J.Crew Group, Inc. Announces Second Quarter Fiscal 2006 Results
Second Quarter Revenues Rise 17% to $269.2 million
Second Quarter Operating Income Increases 33% to $26.8 million
NEW YORK, Aug. 24 /PRNewswire-FirstCall/ -- J.Crew Group, Inc. (NYSE: JCG), today announced financial results for the three and six months ended July 29, 2006.
For the three months ended July 29, 2006:
- Revenues for the second quarter increased 17% to $269.2 million from
$229.4 million in the second quarter of fiscal 2005. Store sales (Retail
and Factory) increased 21% to $197.4 million, with comparable store
sales increasing 16%. Comparable store sales rose 15% in the second
quarter of fiscal 2005. Direct sales (Internet and Catalog) for the
second quarter rose by 7% to $62.8 million.
- Operating income increased 33% to $26.8 million compared to
$20.1 million in the second quarter of fiscal 2005.
- Net loss applicable to common stockholders was $2.8 million, or $(0.08)
per diluted share, compared to $1.6 million, or $(0.07) per diluted
share in the second quarter of fiscal 2005. Net loss in the second
quarter of fiscal 2006 includes pre-tax charges of $10.0 million related
to the refinancing of debt and $0.5 million for stock option expense
related to SFAS 123(R) which was not applicable in fiscal 2005.
Excluding these items net income would have been $7.2 million, or
$0.20 per diluted share.
Millard Drexler, J.Crew's Chairman and CEO stated: "We are pleased with our second quarter results, and look forward to building on the new foundation we have created for J.Crew Group. Our team is focused on driving productivity across all areas of the business, and we are confident about our near and long-term prospects."
Adjusted net income for the second quarter of fiscal 2006 totaled $13.3 million, or $0.21 per diluted share. Adjusted net income:
(i) assumes the Company's initial public offering occurred at
April 29, 2006,
(ii) excludes $10.0 million in costs associated with the refinancing of
debt; and
(iii) adjusts the effective tax rate.
On July 3, 2006, J.Crew Group, Inc. closed its initial public offering of common stock in which the Company sold 21.6 million shares raising net proceeds of $402.3 million. Subsequent to the closing, Texas Pacific Group acquired an additional 3.7 million shares with $73.5 million of proceeds from the redemption of preferred stock.
For the six months ended July 29, 2006:
- Revenues for the first six months of fiscal 2006 increased 16% to
$509.9 million from $439.9 million in the six months of fiscal 2005.
Store sales (Retail and Factory) increased 18% to $364.5 million in the
first half of fiscal 2006, with comparable store sales increasing 14%.
Comparable store sales rose 24% in the first half of 2005. Direct sales
(Internet and Catalog) for the first half of 2006 increased by 9% to
$129.0 million.
- Operating income increased 28% to $55.1 million compared to
$43.1 million in the first half of fiscal 2005.
- Net income applicable to common stockholders was $1.7 million, or $0.05
per diluted share, compared to a net loss of $0.1 million, or $0.00 per
diluted share in the first half of fiscal 2005. Net income for the first
six months of fiscal 2006 includes pre-tax charges of $10.0 million
related to the refinancing of debt and $1.0 million related to stock
option expense related to SFAS 123(R) which was not applicable in fiscal
2005. Excluding these items net income would have been $11.8 million or
$0.34 per diluted share.
- Adjusted net income for the 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 Exhibits (3) and (4).
Long Term Growth Targets
The Company noted that its annual long term growth targets include: (i) mid single digit comparable Store sales increase; (ii) high single digit Direct sales growth; (iii) 7% - 9% net square footage expansion; and (iv) EPS growth in excess of 20%.
Use of Non-GAAP Financial Measures
The Company has provided non-GAAP adjusted interest expense, loss on refinancing of debt, income taxes, net income, preferred stock dividends and earnings per diluted share information for the three months and six months ended July 29, 2006 in this release, in addition to providing financial results in accordance with GAAP. This information reflects, on a non-GAAP adjusted basis, the Company's adjusted interest expense, loss on refinancing of debt, income taxes, net income, preferred stock dividends and earnings per diluted share after excluding the effects of transactions which resulted from the Company's recent 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 excluding expenses that the Company believes are not indicative of the Company's 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 months and six months ended July 29, 2006 are included in Exhibits (3) and (4).
Conference Call Information
A conference call to discuss second quarter results is scheduled for today August 24, 2006 at 4:30 PM Eastern Time. Investors and analysts interested in participating in the call are invited to dial (800) 811-0667 approximately ten minutes prior to the start of the call. The conference call will also be web-cast live at www.jcrew.com. A replay of this call will be available until August 31, 2006 and can be accessed by dialing (888) 203-1112 and entering code 3641798.
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 and accessories. As of August 24, 2006, the Company operates 169 retail stores, the J.Crew catalog business, jcrew.com, and 50 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.
