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News Release

J. Crew Group, Inc. Announces First Quarter Fiscal 2009 Results

May 28, 2009 at 4:02 PM EDT

First Quarter Revenues of $345.8 million

First Quarter Diluted Earnings Per Share of $0.32

NEW YORK, May 28 /PRNewswire-FirstCall/ -- J. Crew Group, Inc. (NYSE: JCG) today announced financial results for the three months ended May 2, 2009 (first quarter fiscal 2009).

First quarter highlights:

  • Revenues increased 2% to $345.8 million. Store sales (Retail and Factory) increased 5% to $240.7 million, with comparable store sales decreasing 5%. Comparable store sales increased 2% in the first quarter of fiscal 2008. Direct sales (Internet and Phone) decreased 6% to $95.4 million. Direct sales increased 17% to $100.9 million in the first quarter of fiscal 2008.
  • Gross margin decreased to 42.2% of revenues from 46.9% of revenues in the first quarter of fiscal 2008. The decrease in gross margin is primarily related to increased markdowns as a result of beginning of quarter inventory levels.
  • Operating income decreased 34% to $35.3 million, or 10.2% of revenues, compared to $53.0 million, or 15.6% of revenues, in the first quarter of fiscal 2008. Operating income in the first quarter of fiscal 2009 includes a charge of $1.3 million for severance and related costs associated with our workforce reduction announced in February 2009 and non-cash asset impairment charges of $1.0 million related to underperforming stores.
  • Net income was $20.4 million, or $0.32 per diluted share and includes the impact of severance and asset impairment charges of approximately $0.02. Net income was $30.5 million, or $0.48 per diluted share, in the first quarter of fiscal 2008.

Millard Drexler, J. Crew's Chairman and CEO stated: "We are relatively pleased with our first quarter results and while earnings were lower than last year, we did experience an improved trend in our business. We think it is clear that there is no choice in this environment than to continue to be creative and figure out where the customer is going, not to respond to where he or she has been."

Balance Sheet highlights as of May 2, 2009:

  • Cash and cash equivalents were $154.6 million at the end of the first quarter compared to $121.5 million at the end of the first quarter in the prior year.


  • Inventories at the end of the quarter were $193.9 million, reflecting the impact of 43 net stores opened since the first quarter of fiscal 2008. Inventory per square foot was flat to last year at the end of the first quarter of fiscal 2008.

Guidance

The Company currently expects second quarter fiscal 2009 diluted earnings per share in the range of $0.08 to $0.12.

Conference Call Information

A conference call to discuss first quarter results is scheduled for today, May 28, 2009, at 4:30 PM Eastern Time. Investors and analysts interested in participating in the call are invited to dial (877) 407-0784 approximately ten minutes prior to the start of the call. The conference call will also be webcast live at www.jcrew.com. A replay of this call will be available until June 4, 2009 and can be accessed by dialing (877) 660-6853 and entering account number 3055 and conference ID number 323565.

About J. Crew Group, Inc.

J. Crew Group, Inc. is a nationally recognized multi-channel retailer of women's, men's and children's apparel, shoes and accessories. As of May 28, 2009, the Company operates 238 retail stores (including 8 crewcuts and 14 Madewell stores), the J. Crew catalog business, jcrew.com, and 76 factory outlet stores. Additionally, certain product, press release and SEC filing information concerning the Company is available at the Company's website www.jcrew.com.

Forward-Looking Statements:

Certain statements herein are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the Company's current expectations or beliefs concerning future events and actual results of operations may differ materially from historical results or current expectations. Any such forward-looking statements are subject to various risks and uncertainties, including the strength of the economy, changes in the overall level of consumer spending or preferences in apparel, our ability to compete with other retailers, the performance of the Company's products within the prevailing retail environment, our strategy and expansion plans, reliance on key personnel, trade restrictions, political or financial instability in countries where the Company's goods are manufactured, postal rate increases, paper and printing costs, availability of suitable store locations at appropriate terms and other factors which are set forth in the Company's Form 10-K and in all filings with the SEC made by the Company subsequent to the filing of the Form 10-K. The Company does not undertake to publicly update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.




