J.Crew Group, Inc. Announces First Quarter Fiscal 2013 Results

Jun 06, 2013, 16:01 ET from J. Crew Group, Inc.

NEW YORK, June 6, 2013 /PRNewswire/ -- J.Crew Group, Inc. today announced financial results for the three months ended May 4, 2013.

First Quarter Highlights:

  • Revenues increased 12% to $564.1 million, with comparable company sales increasing 5%.  When realigning the weeks of the first quarter last year to be consistent with the current year retail calendar, comparable company sales increased 3% on top of an increase of 16% in the first quarter last year.  Store sales increased 7% to $380.2 million on top of an increase of 26% in the first quarter last year.  Direct sales increased 23% to $176.2 million on top of an increase of 19% in the first quarter last year.  
  • Gross margin decreased to 44.7% from 47.6% in the first quarter last year.        
  • Selling, general and administrative expenses were $178.4 million, or 31.6% of revenues, compared to $164.2 million, or 32.6% of revenues, in the first quarter last year.                    
  • Operating income was $73.6 million, or 13.1% of revenues, compared to $75.7 million, or 15.0% of revenues, in the first quarter last year. 
  • Net income was $29.3 million compared to $30.7 million in the first quarter last year. 
  • Adjusted EBITDA was $101.0 million compared to $101.6 million in the first quarter last year.  An explanation of the manner in which we use adjusted EBITDA and an associated reconciliation to GAAP measures are included in Exhibit (3).    

Balance Sheet Highlights:   

  • Cash and cash equivalents decreased to $91.9 million from $216.1 million at the end of the first quarter last year, primarily due to a one-time special dividend of $197.5 million that was paid in the fourth quarter last year.
  • Total debt was $1,576 million, consisting of the senior secured term loan of $1,176 million, maturing in 2018, and the senior unsecured notes of $400 million, maturing in 2019; compared to $1,591 million at the end of the first quarter last year. 
  • Inventories were $308.3 million compared to $250.6 million at the end of the first quarter last year.  Inventories and inventories per square foot increased 23% and 13%, respectively.

How We Assess the Performance of Our Business

In assessing the performance of our business, we consider a variety of performance and financial measures.  A key measure used in our evaluation is comparable company sales, which includes (i) net sales from stores that have been open for at least twelve months, (ii) direct net sales, and (iii) shipping and handling fees.   

Use of Non-GAAP Financial Measures

This announcement includes certain non-GAAP financial measures.  An explanation of the manner in which we use adjusted EBITDA and an associated reconciliation to GAAP measures is included in Exhibit (3). 

Conference Call Information

A conference call to discuss first quarter results is scheduled for today, June 6, 2013, at 4:30 PM Eastern Time.  Investors and analysts interested in participating in the call are invited to dial (877) 407-3982 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 13, 2013 and can be accessed by dialing (877) 870-5176 and entering conference ID number 415278.  

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 June 6, 2013, the Company operates 307 retail stores (including 245 J.Crew retail stores, eight crewcuts stores and 54 Madewell stores), jcrew.com, jcrewfactory.com, the J.Crew catalog, madewell.com, the Madewell catalog, and 107 factory stores.  Additionally, certain product, press release and SEC filing information concerning the Company are available at the Company's website www.jcrew.com

Forward‑Looking Statements:

Certain statements herein, including projected store count and square footage in Exhibit (4) hereof, 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 our 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 our substantial indebtedness and lease obligations, the strength of the global economy, declines in consumer spending or changes in seasonal consumer spending patterns, competitive market conditions, our ability to anticipate and timely respond to changes in trends and consumer preferences, our ability to successfully develop, launch and grow our newer concepts and execute on strategic initiatives, products offerings, sales channels and businesses, material disruption to our information systems, our ability to implement our real estate strategy, our ability to attract and retain key personnel, interruptions in our foreign sourcing operations, and other factors which are set forth in the section entitled "Risk Factors" and elsewhere in our Annual Report on Form 10-K and in all filings with the SEC made subsequent to the filing of the Form 10-K. We do not undertake to publicly update or revise any 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
(in thousands, except percentages)
(unaudited)






First Quarter
Fiscal 2013


First Quarter
Fiscal 2012





Net sales:




Stores

$         380,193


$         354,008

Direct

176,161


143,437





Other

7,758


6,078





Total revenues

564,112


503,523





Cost of goods sold, including buying and occupancy costs

312,097


263,671





Gross profit

252,015


239,852

As a percent of revenues

44.7%


47.6%





Selling, general and administrative expenses

178,397


164,181

As a percent of revenues

31.6%


32.6%









Operating income

73,618


75,671

As a percent of revenues

13.1%


15.0%





Interest expense, net

25,681


25,412









Income before income taxes

47,937


50,259





Provision for income taxes

18,617


19,562









Net income

$           29,320


$           30,697





 






Exhibit (2)

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







(in thousands)

May 4, 2013


February 2, 2013


April 28, 2012







Assets






Current assets:






