J. Crew Group, Inc. Announces Second Quarter Fiscal 2007 Results
Second Quarter Operating Income Increases 38% First Six Months Operating Income Rises 48% Second Quarter Diluted EPS of $0.32
NEW YORK, Sept. 5 /PRNewswire-FirstCall/ -- J. Crew Group, Inc. (NYSE: JCG) today announced financial results for the three months (second quarter) and six months (first six months) ended August 4, 2007.
Second Quarter highlights: -- Revenues increased 13% to $304.7 million. Store sales (Retail and Factory) increased 11% to $219.6 million, with comparable store sales increasing 4%. Realigning last year's calendar weeks to be consistent with the current year retail calendar weeks would result in a comparable store sales increase of 6% in the second quarter of fiscal 2007. Comparable store sales increased 16% in the second quarter of fiscal 2006. Direct sales (Internet and Catalog) rose by 19% to $74.5 million. Direct sales increased 7% in the second quarter of fiscal 2006. -- Gross margin increased 160 basis points to 43.7% of revenues from 42.1% of revenues in the second quarter of fiscal 2006. -- Operating income increased 38% to $37.1 million, or 12.2% of revenues, compared to $26.8 million, or 10.0% of revenues, in the second quarter of fiscal 2006. -- Net income available to common stockholders was $20.6 million, or $0.32 per diluted share, compared with a net loss of $2.8 million, or loss of $0.08 per diluted share, in the second quarter of fiscal 2006. -- Adjusted net income for the second quarter of fiscal 2006 totaled $13.3 million, or $0.21 per diluted share. A reconciliation of net income on a GAAP basis to adjusted net income is included in Exhibit (3) of this press release.
Millard Drexler, J. Crew's Chairman and CEO stated: "We are pleased with our second quarter and first six months results. Our team continues to be focused on the level of design, quality, style and detail that our customers have come to expect from us."
First Six Months highlights: -- Revenues increased 18% to $602.0 million. Store sales (Retail and Factory) increased 15% to $420.6 million, with comparable store sales increasing 8%. Realigning last year's calendar weeks to be consistent with the current year retail calendar weeks would result in a comparable store sales increase of 7% in the first six months of fiscal 2007. Comparable store sales increased 14% in the first six months of fiscal 2006. Direct sales (Internet and Catalog) rose by 25% to $161.1 million. Direct sales increased 9% in the first half of fiscal 2006. -- Gross margin increased 140 basis points to 45.1% of revenues from 43.7% of revenues in the first six months of fiscal 2006. -- Operating income increased 48% to $81.5 million, or 13.5% of revenues, compared to $55.1 million, or 10.8% of revenues, in the first six months of fiscal 2006. -- Net income available to common stockholders was $45.3 million, or $0.71 per diluted share, compared to a net income of $1.7 million, or $0.05 per diluted share, in the first six months of fiscal 2006. -- Adjusted net income for the first six months of fiscal 2006 totaled $27.5 million, or $0.43 per diluted share. A reconciliation of net income on a GAAP basis to adjusted net income is included in Exhibit (3) of this press release. Guidance
The Company's long-term annual financial targets include comparable store sales growth in the mid single-digit range, Direct sales growth in the high single-digits, net square footage expansion in the 7% to 9% range, and diluted EPS growth in excess of 20%.
Use of Non-GAAP Financial Measures
In addition to providing financial results in accordance with GAAP, the Company has provided non-GAAP adjusted interest expense, loss on refinancing of debt, income taxes, net income, preferred stock dividends and earnings per share information for the three and six months ended July 29, 2006 in this release. This information reflects, on a non-GAAP adjusted basis, the Company's adjusted interest expense, income taxes, net income, preferred stock dividends, weighted average shares outstanding and earnings per share after considering the effects of transactions which resulted from the Company's initial public offering, refinancings and adjusted tax rates. This non-GAAP financial information is provided to enhance the user's overall understanding of the Company's current financial performance. Specifically, the Company believes the non-GAAP adjusted results provide useful information to both management and investors by adjusting the items discussed above that the Company believes are not indicative of future results. The non-GAAP financial information should be considered in addition to, not as a substitute for or as being superior to, net income, earnings per share or other measures of financial performance prepared in accordance with GAAP. This non-GAAP information and a reconciliation of this information to GAAP amounts for the three and six months ended July 29, 2006 are included in Exhibit (3).
