How J. Crew's smaller sister brand is defying the company's curse and taking over America

J. Crew is in the middle of a crisis. 

Sales have been sliding amid criticisms that the company is alienating its target customer: young, professional women.

The brand is currently working to overhaul its business by offering better designs. Management recently laid off 10% of its corporate employees, and iconic creative director Jenna Lyons has receded from the public eye. 

But during J. Crew's recent layoffs, a victor emerged - its sister brand Madewell, which under J. Crew, opened its first store in 2006.

While J. Crew is sold to professionals who crave clean lines, Madewell has maintained a more hip and artsy look, emphasizing its denim line. Madewell also strictly focuses on women. 

As women leave J. Crew, citing its poorly fitting sweaters (one in particular) and allegedly poor quality, Madewell's sales are soaring, Bloomberg reports. And J. Crew has 283 stores, while Madewell has a surprising 88, according to a recent release.

As part of the company's management shakeup, Madewell design chief Somsack Sikhounmuong is taking over J. Crew's women's business, a move that seems like a logical choice given his success with the company's coveted demographic.

Here's what Madewell is doing right. 

Madewell's unlikely past and ascent to being "cool"

The Madewell brand has been around since 1937, a year still emblazoned on the brand's tags.

But it wasn't always a trendy choice for women.

The company was founded in New England by Russian immigrant Julius Kivowitz. It originally sold bib overalls, jeans, and dungarees for factory workers and fishermen.

Madewell went on this way for decades, until 1989, which Buzfeed reported was the year the last factory shut down. But this history was largely unknown until Buzzfeed published an eye-opening essay by Dan Nosowitz, the great-grandson of Madewell's founder, highlighting how J. Crew CEO Mickey Drexler purchased the brand name nine years ago and spun it into a story of his own.

"It [Madewell] traces the evolution of how Americans shop, and how Americans shop heavily informs how Americans see themselves; we, as a country, are what we buy," Nosowitz wrote in the Buzzfeed essay. "Mickey Drexler, in creating J. Crew's new womenswear stores, shrewdly read the market and realized that stocking nice clothes wouldn't be enough: He'd have to tell a story along with them. Drexler didn't have any stories, so he bought ours." 

Madewell turned heads in the retail industry in 2006 when J. Crew acquired the brand. Drexler told The New York Times this winter that he "[loves] the vintageness" of Madewell. 

It's not the first time Drexler launched a successful "sister" brand to a well-known retailer.

When he was CEO of Gap three decades ago (he was let go in 2002), Drexler successfully launched the lower-priced Old Navy brand. (Old Navy is now also outpacing its larger namesake).  

A few years after acquiring Madewell, Drexler decided to focus his energy on making the brand huge. 

One of his most prominent moves was promoting Sikhounmuong to design chief of Madewell in 2013.

A style that resonates with customers 

 Sikhounmuong's career trajectory is similar to that of J. Crew's famous creative director, Jenna Lyons.

Like Lyons, Sikhounmuong started working at J. Crew after graduating from the Parsons School of Design. More than 12 years later, he started leading the design team at Madewell, according to WhoWhatWear. 

At the time, he described his plans to "refresh" Madewell's aesthetic and move away from jumping on fast-fashion trends.

"We are cleaning and simplifying, so we're steering the collection towards the classic, straightforward, and effortlessly sexy design and taking the things Madewell has done best - tomboy pieces, denim, and leather - and giving them a bigger platform," he told WhoWhatWear. 

His strategy obviously worked; profits jumped 35% in 2014's fiscal year to $245.3 million. 

As of March 20th, Madewell planned to open 15 new stores, totaling 100, reported Digiday. As of June 10, there were 88 units. This will still be smaller than J. Crew's 283 units.

Madewell is now in partnerships with Nordstrom and Net-A-Porter.

And young women - Madewell's intended demographic - are going crazy for the brand.

Hopes are high that Sikhounmuong can repeat his success as he returns to J. Crew. He repaired Madewell when its audience felt alienated; perhaps he could do the same by identifying J. Crew's target customer. After all, Madewell has been an expert at speaking to the customer.

As Drexler continues to helm both brands, it seems likely that he could pull from Madewell's hits. 

