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News Release

J. Crew Group, Inc. Announces First Quarter Fiscal 2007 Results

First Quarter Revenues Rise 24% to $297.3 million First Quarter Operating Income Increases 57% to $44.4 million

NEW YORK, May 31 /PRNewswire-FirstCall/ -- J. Crew Group, Inc. (NYSE: JCG) today announced financial results for the three months ended May 5, 2007 (first quarter fiscal 2007).

First quarter highlights:

  • Revenues increased 24% to $297.3 million. Store sales (Retail and Factory) increased 20% to $201.0 million, with comparable store sales increasing 13%. Realigning last year's calendar weeks to be consistent with the current year retail calendar weeks would result in a comparable store sales increase of 8% in the first quarter of fiscal 2007. Comparable store sales increased 12% in the first quarter of fiscal 2006. Direct sales (Internet and Catalog) rose by 31% to $86.6 million. Direct sales increased 12% in the first quarter of fiscal 2006.
  • Gross margin increased 110 basis points to 46.6% of revenues from 45.5% of revenues in the first quarter of fiscal 2006.
  • Operating income increased 57% to $44.4 million, or 14.9% of revenues, compared to $28.3 million, or 11.8% of revenues, in the first quarter of fiscal 2006.
  • Net income available to common stockholders was $24.6 million, or $0.39 per diluted share, compared to $4.4 million, or $0.12 per diluted share, in the first quarter of fiscal 2006.
  • Adjusted net income for the first quarter of fiscal 2006 totaled $14.2 million, or $0.22 per diluted share. A reconciliation of net income on a GAAP basis to adjusted net income is included in Exhibit (3) of this press release.

Millard Drexler, J. Crew's Chairman and CEO stated: "We are pleased with our first quarter results which reflect the hard work of our team in always doing our best to satisfy our customers. Our customers have come to expect from J. Crew the kind of quality, style and design that we work hard to consistently provide."

Guidance

The Company's long-term annual financial targets include comparable store sales growth in the mid single-digit range, Direct sales growth in the high single-digits, net square footage expansion in the 7% to 9% range, and diluted EPS growth in excess of 20%.

Use of Non-GAAP Financial Measures

In addition to providing financial results in accordance with GAAP, the Company has provided non-GAAP adjusted interest expense, income taxes, net income, preferred stock dividends and earnings per share information for the three months ended April 29, 2006 in this release. This information reflects, on a non-GAAP adjusted basis, the Company's adjusted interest expense, income taxes, net income, preferred stock dividends, weighted average shares outstanding and earnings per share after considering the effects of transactions which resulted from the Company's 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 adjusting the items discussed above that the Company believes are not indicative of 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 ended April 29, 2006 are included in Exhibit (3).

Conference Call Information

A conference call to discuss first quarter results is scheduled for today, May 31, 2007, at 4:30 PM Eastern Time. Investors and analysts interested in participating in the call are invited to dial (888) 802-8577 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 7, 2007 and can be accessed by dialing (877) 519-4471 and entering code 8810378.

About J. Crew Group, Inc.

J. Crew Group, Inc. is a nationally recognized multi-channel retailer of women's and men's apparel, shoes and accessories. As of May 31, 2007, the Company operates 186 retail stores, the J. Crew catalog business, jcrew.com, and 53 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, our ability to compete with other retailers, the performance of the Company's products within the prevailing retail environment, our strategy and expansion plans, 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.

                                                            Exhibit (1)
                             J. Crew Group, Inc.
               Condensed Consolidated Statements of Operations
                                 (Unaudited)

    (In thousands, except percentages
    and per share amounts)            Three Months        Three Months
                                          Ended              Ended
                                       May 5, 2007      April 29, 2006
                                 -------------------   ------------------
    Net sales
         Stores                           $201,009            $167,124
         Direct                             86,570              66,211
                                 -------------------   ------------------
                                           287,579             233,335
    Other                                    9,733               7,352
                                 -------------------   ------------------
    Total Revenues                         297,312             240,687

    Costs of goods
     sold, buying and
     occupancy costs                       158,774             131,293
                                 -------------------   ------------------
    Gross Profit                           138,538             109,394
        As a percent of revenues            46.6 %              45.5 %


    Selling, general
     and administrative
     expenses                               94,165              81,100
        As a percent of revenues            31.7 %              33.7 %
                                 -------------------   ------------------
    Operating income                        44,373              28,294
        As a percent of revenues            14.9 %              11.8 %

    Interest expense, net                    3,442              19,196
                                 -------------------   ------------------
    Income before
     income taxes                           40,931               9,098

    Provision for
     income taxes                           16,282               1,300
                                 -------------------   ------------------

    Net income                              24,649               7,798


    Preferred stock
     dividends                                   -              (3,364)
                                 -------------------   ------------------
    Net income
     available to
     common
     stockholders                          $24,649              $4,434
                                 ===================   ==================
    Income per share:
         Basic                               $0.41               $0.17
         Diluted                             $0.39               $0.12

    Weighted average
     shares outstanding:
         Basic                              59,731              25,434
         Diluted                            63,248              37,880