Cash and cash equivalents

$           91,881


$           68,399


$         216,103

Inventories

308,327


265,628


250,596

Prepaid expenses and other current assets

61,158


65,791


56,867

Prepaid income taxes


11,620


Total current assets

461,366


411,438


523,566







Property and equipment, net

333,550


324,111


285,192







Favorable lease commitments, net

32,748


35,104


45,589







Deferred financing costs, net

49,366


51,851


56,328







Intangible assets, net

973,150


975,517


982,871







Goodwill

1,686,915


1,686,915


1,686,915







Other assets

3,189


1,778


2,492

Total assets

$      3,540,284


$      3,486,714


$      3,582,953













Liabilities and Stockholders' Equity






Current liabilities:






Accounts payable

$         172,488


$         141,119


$         129,865

Other current liabilities

142,813


153,743


121,718

Interest payable

10,447


18,812


12,778

Income taxes payable

9,075



12,491

Current portion of long-term debt

12,000


12,000


15,000

Total current liabilities

346,823


325,674


291,852







Long-term debt

1,564,000


1,567,000


1,576,000







Unfavorable lease commitments and deferred credits.

74,729


71,146


58,600







Deferred income taxes, net

393,489


392,984


410,517







Other liabilities

39,390


38,419


37,157







Stockholders' equity

1,121,853


1,091,491


1,208,827

Total liabilities and stockholders' equity

$      3,540,284


$      3,486,714


$      3,582,953







 




Exhibit (3)

J.Crew Group, Inc.
Reconciliation of Adjusted EBITDA
Non-GAAP Financial Measure





The following table reconciles net income reflected on the Company's condensed consolidated statements of operations for the first quarter to: (i) Adjusted EBITDA (a non-GAAP measure), (ii) cash flows from operating activities (prepared in accordance with GAAP) and (iii) cash and cash equivalents as reflected on the condensed consolidated balance sheet (prepared in accordance with GAAP).





(in millions)

First Quarter
Fiscal 2013


First Quarter
Fiscal 2012





Net income

$               29.3


$               30.7

Provision for income taxes

18.6


19.6

Interest expense, net

25.7


25.4

Depreciation and amortization

21.8


19.2





EBITDA

95.4


94.9





Share-based compensation

1.2


1.1

Amortization of lease commitments

1.8


3.6

Sponsor monitoring fees

2.6


2.0





Adjusted EBITDA

101.0


101.6





Taxes paid

(0.7)


(3.1)

Interest paid

(28.6)


(36.9)

Changes in working capital

(16.0)


(27.0)





Cash flows from operating activities

55.7


34.6

Cash flows from investing activities

(28.9)


(37.3)

Cash flows from financing activities

(3.2)


(3.0)





Effect of changes in foreign exchange
rates on cash and cash equivalents

(0.1)






Increase (decrease) in cash

23.5


(5.7)

Cash and cash equivalents, beginning

68.4


221.8





Cash and cash equivalents, ending

$               91.9


$             216.1





 

We present Adjusted EBITDA, a non-GAAP financial measure, because we use such measure to: (i) monitor the performance of our business, (ii) evaluate our liquidity, and (iii) determine levels of incentive compensation. We believe the presentation of this measure will enhance the ability of our investors to analyze trends in our business, evaluate our performance relative to other companies in the industry, and evaluate our ability to service debt. 

Adjusted EBITDA is not a presentation made in accordance with generally accepted accounting principles, and therefore, differences may exist in the manner in which other companies calculate this measure. Adjusted EBITDA should not be considered an alternative to (i) net income, as a measure of operating performance, or (ii) cash flows, as a measure of liquidity.  Adjusted EBITDA has important limitations as an analytical tool and should not be considered in isolation to, or as a substitute for, analysis of the Company's results as measured in accordance with GAAP. 

 






Exhibit (4)

Actual and Projected Store Count and Square Footage









Fiscal 2013

Quarter


Total stores open at beginning of the quarter


Number of stores opened during the quarter(1)


Number of stores closed during the quarter(1)


Total stores open at end of the quarter

1st Quarter(2)


401


8



409

2nd Quarter(3)


409


12



421

3rd Quarter(3)


421


17


(1)


437

4th Quarter(3)


437


9


(1)


445

 



Fiscal 2013

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(2)


2,330,687


40,113



2,370,800

2nd Quarter(3)


2,370,800


60,852


(2,019)


2,429,633

3rd Quarter(3)


2,429,633


93,090


(5,012)


2,517,711

4th Quarter(3)


2,517,711


46,366


(7,777)


2,556,300

 

(1)

Actual and projected number of stores opened or closed during fiscal 2013 by channel are as follows:


Q1 – Three retail, one factory, and four Madewell stores.


Q2 – Three international retail, four factory, one international factory, and four Madewell stores.


Q3 – Six retail, two international retail, three factory, and six Madewell stores. Close one retail store.


Q4 Two retail, four factory, and three Madewell stores.  Close one retail store.



(2)

Reflects actual activity.

(3)

Reflects projected activity.

 

SOURCE J. Crew Group, Inc.



RELATED LINKS

http://www.jcrew.com