J. Crew Designer Benefits from “Obama Bump”

After the public learned that the Obama girls wore J. Crew-designed coats for their father’s inauguration, the company enjoyed what became known as “the Obama bump.”  Sales soared – especially after the company crowed about its connection to the First Family – and online traffic spiked so high that the company’s web site crashed.

The “Obama bump” no doubt contributed to J. Crew’s (JCG) decision to reward Jenna Lyons Mazeau (who’s often referred to as “Jenna Lyons”), the company’s Creative Director for its women’s clothing.

In an 8-K and Special Bonus Agreement the company filed last week, J. Crew disclosed that it paid Lyons Mazeau a “one-time cash bonus of one million dollars ($1,000,000)” on October 27, 2009.  The only strings attached to the bonus are that if Mazeau leaves the company within two years  “for any reason other than by the Company without Cause or by you for Good Reason,” she will have to repay all  – or some – of the special bonus (the amounts vary based on how long she is with the company).

Even without the Obamas, though, Lyons Mazeau has become something of a celebrity.  Her advice and recommendations appear regularly in a variety of publications, and she has become a household name to many.  And as this article notes, she’s the “creative director for the brand that’s become the go-to for women who demand designer style… without designer prices.”

While other retailers faltered in the past five years, J. Crew’s stock remained relatively stable.  The exception occurred in late May, 2008, when the company’s stock started a steady six-month decline.  Since last November, however, the stock has increased 119%; in fact, it is currently not too far below its highest price in recent history.

There’s certainly nothing wrong with rewarding creative geniuses, and no one can fault the company for giving Lyons Mazeau the bonus in a manner that gives her an incentive to stay with the company for at least four more years.  Yet the bonus must be viewed in the context of other recent events:  Even when the stock was climbing, at the end of Feb. 2009, the company cut nearly 100 jobs, suspended its contributions to employees’ 401(k) plans, and froze wages in an effort to save about $40 million a year.  But if the Obama bump continues, perhaps those decisions can be reversed and employees throughout the ranks can benefit from the company’s good sales.

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