                                                            Exhibit (2)
                             J. Crew Group, Inc.
                    Condensed Consolidated Balance Sheets
                                 (Unaudited)



    (In thousands)                        May 5, 2007       February 3, 2007
    --------------                   -------------------   ------------------
    Assets
    Current assets:
       Cash and cash
        equivalents                              $81,321             $88,900
       Inventories                               144,759             140,670
       Prepaid expenses and
        other current assets                      45,842              47,528
                                     -------------------   ------------------
    Total current assets                         271,922             277,098
     Property and equipment, net                 125,208             121,814

    Other assets                                  31,792              29,154
                                     -------------------   ------------------
    Total assets                                $428,922            $428,066
                                     ===================   ==================


    Liabilities and Stockholders'
     equity
    Current liabilities:
       Accounts payable                          $66,358             $77,836
       Other current
        liabilities                               65,883              76,666
       Income taxes payable                        5,675               5,496
                                     -------------------   ------------------
    Total current
     liabilities                                 137,916             159,998

    Long-term debt                               175,000             200,000

    Deferred credits                              64,489              62,448

    Other liabilities                              6,435                   -

    Stockholders' equity                          45,082               5,620
                                     -------------------   ------------------
    Total liabilities and
     stockholders' equity                       $428,922            $428,066
                                     ===================   ==================



                                                            Exhibit (3)

    Reconciliation of net income on a GAAP basis to "Adjusted net income"



                                        Three Months Ended April 29, 2006
    (In thousands, except percentages     GAAP                       As
    and per share amounts)                Basis    Adjustments    Adjusted


    Total Revenues                       $240,687          -      $240,687

    Cost of goods sold,
     buying and
     occupancy costs                      131,293          -       131,293


    Gross profit                          109,394          -       109,394

    Selling, general
     administrative
     expenses                              81,100          -        81,100



    Operating income                       28,294          -         28,294


    Interest expense, net                  19,196    (14,096)   (a)   5,100
                                         --------    --------       -------
    Income before income taxes              9,098     14,096         23,194


    Provision for income taxes              1,300      7,653   (b)    8,953
                                         --------   ---------       -------
    Net income                              7,798      6,443         14,241

    Preferred stock dividends              (3,364)     3,364   (c)        -
                                         --------   ---------        -------
    Net income
     available to common
     stockholders                          $4,434     $9,807        $14,241
                                         ========   =========       =========
    Earnings per share:
         Basic                              $0.17      $0.08          $0.25
         Diluted                            $0.12      $0.10          $0.22

    Weighted average
     shares outstanding:

         Basic                             25,434     32,366   (d)   57,800
         Diluted                           37,880     26,220   (d)   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 aggregate principal
        amount of 9 3/4% notes with the proceeds of the $285.0 million senior
        term loan, (v) the repayment of $35.0 million of the senior term loan
        with the proceeds of the IPO completed in July 2006 and (vi) the
        amortization of deferred financing costs related to the term loan
        entered into in May 2006, assuming each of these transactions had been
        completed at the beginning of the fiscal year.
    (b) to adjust the provision for income taxes to reflect the Company's
        estimated future ongoing effective tax rate of 38.6%, as the effective
        tax rate in the three months ended April 29, 2006 is not
        representative of the Company's ongoing effective tax rate.
    (c) to reflect the redemption of $92.8 million of Series A preferred
        stock.
    (d) to reflect the number of common shares outstanding after the IPO on a
        basic and diluted basis.


                                                            Exhibit (4)
             Actual and Projected Store Count and Square Footage


     Fiscal 2007
                  Total stores open  Number of   Number of     Total stores
                  at beginning of     stores      stores        open at the
                    the quarter      opened      closed        end of the
                                     during the  during the    quarter
                                     quarter     quarter
    Quarter
    1st Quarter
     (Actual)             227           6           0              233
    2nd Quarter
     (Projected)          233          10           2              241
    3rd Quarter
     (Projected)          241          14           1              254
    4th Quarter
     (Projected)          254           7           0              261





     Fiscal 2007
                   Total gross  Gross square  Reduction       Total gross
                   square feet  feet for      of gross        square feet
                   at           stores        square feet     at end of
                   beginning    opened during  for stores      the quarter
                   of the       the quarter   closed or
                   quarter                    downsized
                                              during the
                                              quarter
    Quarter
    1st Quarter
     (Actual)      1,543,904     22,615            0            1,566,519
    2nd Quarter
     (Projected)   1,566,519     45,215      (15,164)           1,596,570
    3rd Quarter
     (Projected)   1,596,570     68,298       (6,700)           1,658,168
    4th Quarter
     (Projected)   1,658,168     37,923            0            1,696,091

SOURCE J. Crew Group, Inc.

CONTACT:
James Scully, Chief Financial Officer
1-212-209-8040
or
Investor Contacts
Allison Malkin
Chad Jacobs
or
Joe Teklits
all of Integrated Corporate Relations
1-203-682-8200
for J. Crew Group, Inc.
Web site: http://www.jcrew.com

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.