                                                             Exhibit (1)

                                     J. Crew Group, Inc.
                        Condensed Consolidated Statements of Operations
                                        (Unaudited)

    (In thousands, except      Three Months     Three Months
     percentages and per           Ended            Ended
     share data)                May 2, 2009      May 3, 2008

    Net sales
         Stores                   $240,726         $229,109
         Direct                     95,360          100,934
                                   336,086          330,043
    Other                            9,684           10,536
    Total Revenues                 345,770          340,579

    Costs of goods sold,
     buying and occupancy
     costs                         199,833          180,692
    Gross Profit                   145,937          159,887
         As a percent of revenues     42.2%            46.9%

Selling, general and

administrative expenses 110,669 106,841

         As a percent of revenues     32.0%            31.4%
    Operating income                35,268           53,046
         As a percent of revenues     10.2%            15.6%

    Interest expense, net            1,077            2,370

    Income before income taxes      34,191           50,676

    Provision for income taxes      13,746           20,175

    Net income                     $20,445          $30,501

    Income per share:
         Basic                       $0.33            $0.50
         Diluted                     $0.32            $0.48

    Weighted average
     shares outstanding:
         Basic                      62,130           61,192
         Diluted                    63,319           64,076


                                                             Exhibit (2)



                                     J. Crew Group, Inc.
                            Condensed Consolidated Balance Sheets
                                        (Unaudited)



    (In thousands)                       May 2,    January 31,   May 3,
                                          2009        2009        2008

    Assets
    Current assets:
       Cash and cash equivalents        $154,578    $146,430    $121,532
       Inventories                       193,923     187,044     174,493
       Prepaid expenses and other
        current assets                    30,746      34,926      32,850
       Prepaid & refundable income
        taxes                              9,892      23,116       8,600
    Total current assets                 389,139     391,516     337,475

Property and equipment, net 205,683 201,675 174,438


    Other assets                          20,161      20,618      33,299
    Total assets                        $614,983    $613,809    $545,212



    Liabilities and
     Stockholders' equity
    Current liabilities:
       Accounts payable                  $97,503    $119,719     $95,657
       Other current liabilities          83,871      83,889      77,816
       Current portion of long-term
        debt                               1,100         800           -
       Income taxes payable                    -           -       6,669
       Deferred income taxes, net          4,049       4,049           -
    Total current liabilities            186,523     208,457     180,142

    Long-term debt                        98,900      99,200     100,000

    Deferred credits                      73,825      73,815      68,388

    Other liabilities                      7,361       7,388       7,715

    Stockholders' equity                 248,374     224,949     188,967
    Total liabilities and
     stockholders' equity               $614,983    $613,809    $545,212



                                                             Exhibit (3)


Actual and Projected Store Count and Square Footage

    Fiscal 2009                     Total     Number of Number of  Total
                                    stores     stores    stores    stores
                                     open      opened    closed    open at
                                 at beginning  during    during    end of
                                    of the      the       the       the
    Quarter                         quarter   quarter   quarter   quarter
    1st Quarter (Actual)              300        12         2       310
    2nd Quarter (Projected)           310         7         0       317
    3rd Quarter (Projected)           317         4         0       321
    4th Quarter (Projected)           321         1         0       322


                                                      Reduction
    Fiscal 2009                              Gross     of gross    Total
                                 Total      square     square      gross
                                 gross       feet       feet       square
                                 square    for stores for stores   feet
                                feet at    opened or  closed or     at
                                beginning   expanded   downsized   end of
                                 of the    during the during the    the
    Quarter                      quarter     quarter   quarter     quarter
    1st Quarter (Actual)        1,864,133    52,185    (8,258)    1,908,060
    2nd Quarter (Projected)     1,908,060    29,992         0     1,938,052
    3rd Quarter (Projected)     1,938,052    18,064         0     1,956,116
    4th Quarter (Projected)     1,956,116     4,512         0     1,960,628

SOURCE J. Crew Group, Inc.

CONTACT:
Company Contact:
James S. Scully,
Chief Administrative Officer and Chief Financial Officer,
+1-212-209-8040;
Investor Contact:
Allison Malkin, Chad Jacobs, or Joe Teklits,
ICR, Inc.,
+1-203-682-8200
(JCG)

Certain statements herein are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the Company's current expectations or beliefs concerning future events and actual results of operations may differ materially from historical results or current expectations. Any such forward-looking statements are subject to various risks and uncertainties, including the strength of the economy, changes in the overall level of consumer spending or preferences in apparel, the performance of the Company's products within the prevailing retail environment, trade restrictions, political or financial instability in countries where the Company's goods are manufactured, postal rate increases, paper and printing costs, availability of suitable store locations at appropriate terms and other factors which are set forth in the Company's Form 10-K and in all filings with the SEC made by the Company subsequent to the filing of the Form 10-K. The Company does not undertake to publicly update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.