Forward-Looking 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, the performance of the Company's products within the prevailing retail environment, 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. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
(Amounts in thousands, except July 29, July 30, July 29, July 30,
percentages and per share amounts) 2006 2005 2006 2005
Net Sales:
Stores $197,410 $162,659 $364,535 $307,867
Direct 62,823 58,679 129,033 118,050
260,233 221,338 493,568 425,917
Other 8,936 8,028 16,288 13,984
Total revenues 269,169 229,366 509,856 439,901
Costs of goods sold, buying and
occupancy costs 155,951 132,346 287,244 246,435
Gross profit 113,218 97,020 222,612 193,466
As a percent of revenues 42.1% 42.3% 43.7% 44.0%
Selling, general and
administrative expenses 86,399 76,877 167,498 150,337
As a percent of revenues 32.1% 33.5% 32.9% 34.2%
Operating income 26,819 20,143 55,114 43,129
As a percent of revenues 10.0% 8.8% 10.8% 9.8%
Interest expense, net 15,660 17,911 34,856 35,400
Loss on refinancing of debt 10,039 -- 10,039 --
Income before income taxes 1,120 2,232 10,219 7,729
Provision for income taxes 1,100 500 2,400 1,100
Net income 20 1,732 7,819 6,629
Preferred stock dividends (2,777) (3,364) (6,141) (6,728)
Net income (loss) applicable to
common stockholders $ (2,757) $ (1,632) $ 1,678 $ (99)
Earnings per share:
Basic $ (0.08) $ (0.07) $ 0.05 $ 0.00
Diluted $ (0.08) $ (0.07) $ 0.05 $ 0.00
Weighted average shares outstanding:
Basic 36,433 24,168 30,934 24,155
Diluted 36,433 24,168 34,670 24,155
Exhibit (2)
J.Crew Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
July 29, July 30,
2006 2005
(Unaudited) (Unaudited)
(Amounts in thousands)
Assets
Current assets:
Cash and cash equivalents $ 68,838 $ 29,692
Inventories 134,636 110,569
Prepaid expenses and other current assets 34,463 31,945
Total current assets 237,937 172,206
Property and equipment, net 109,923 113,466
Other assets 14,637 13,194
Total assets $362,497 $ 298,866
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable $ 78,610 $ 71,327
Other current liabilities 51,582 52,760
Income taxes payable 3,568 1,639
Current portion of long term debt 2,500 -------
Total current liabilities 136,260 125,726
Long-term debt 247,500 603,475
Deferred credits 61,457 57,191
Preferred stock ------- 92,800
Stockholders' deficit (82,720) (580,326)
Total liabilities and stockholders' deficit $362,497 $ 298,866
Exhibit (3)
Reconciliation of net income from GAAP basis to "Adjusted Net Income" for the three months ended July 29, 2006
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 and
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
(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 9-3/4% notes with the
proceeds of the $285.0 million senior term loan, (v) the repayment of
the $35.0 million of the senior term loan with the proceeds of the IPO
and (vi) the amortization of deferring financing costs related to the
new term loan
(b) to eliminate the loss on refinancing of debt
(c) the provision for income taxes on a GAAP basis reflects the non-
deductibility of preferred stock dividends, the utilization of net
operating loss carryovers and certain AMT adjustments; the provision
for income taxes on an "as adjusted" basis reflects an effective tax
rate of 38.6%, which would be expected to occur after giving effect to
the exclusion of the aforementioned items which are not expected to
occur on an ongoing basis.
(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 offering
on a basic and diluted basis
Exhibit (4)
Reconciliation of net income from GAAP basis to "Adjusted Net Income" for the six months ended July 29, 2006
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 and
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 $ .05 $ .43 $ .48
Diluted $ .05 $ .38 $ .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 9-3/4% notes with
the proceeds of the $285.0 million senior term loan, (v) the
repayment of the $35.0 million of the senior term loan with the
proceeds of the IPO and (vi) the amortization of deferring financing
costs related to the new term loan
(b) to eliminate the loss on refinancing of debt
(c) the provision for income taxes on a GAAP basis reflects the non-
deductibility of preferred stock dividends, the utilization of net
operating loss carryovers and certain AMT adjustments; the provision
for income taxes on an "as adjusted" basis reflects an effective tax
rate of 38.6%, which would be expected to occur after giving effect
to the exclusion of the aforementioned items which are not expected
to occur on an ongoing basis.
(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 offering
on a basic and diluted basis
Exhibit 5: Fiscal 2006 Projected Store Count and Square Footage
Total stores
open at Number of stores Number of stores Total stores
beginning of opened during closed during open at end
Quarter the quarter the quarter the quarter the quarter
1st Quarter
(Actual) 203 5 2 206
2nd Quarter
(Actual) 206 10 0 216
3rd Quarter
(Projected) 216 10 0 226
4th Quarter
(Projected) 226 3 1 228
Reduction of
gross square
feet for
Total gross Gross square stores closed Total gross
square feet at feet for stores or downsized square feet
beginning of opened during during at end of
the quarter the quarter the quarter the quarter
Quarter
1st Quarter
(Actual) 1,478,384 25,474 (14,500) 1,489,358
2nd Quarter
(Actual) 1,489,358 42,147 (2,137) 1,529,368
3rd Quarter
(Projected) 1,529,368 37,133 (11,688) 1,554,813
4th Quarter
(Projected) 1,554,813 11,485 (6,911) 1,559,387
SOURCE J.Crew Group, Inc.
CONTACT: Company Contact - James Scully, Chief Financial Officer,
+1-212-209-8040; Investor Contact - Allison Malkin, Chad Jacobs, or Joe
Teklits, all of Integrated Corporate Relations, +1-203-682-8200/