Conference Call Information
A conference call to discuss second quarter results is scheduled for today, September 5, 2007, at 4:30 PM Eastern Time. Investors and analysts interested in participating in the call are invited to dial (888) 802-8577 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 September 12, 2007 and can be accessed by dialing (877) 519- 4471 and entering code 9133043.
About J. Crew Group, Inc.
J. Crew Group, Inc. is a nationally recognized multi-channel retailer of women's and men's apparel, shoes and accessories. As of August 31, 2007, the Company operates 189 retail stores, the J. Crew catalog business, jcrew.com, and 55 factory outlet stores. Additionally, certain product, press release and SEC filing information concerning the Company are available at the Company's website www.jcrew.com.
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) (Amounts in thousands, except Three Months Three Months Six Months Six Months percentages Ended Ended Ended Ended and per August 4, July 29, August 4, July 29, share amounts) 2007 2006 2007 2006 Net sales Stores $219,586 $197,410 $420,595 $364,535 Direct 74,538 62,823 161,108 129,033 294,124 260,233 581,703 493,568 Other 10,607 8,936 20,340 16,288 Total Revenues 304,731 269,169 602,043 509,856 Costs of goods sold, buying and occupancy costs 171,554 155,951 330,303 287,244 Gross Profit 133,177 113,218 271,740 222,612 As a percent of revenues 43.7% 42.1% 45.1% 43.7% Selling, general administrative expenses 96,054 86,399 190,244 167,498 As a percent of revenues 31.5% 32.1% 31.6% 32.9% Operating income 37,123 26,819 81,496 55,114 As a percent of revenues 12.2% 10.0% 13.5% 10.8% Interest expense, net 2,858 15,660 6,300 34,856 Loss on refinancing of debt ---- 10,039 ---- 10,039 Income before income taxes 34,265 1,120 75,196 10,219 Provision for income taxes 13,630 1,100 29,912 2,400 Net income 20,635 20 45,284 7,819 Preferred stock dividends ---- (2,777) ---- (6,141) Net income (loss) applicable to common stockholders $20,635 ($2,757) $45,284 $1,678 Income (loss) per share: Basic $0.34 ($0.08) $0.75 $0.05 Diluted $0.32 ($0.08) $0.71 $0.05 Weighted average shares outstanding: Basic 60,316 36,433 60,024 30,934 Diluted 63,806 36,433 63,698 34,670 Exhibit (2) J. Crew Group, Inc. Condensed Consolidated Balance Sheets (Unaudited) (In thousands) August 4, 2007 February 3, 2007 Assets Current assets: Cash and cash equivalents $119,672 $88,900 Inventories 158,560 140,670 Prepaid expenses and other current assets 52,633 47,528 Total current assets 330,865 277,098 Property and equipment, net 138,031 121,814 Other assets 31,248 29,154 Total assets $500,144 $428,066 Liabilities and Stockholders' equity Current liabilities: Accounts payable $92,350 $77,836 Other current liabilities 71,579 76,666 Income taxes payable 7,756 5,496 Total current liabilities 171,685 159,998 Long-term debt 175,000 200,000 Deferred credits 67,159 62,448 Other liabilities 6,603 - Stockholders' equity 79,697 5,620 Total liabilities and stockholders' equity $500,144 $428,066 Exhibit (3) Reconciliation of net income on a GAAP basis to "Adjusted net income" Three Months Ended July 29, 2006 (Amounts in thousands, except percentages and per share amounts) GAAP Basis Adjustments As Adjusted Total Revenues $269,169 ---- $269,169 Cost of goods sold, buying and occupancy costs 155,951 ---- 155,951 Gross profit 113,218 ---- 113,218 Selling, general administrative expenses 86,399 ---- 86,399 Operating income 26,819 ---- 26,819 Interest expense, net 15,660 (10,460) (a) 5,200 Loss on refinancing of debt 10,039 (10,039) (b) ---- Income before