2014

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

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.



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