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Why stores 'race to the bottom': J. Crew's Drexler

The feeding frenzy for sales and deals during the holiday shopping season has retailers locked in a fierce "battle on margins" this year, J. Crew Chairman and CEO Mickey Drexler told CNBC on Thursday.

"I lived through a lot of holiday seasons and you can predict that 2014 will be more promotional than 2013—if that's possible," he said in a "Squawk Box" interview. "The environment is, 'If I can't be creative, if I can't be inventive, I'm just going to lower my prices.'"

Mickey S. Drexler, chief executive officer of J. Crew Group.
Chris Radcliffe | Bloomberg | Getty Images
Mickey S. Drexler, chief executive officer of J. Crew Group.

Drexler was tapped in 2003 to turn around J. Crew after he was fired from The Gap, where he really made a name for himself over nearly two decades. He presided over a successful IPO at J. Crew in 2006. In 2011, the retailer was taken private.

This "race to the bottom" mentality is forcing stores to "battle on margins because we have to remain competitive," Drexler said.

Emanuel Chirico, chairman and CEO of clothier PVH Corp., agreed. "This year, successful retailers are going to be the ones who can really manage their gross margin, manage their markdowns." PVH—formerly named Phillips-Van Heusen—is the company behind the Tommy Hilfiger, Calvin Klein, Van Heusen, and Izod brands as well as many licensed names.

A customer leaves the Tommy Hilfiger flagship store, now owned by PVH, on Fifth Avenue in New York.
Ramin Talaie | Bloomberg | Getty Images
A customer leaves the Tommy Hilfiger flagship store, now owned by PVH, on Fifth Avenue in New York.

"The entire promotional environment is much more promotional than it was this time last year," he continued in a separate "Squawk Box" interview. "It's a very hard situation to read, very choppy."

When asked for a read on how the American consumer is feeling, Drexler said, "If you think you know the consumer better than anyone then you're in real trouble. So we take a close watch. You spend time in stores."

At PVH, Chirico said the shortened holiday shopping season with Thanksgiving being so late this year has compressed his sales. But he said business is picking up in these final days before Christmas.

He predicted the cold weather might be the "silver lining in all this," because post-holiday gross margins might be stronger.

As for online sales at J. Crew and its women's clothing brand Madewell, they're the most profitable vehicle, according to Drexler. "It's one location. It's one cost center. And it's leveraged like crazy around the world."

He revealed that the clothing company's business is "30 percent online and growing." In the next five years, he predicted that number could be as high as 37 percent.

By CNBC's Matthew J. Belvedere. Follow him on Twitter @Matt_SquawkCNBC.

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