income taxes 1,120 20,499 21,619 Provision for income taxes 1,100 7,245 (c) 8,345 Net income 20 13,254 13,274 Preferred stock dividends (2,777) 2,777 (d) ---- Net income (loss) applicable to common stockholders ($2,757) $16,031 $13,274 Earnings per share: Basic ($0.08) $0.31 $0.23 Diluted ($0.08) $0.29 $0.21 Weighted average shares outstanding: Basic 36,433 21,367 (e) 57,800 Diluted 36,433 27,667 (e) 64,100 Six Months Ended July 29, 2006 (Amounts in thousands, except percentages and per share amounts) GAAP Basis Adjustments As Adjusted Total Revenues $509,856 ---- $509,856 Cost of goods sold, buying and occupancy costs 287,244 ---- 287,244 Gross profit 222,612 ---- 222,612 Selling, general administrative expenses 167,498 ---- 167,498 Operating income 55,114 ---- 55,114 Interest expense, net 34,856 (24,556) (a) 10,300 Loss on refinancing of debt 10,039 (10,039) (b) ---- Income before income taxes 10,219 34,595 44,814 Provision for income taxes 2,400 14,898 (c) 17,298 Net income 7,819 19,697 27,516 Preferred stock dividends (6,141) 6,141 (d) ---- Net income (loss) applicable to common stockholders $1,678 $25,838 $27,516 Earnings per share: Basic $0.05 $0.43 $0.48 Diluted $0.05 $0.38 $0.43 Weighted average shares outstanding: Basic 30,934 26,866 (e) 57,800 Diluted 34,670 29,430 (e) 64,100 (a) to adjust interest expense for (i) the redemption of all outstanding preferred stock, (ii) the conversion of the 5% notes payable into common stock, (iii) the redemption of $21.7 million of the 13 1/8% debentures, (iv) the repayment of $275.0 million aggregate principal amount of 9 3/4% notes with the proceeds of the $285.0 million senior term loan, (v) the repayment of $35.0 million of the senior term loan with the proceeds of the IPO completed in July 2006 and (vi) the amortization of deferred financing costs related to the term loan entered into in May 2006, assuming each of these transactions had been completed at the beginning of the fiscal year. (b) to eliminate the loss on refinancing of debt. (c) to adjust the provision for income taxes to reflect the Company's estimated future ongoing effective tax rate of 38.6%, as the effective tax rate in the three and six months ended July 29, 2006 is not representative of the Company's ongoing effective tax rate. (d) to reflect the redemption of $92.8 million of Series A preferred stock. (e) to reflect the number of common shares outstanding after the IPO on a basic and diluted basis. Exhibit (4) Actual and Projected Store Count and Square Footage Fiscal 2007 Quarter Total stores Number of Number of Total stores open at stores stores open at beginning opened during closed during end of the of the quarter the quarter the quarter quarter 1st Quarter (Actual) 227 6 0 233 2nd Quarter (Actual) 233 7 2 238 3rd Quarter (Projected) 238 13 1 250 4th Quarter (Projected) 250 11 0 261 Fiscal 2007 Quarter Total gross Gross square Reduction of Total gross square feet feet for stores gross square square feet at beginning opened or feet for stores at end of of the quarter expanded during closed or the quarter the quarter downsized during the quarter 1st Quarter (Actual) 1,543,904 22,615 0 1,566,519 2nd Quarter (Actual) 1,566,519 33,961 (20,939) 1,579,541 3rd Quarter (Projected) 1,579,541 59,352 (6,700) 1,632,193 4th Quarter (Projected) 1,632,193 66,137 0 1,698,330
SOURCE J. Crew Group, Inc.
CONTACT: Company Contact, James S. Scully, Chief Financial Officer of J.
Crew Group, Inc., +1-212-209-8040; or Investor Contact, Allison Malkin, or
Chad Jacobs, or Joe Teklits, all of Integrated Corporate Relations,
Web site: http://www.jcrew.com