What will cheaper J.Crew line mean for brand's image?

As J.Crew prepares to launch a more affordable clothing line, the company's CEO won't be worrying about how its cheaper products will hurt their image, according to CBS News financial contributor Mellody Hobson.

Hobson said Mickey Drexler was the first person ever to implement this type of initiative during his reign as CEO of Gap Inc.

"Old Navy was the lower-priced Gap. It was incredibly successful under his tenure, and then all the other retailers followed," Hobson said Monday on "CBS This Morning."

Similar stores include Last Call of Neiman Marcus, Nordstrom Rack and Saks Off 5th.

The company says its new line, J.Crew Mercantile will feature "a collection of original styles once only found at J.Crew factory stores."

"(Drexler) is saying he wants to open these stores because he's taking the J.Crew brand to places where it would not exist. He mentioned strip malls as a possibility," Hobson said "And this is for the customer that is not going to go to that high-end shopping district or that high-end mall, who is a valued buyer and wants to have the J.Crew experience."

But the company is also running into trouble it can't afford. The retail giant laid off nearly 200 people last month, as it fights a sales slump.

Hobson said the last quarter was particularly unfavorable, as revenue declined 2 percent, to $582 million, compared with total revenue in the previous quarter.

She said Drexler saw J.Crew sales slumped because of two mistakes.

"He was the first to admit on the phone that 'We had a bad year.' He said full stop, 'We had a bad year.' They raised their prices at a time when their merchandise was not resonating with their consumers, and it was a double whammy," Hobson said.

And although J.Crew Mercantile products will be cheaper, Drexler insisted his company will always stand for quality. Hobson said not to confuse J.Crew with "fast retailers" like Zara, Uniqlo or H&M.