J.Crew Group, Inc. Announces Third Quarter Fiscal 2010 Results

Third Quarter Revenues Increase 4% to $429.3 million;

Third Quarter Diluted Earnings Per Share of $0.58

Nov 23, 2010, 10:30 ET from J.Crew Group, Inc.

NEW YORK, Nov. 23, 2010 /PRNewswire-FirstCall/ -- J.Crew Group, Inc. (NYSE: JCG) today announced financial results for the three months (third quarter) and nine months (first nine months) ended October 30, 2010.  The Company also issued a separate press release today announcing that it has entered into a definitive agreement to be acquired by funds affiliated with TPG Capital and Leonard Green & Partners, L.P.

Third Quarter highlights:

  • Revenues increased 4% to $429.3 million.  Store sales increased 1% to $303.3 million, with comparable store sales decreasing 1%.  Comparable store sales increased 8% in the third quarter of fiscal 2009.  Direct sales (Internet and Phone) rose 12% to $117.9 million.  Direct sales increased 4% to $105.5 million in the third quarter of fiscal 2009.  
  • Gross margin decreased to 43.5% of revenues from 48.4% of revenues in the third quarter of fiscal 2009.
  • Operating income decreased to $64.1 million, or 14.9% of revenues, compared to $75.2 million, or 18.2% of revenues, in the third quarter of fiscal 2009.  Operating income reflects a $10.2 million decrease in share-based and incentive compensation compared to the third quarter last year.  
  • Interest expense of $2.1 million includes a non-cash charge of $1.4 million representing the remaining unamortized deferred financing costs incurred under the term loan.
  • Net income was $37.8 million, or $0.58 per diluted share, compared to $43.9 million, or $0.67 per diluted share, in the third quarter of fiscal 2009.  

First Nine Months highlights:

  • Revenues increased 12% to $1,250.7 million.  Store sales increased 11% to $888.2 million, with comparable store sales increasing 8%.  Comparable store sales decreased 0.4% in the first nine months of fiscal 2009.  Direct sales rose 16% to $334.8 million.  Direct sales increased 1% to $289.0 million in the first nine months of fiscal 2009.  
  • Gross margin increased to 45.6% of revenues from 44.2% of revenues in the first nine months of fiscal 2009.
  • Operating income increased to $198.5 million, or 15.9% of revenues, compared to $142.7 million, or 12.8% of revenues, in the first nine months of fiscal 2009.  Operating income reflects a $10.1 million decrease in share-based and incentive compensation compared to the first nine months last year. Operating income in the first nine months of fiscal 2009 includes charges of approximately $5.3 million related to our workforce reduction, underperforming stores and lease termination actions.
  • Interest expense of $3.4 million includes a non-cash charge of $1.4 million representing the remaining unamortized deferred financing costs incurred under the term loan.
  • Net income was $117.5 million, or $1.78 per diluted share, compared to $82.9 million, or $1.29 per diluted share, in the first nine months of fiscal 2009.  

Balance Sheet highlights as of October 30, 2010:

  • Cash and cash equivalents were $311.7 million at the end of the third quarter compared to $246.8 million at the end of the third quarter of fiscal 2009.  
  • Inventories at the end of the quarter were $261.0 million, compared to $223.9 million at the end of the third quarter of fiscal 2009.  Inventory per square foot at the end of the quarter increased 14% compared to the end of the third quarter of fiscal 2009.    
  • On August 31, 2010, the Company made a voluntary prepayment of $49.2 million representing the remaining principal amount outstanding under the term loan. Therefore, there was no debt outstanding at the end of the third quarter compared to $99.5 million at the end of the third quarter of fiscal 2009.

Guidance

For fiscal 2010 the Company currently expects diluted earnings per share in the range of $2.08 to $2.13, as compared to its previous guidance range of $2.25 to $2.35 and fiscal 2009 diluted earnings per share of $1.91.  

Conference Call Information

A listen-only call offering additional comments on third quarter results and this morning's transaction announcement will be available to all investors starting at 11:00 AM Eastern Time this morning.  Callers may listen to this call by dialing (800) 642-1687, or (706) 645-9291 outside the U.S. and Canada, and by referencing conference ID 27737604. The listen-only call will also be webcast on the 'Investor Relations' section of the Company's website at www.jcrew.com.  The listen-only call will be available until November 30, 2010.

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 November 23, 2010, the Company operates 250 retail stores (including 221 J.Crew retail stores, 9 crewcuts and 20 Madewell stores), the J.Crew catalog business, jcrew.com, madewell.com and 85 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.  

