J.Crew Reports $19 Million Increase In Operating Income For The Third Quarter
NEW YORK (December 9, 2004) - J. Crew Group, Inc. announced today that its operating income for the thirteen weeks ended October 30 increased by $19 million to $13 million, compared to an operating loss of $6 million in the comparable period last year, reflecting strong sales increases and gross margin improvement across all channels of distribution.
Consolidated revenues for the thirteen weeks ended October 30 increased 36% to $206 million from $151 million last year. Retail sales (including Factory) increased by 35% to $154 million, compared to $114 million last year. Comparable store sales increased by 30%. Direct sales (Internet and catalog) increased by 47% to $47 million, compared to $32 million last year due to increased demand and new editions.
Millard Drexler, Chairman and CEO said, "We continue to focus on quality, unique product assortments and endless attention to customer service, and we are pleased that the performance of the company is reflective of these efforts. As the holiday season gets into full swing, we are hopeful about our ability to deliver the quality, detail and styles our customers are looking for."
Gross margin increased to 43% in the third quarter, compared to 40% last year, primarily attributable to lower markdowns in all channels.
Selling, general and administrative expenses during the quarter were $76 million, or 37% of sales, compared to $66 million, or 44% of sales in the prior year. The decrease as a percentage of sales was driven primarily by operating leverage due to the significant increase in comparable store sales.
Net loss for the third quarter was $10 million, compared to a $24 million loss in the prior year.
Consolidated revenues for the thirty-nine weeks ended October 30 were $540 million compared to $479 million last year, an increase of 13%. Retail sales increased by 19% to $397 million from $333 million, as comparable store sales increased by 16%. Direct sales increased to $127 million from $125 million last year based on strong sales increases in the second and third quarters. The first quarter had a sales decline of $19 million resulting from reduced clearance sales and lower catalog circulation.
Gross margin increased to 41% compared to 35% last year, resulting from decreased markdowns and clearance sales.
Selling, general and administrative expenses for the thirty-nine week period increased to $205 million, or 38% of sales, from $201 million, or 42% of sales.
Operating income was $19 million compared to an operating loss of $32 million last year, an improvement of $51 million.
Net loss for the thirty-nine week period was $47 million. In 2003, the loss was $75 million (excluding non-recurring income of $45 million). The current year loss was also negatively impacted by additional interest expense of $23 million, primarily due to the inclusion of preferred stock dividends of $16 million for the first half of 2004 that were recorded as a direct charge to stockholders' deficit in 2003. Excluding such dividends, the 2004 net loss for the thirty-nine weeks would have been $31 million as compared to the loss of $75 million for the comparable 2003 period.
Inventory at October 30 was $137 million, up 15% from the prior year, primarily due to higher current season inventories in all channels, commensurate with business trends. There were no outstanding borrowings under the Company's working capital facility at the end of the third quarter of 2004.
Third Quarter Conference Call
The Company's third quarter investor conference call will be held today, December 9, 2004 at 11 a.m. eastern time. The event will be available through an audio webcast at www.jcrew.com (click on "Help" and "Investor Relations") and www.companyboardroom.com. A replay of the call will be archived on those websites and will also be available by telephone through December 16, 2004 at (888) 286-8010, reference #66022307. J. Crew Group, Inc. is a leading multi-channel retailer of women's and men's apparel, shoes and accessories. The Company operates 157 retail stores, the J. Crew catalog business, jcrew.com, and 42 factory outlet stores.