"The consumer wants to know that they can depend on the brand to address their needs, and I think that is something Madewell is doing so well and has J. Crew probably lost its way a bit," Robert Burke, retail and branding expert and chairman and CEO of Robert Burke Associates, told Business Insider. "But I will say all of that and say that Mickey Drexler's very quick to recognize these things. He understands the importance of having brand consistency." 

Sikhounmuong's success with Madewell can be largely attributed to how well he knows and understands his audience.

Madewell "has been very focused on who the consumer is, and it's been strategic in how they expanded their business and the product categories," Burke told Business Insider.

He added that people turn to established brands during times of financial crisis, which made it easy for Madewell to take off during the recession.

"People went to heritage brands, and this one happened to be a very, very good heritage brand that could tell a very focused and compelling story," he said. 

On the Madewell blog, Sikhounmuong described his 2014 line as "effortless, cool, creative and unfussy - the same words I'd use to describe the Madewell girl." He said that Madewell girls "prefers authenticity over trends. She wants clothing and accessories that add to her already well-rounded wardrobe, not trendy clothes that make her easy to label."

"I think there's an interest in authenticity right now, and when people spend money, they want to feel that they're buying something with longevity," Burke said. "When you look at the heritage moment or "made in a America" kind of moment, it transcends fashion ... it becomes a lifestyle."

Sikhounmuong also explained that he knew what not to put on the rack. "What you won't see in the stores is just as important as what you will. It's all about the edit," Sikhounmuong said on Madewell's blog.. 

And at best, Drexler and Sikhounmuong are innately tuned into what women want to wear. "Madewell is just really capturing the moment right now of how women wanna dress," said Lauren Sherman, fashion writer and Fashionista's editor-at-large to Business Insider.

Quality is key to Madewell's success

 But there's no witchcraft or secret insight into the trends that makes it so great. The real secret to Madewell's success is fairly simple. The product is true to its namesake: the clothes are made well.

This also illustrates a stark contrast between Madewell and J. Crew, which has been rife with quality complaints.

"At present, Madewell's product is better than J.Crew's," Fashionista's editor-in-chief Lauren Indvik told Business Insider. She pointed to the company's denim line as a prime example. 

"They have a great staple in $130 jeans, which fit better and are more trend-driven than Gap, and more affordable than designer denim," Indvik said. 

She also noted that Madewell sells at a competitive price point - "in league with Zara, but better quality. Sales are infrequent, so I trust the value of the product more." 

This is where sister brand J. Crew has stalled.

"J.Crew, to me, has gotten boring, at both a product and styling level. There is very little that is new," Indvik said. "They keep churning out too many of the same silhouettes, in different colorations and prints, season after season. Fit is challenging for a lot of women, and as many have pointed out, sizing is off." 

Madewell company has the added prestige of being the go-to non-runway brand for celebrities. WhoWhatWear dubbed the brand "the affordable brand almost every celebrity is wearing."

J. Crew may have had Michelle Obama, but Madewell has Sarah Jessica Parker, Taylor Schilling, Amy Adams, and Emma Stone - hot names for younger clientele.

Madewell also has something else: a curated aesthetic with a heritage influence, without being pegged as a heritage brand. "It's a brand for cool girls," said Fashionista's Sherman. 

Can Madewell stay hot?

Madewell has primarily thrived by truly trapping into current trends. "That's what Mickey Drexler is really good at." Sherman said to Business Insider. "Tapping into something and capitalizing on it."

But in the meantime, can Madewell continue to keep its audience? 

After all, as with all trends, the heritage-esque look - the vintage, curated, mason-jar aesthetic - can only stay cool for so long. Then again, all trends fade at some point. It's the ebb and flow of fashion.

Fortunately for Madewell, the brand primarily prides itself on authenticity and connecting with its audience rather than focusing on its "heritage" alone. 

"I think that Madewell has reason for success - that it's stayed absolutely focused. I don't think it's made too many mistakes and I don't believe from my perspective it's confused the consumer or neglected the consumer, said branding expert Burke. "It has evolved, which is very important for a brand to continue to evolve, but not at a pace that leaves the customers behind."

As for Drexler, he believes in the brand and thinks it has the potential to be a staple in women's closets for decades to come.

"I would like Madewell jeans to be the Levi's of its generation," he told the The New York Times earlier this year.