ForwardLooking 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, systems upgrades, 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.

J.Crew Group, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(Amounts in thousands, except percentages and per share data)

Three Months Ended October 30, 2010

Three Months Ended October 31, 2009

Nine Months Ended October 30, 2010

Nine Months Ended October 31, 2009

Net sales

    Stores

$303,252

$300,066

$888,231

$799,871

    Direct

117,940

105,480

334,806

289,012

421,192

405,546

1,223,037

1,088,883

Other

8,137

8,563

27,690

28,551

Total Revenues

429,329

414,109

1,250,727

1,117,434

Costs of goods sold, buying and occupancy costs

242,708

213,682

679,955

623,844

Gross profit

186,621

200,427

570,772

493,590

    As a percent of revenues

43.5%

48.4%

45.6%

44.2%

Selling, general and administrative expenses

122,566

125,241

372,286

350,924

    As a percent of revenues

28.5%

30.2%

29.8%

31.4%

Operating income

64,055

75,186

198,486

142,666

    As a percent of revenues

14.9%

18.2%

15.9%

12.8%

Interest expense, net

2,127

1,052

3,386

3,207

Income before income taxes

61,928

74,134

195,100

139,459

Provision for income taxes

24,095

30,265

77,632

56,535

Net income

$37,833

$43,869

$117,468

$82,924

Income per share:

    Basic

$0.60

$0.70

$1.85

$1.33

    Diluted

$0.58

$0.67

$1.78

$1.29

Weighted average shares outstanding:

    Basic

63,512

62,775

63,330

62,406

    Diluted

65,741

65,223

65,823

64,317

J.Crew Group, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

October 30, 2010

January 30, 2010

October 31, 2009

Assets

Current assets:

  Cash and cash equivalents

$311,702

$298,107

$246,785

  Inventories

260,969

190,231

223,894

  Prepaid expenses and other current assets

35,543

29,522

30,027

  Prepaid income taxes

1,930

1,455

-

Total current assets

610,144

519,315

500,706

Property and equipment, net

195,873

194,615

198,086

Other assets

22,780

24,628

19,683

Total assets

$828,797

$738,558

$718,475

Liabilities and Stockholders' equity

Current liabilities:

  Accounts payable

$144,610

$127,733

$117,823

  Other current liabilities

99,026

106,652

92,022

  Current portion of long-term debt

-

-

1,028

  Deferred income taxes, net

958

958

4,049

Total current liabilities

244,594

235,343

214,922

Long-term debt

-

49,229

98,458

Deferred credits

67,058

67,646

69,015

Other liabilities

9,521

10,462

6,817

Stockholders' equity

507,624

375,878

329,263

Total liabilities and stockholders' equity

$828,797

$738,558

$718,475

Actual and Projected Store Count and Square Footage (Note 1)

Fiscal 2010

(Note 2)

(Note 2)

Quarter

Total stores open

at beginning of the quarter

Number of stores opened during

the quarter

Number of stores closed during

the quarter

Total stores

open at end of

the quarter

1st Quarter (Actual)

321

4

0

325

2nd Quarter (Actual)

325

3

1

327

3rd Quarter (Actual)

327

4

0

331

4th Quarter (Projected)

331

4

0

335

Fiscal 2010

Quarter

Total gross square feet at beginning of the quarter

Gross square feet for stores 

opened or expanded during the quarter

Reduction of gross square feet for stores closed or downsized during the quarter

Total gross square feet at end of the quarter

1st Quarter (Actual)

1,958,140

20,168

(615)

1,977,693

2nd Quarter (Actual)

1,977,693

12,631

(7,822)

1,982,502

3rd Quarter (Actual)

1,982,502

14,257

0

1,996,759

4th Quarter (Projected)

1,996,759

22,877

0

2,019,636

Note 1 -

Store count and square footage summary excludes three clearance store locations.  Above summary includes one factory store and one retail store that are temporarily closed at the time of this announcement.

Note 2 -

Actual and Projected number of stores opened and closed during Fiscal 2010 by quarter:

1st Quarter--opened two retail and two factory stores (Actual).

2nd Quarter--opened one retail, one factory and one Madewell store; closed one retail store (Actual).

3rd Quarter--opened two retail, one factory and one Madewell store (Actual).

4th Quarter--plan to open two factory, one factory crewcuts and one Madewell store (Projected).

SOURCE J.Crew Group, Inc.



RELATED LINKS

http://www.jcrew.com