to achieve sustainable revenue growth. We view the capital structure as still untenable at current leverage levels."