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News Release

J. Crew Group, Inc. Announces First Quarter Fiscal 2008 Results

May 29, 2008 at 4:03 PM EDT

First Quarter Revenues Rise 15% to $340.6 million

First Quarter Operating Income Increases 20% to $53.0 million

Revises Guidance for Fiscal 2008

NEW YORK, May 29 /PRNewswire-FirstCall/ -- J. Crew Group, Inc. [NYSE: JCG] today announced financial results for the three months ended May 3, 2008 (first quarter fiscal 2008).

First quarter highlights:

  • Revenues increased 15% to $340.6 million. Store sales (Retail and Factory) increased 14% to $229.1 million, with comparable store sales increasing 2%. Comparable store sales increased 8% in the first quarter of fiscal 2007. Direct sales (Internet and Catalog) rose by 17% to $100.9 million. Direct sales increased 31% to $86.6 million in the first quarter of fiscal 2007.
  • Gross margin increased to 46.9% of revenues from 46.6% of revenues in the first quarter of fiscal 2007.
  • Operating income increased 20% to $53.0 million, or 15.6% of revenues, compared to $44.4 million, or 14.9% of revenues, in the first quarter of fiscal 2007.
  • Net income was $30.5 million, or $0.48 per diluted share, compared to $24.6 million, or $0.39 per diluted share, in the first quarter of fiscal 2007.

Millard Drexler, J. Crew's Chairman and CEO stated: "I am pleased with our first quarter results. We are on a mission to be the best we can be on quality, style, design and service for our customers. We are dedicated to continuing to always build and invest in our company for the long term."

Guidance

The Company issued its initial guidance for the second quarter and updated its guidance for fiscal 2008. The Company currently expects second quarter diluted earnings per share in the range of $0.31 to $0.33. For fiscal 2008, the Company currently expects diluted earnings per share in the range of $1.70 to $1.75, as compared to its previous guidance range of $1.85 to $1.87 and fiscal 2007 diluted earnings per share of $1.52. The Company's revised expectations for fiscal 2008 include comparable store sales growth in the range of flat to low single-digits, Direct sales growth in the high single-digits and net square footage expansion of approximately 11%.

Balance Sheet highlights as of May 3, 2008

  • Inventories at the end of the quarter were $174.5 million, reflecting the impact of 34 net stores opened since the first quarter of fiscal 2007 and 7 stores opened since the end of fiscal 2007 and the timing of inventory receipts as compared to last year's first quarter.
  • Long-term debt was reduced to $100.0 million, which reflects the Company's voluntary principal payments of $25.0 million during the first three months of fiscal 2008.

Conference Call Information

A conference call to discuss first quarter results is scheduled for today, May 29, 2008, at 4:30 PM Eastern Time. Investors and analysts interested in participating in the call are invited to dial (877) 407-0784 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 6, 2008 and can be accessed by dialing (877) 660-6853 and entering account number 3055 and conference ID number 286170.

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 29, 2008, the Company operates 206 retail stores (including 4 crewcuts and 8 Madewell stores), the J. Crew catalog business, jcrew.com, and 65 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)

                                              Three Months       Three Months
    (In thousands, except                        Ended               Ended
    percentages and share data)               May 3, 2008         May 5, 2007

    Net sales
         Stores                                 $229,109            $201,009
         Direct                                  100,934              86,570
                                                 330,043             287,579
    Other                                         10,536               9,733
    Total Revenues                               340,579             297,312

    Costs of goods sold, buying
     and occupancy costs                         180,692             158,774
    Gross Profit                                 159,887             138,538
        As a percent of revenues                   46.9 %              46.6 %

    Selling, general and
    administrative expenses                      106,841              94,165
        As a percent of revenues                   31.4 %              31.7 %
    Operating income                              53,046              44,373
        As a percent of revenues                   15.6 %              14.9 %

    Interest expense, net                          2,370               3,442

    Income before income taxes                    50,676              40,931

    Provision for income taxes                    20,175              16,282

    Net income                                   $30,501             $24,649

    Income per share:
         Basic                                     $0.50               $0.41
         Diluted                                   $0.48               $0.39

    Weighted average shares outstanding:
         Basic                                    61,192              59,731
         Diluted                                  64,076              63,248



                                                                  Exhibit (2)

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

    (In thousands)           May 3, 2008   February 2, 2008    May 5, 2007

    Assets
    Current assets:
      Cash and cash
       equivalents              $121,532          $131,510        $81,321
      Inventories                174,493           158,525        144,759
      Prepaid expenses
       and other current
       assets                     32,850            33,293         37,242
      Refundable income taxes      8,600             9,794          8,600
    Total current assets         337,475           333,122        271,922

    Property and
     equipment, net              174,438           168,292        125,208

    Other assets                  33,299            34,182         31,792
    Total assets                $545,212          $535,596       $428,922



    Liabilities and
    Stockholders' equity
    Current liabilities:
      Accounts payable           $95,657          $101,277        $66,358
      Other current liabilities   77,816            93,796         65,883
      Income taxes payable         6,669                 -          5,675
    Total current liabilities    180,142           195,073        137,916

    Long-term debt               100,000           125,000        175,000

    Deferred credits              68,388            67,600         64,489

    Other liabilities              7,715             7,601          6,435

    Stockholders' equity         188,967           140,322         45,082

    Total liabilities and
     stockholders' equity       $545,212          $535,596       $428,922



                                                                  Exhibit (3)
    Actual and Projected Store Count and Square Footage

    Fiscal 2008
                             Total
                             stores      Number of    Number of      Total
                             open at      stores       stores        stores
                            beginning     opened       closed         open
                               of         during       during      at end of
    Quarter                the quarter  the quarter  the quarter  the quarter

    1st Quarter (Actual)       260           7            0           267

    2nd Quarter (Projected)    267           8            0           275

    3rd Quarter (Projected)    275          14            0           289

    4th Quarter (Projected)    289          14            2           301



    Fiscal 2008
                                         Gross       Reduction
                             Total       square       of gross
                             gross        feet       square feet    Total
                             square     for stores    for stores    gross
                             feet at    opened or     closed or     square
                            beginning    expanded     downsized     feet at
                               of         during      during the   end of the
    Quarter                the quarter  the quarter    quarter      quarter

    1st Quarter (Actual)    1,688,016     38,685       (2,261)     1,724,440

    2nd Quarter (Projected) 1,724,440     36,313       (7,899)     1,752,854

    3rd Quarter (Projected) 1,752,854     61,895       (4,304)     1,810,445

    4th Quarter (Projected) 1,810,445     71,406      (12,181)     1,869,670

SOURCE J. Crew Group, Inc.

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

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.