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News Release

J. Crew Group, Inc. Announces Fourth Quarter and Fiscal 2008 Results

March 10, 2009 at 4:03 PM EDT

Fourth Quarter Loss Per Share of ($0.22)

Fiscal 2008 Diluted Earnings Per Share of $0.85

NEW YORK, March 10 /PRNewswire-FirstCall/ -- J. Crew Group, Inc. (NYSE: JCG) today announced financial results for the three months (fourth quarter) and fiscal year ended January 31, 2009 (fiscal 2008).

    Fourth Quarter highlights:
  • Revenues decreased 3% to $388.0 million. Store sales (Retail and Factory) decreased 3% to $252.0 million, with comparable store sales decreasing 13%. Comparable store sales increased 4% in the fourth quarter of fiscal 2007. Direct sales (Internet and Phone) decreased 2% to $123.0 million. Direct sales increased 11% in the fourth quarter of fiscal 2007.
  • Gross margin decreased to 27.6% of revenues from 41.3% of revenues in the fourth quarter of fiscal 2007. The decrease in gross margin is primarily due to increased markdowns and promotional selling activities.
  • Operating income (loss) decreased to ($20.4 million), or (5.3%) of revenues, compared with $43.3 million, or 10.8% of revenues, in the fourth quarter of fiscal 2007. Operating loss in the fourth quarter of fiscal 2008 includes non-cash asset impairment charges of approximately $2.1 million related to under performing stores.
  • Net income (loss) in the fourth quarter of fiscal 2008 was ($13.5 million), or ($0.22) per share, and includes the impact of non-cash asset impairment charges of approximately $0.02 per share related to under performing stores. Net income was $25.0 million, or $0.39 per diluted share, in the fourth quarter of fiscal 2007.

Millard Drexler, J. Crew's Chairman and CEO stated: "We are disappointed with our fourth quarter operating results. Our mission, day after day, is to adjust to this new, not fun, retail reality, while not compromising our long term strategy and integrity. We believe the actions we are taking, our focus on quality products and customer service, along with our strong balance sheet, will position us well for when the environment eventually improves."

    Fiscal 2008 highlights:
  • Revenues increased 7% to $1,428.0 million. Store sales (Retail and Factory) increased 7% to $974.3 million, with comparable store sales decreasing 4%. Comparable store sales increased 6% in fiscal 2007. Direct sales (Internet and Phone) increased 8% to $408.9 million. Direct sales increased 22% in fiscal 2007.
  • Gross margin decreased to 38.9% of revenues from 44.1% of revenues in fiscal 2007. The decrease in gross margin is primarily due to increased markdowns and promotional selling activities in the fourth quarter.
  • Operating income decreased 44% to $96.7 million, or 6.8% of revenues, compared to $172.5 million, or 12.9% of revenues, in fiscal 2007. Operating income in fiscal 2008 includes non-cash asset impairment charges of approximately $2.7 million related to under performing stores.
  • Net income for fiscal 2008 was $54.1 million, or $0.85 per diluted share, and includes the impact of non-cash asset impairment charges of approximately $0.03 per share related to under performing stores. Net income was $97.1 million, or $1.52 per diluted share in fiscal 2007.

    Balance Sheet highlights as of January 31, 2009:
  • Cash and cash equivalents were $146.4 million at the end of the fourth quarter and include the impact of voluntary principal payments of debt of $25.0 million made during fiscal 2008. Cash and cash equivalents were $131.5 million at the end of fiscal 2007.
  • Inventories at the end of the fourth quarter were $187.0 million, reflecting the impact of 40 net stores opened since the end of fiscal 2007. Inventory per square foot increased 7% at the end of fiscal 2008 compared to the end of fiscal 2007.

Guidance

As the economy has continued to weaken and become more unpredictable, it has become more difficult to accurately predict results. Given the uncertainty surrounding the economic environment, the Company will suspend providing annual guidance. The Company will continue to provide guidance on a quarter to quarter basis. The Company currently expects first quarter fiscal 2009 diluted earnings per share in the range of $0.07 to $0.12. Our guidance for the first quarter excludes severance and other one time items.

Conference Call Information

A conference call to discuss fourth quarter results is scheduled for today, March 10, 2009, 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 March 17, 2009 and can be accessed by dialing (877) 660-6853 and entering account number 3055 and conference ID number 314947.

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 March 7, 2009, the Company operates 229 retail stores (including 6 Crewcuts and 12 Madewell stores), the J. Crew catalog business, jcrew.com, and 76 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.
                   Condensed Consolidated Statements of Operations
                                    (Unaudited)


    (In thousands,       Three Months  Three Months  Fiscal Year  Fiscal Year
     except percentages      Ended        Ended         Ended        Ended
     and per share        January 31,  February 2,   January 31,  February 2,
     amounts)                2009         2008          2009         2008

    Net sales
         Stores              $252,026    $260,627     $974,284     $914,810
         Direct               122,957     126,020      408,916      377,444
                              374,983     386,647    1,383,200    1,292,254
    Other                      13,054      13,288       44,770       42,469
    Total Revenues            388,037     399,935    1,427,970    1,334,723

    Costs of goods sold,
     buying and occupancy
     costs                    281,101     234,956      872,547      746,180
    Gross Profit              106,936     164,979      555,423      588,543
       As a percent of
        revenues                 27.6%       41.3%        38.9%        44.1%

    Selling, general and
     administrative
     expenses                 127,378     121,678      458,738      416,064
       As a percent of
        revenues                 32.8%       30.4%        32.1%        31.2%
    Operating income
     (loss)                   (20,442)     43,301       96,685      172,479
       As a percent of
        revenues                (5.3%)       10.8%         6.8%        12.9%

    Interest expense, net       1,570       1,847        5,940       11,224

    Income (loss) before
     income taxes             (22,012)     41,454       90,745      161,255

    Provision (benefit)
     for income taxes          (8,463)     16,497       36,628       64,180

    Net income (loss)        $(13,549)    $24,957      $54,117      $97,075


    Income (loss) per
     share:
         Basic                 ($0.22)      $0.41        $0.88        $1.61
         Diluted               ($0.22)      $0.39        $0.85        $1.52

    Weighted average
     shares outstanding:
         Basic                 61,991      60,752       61,687       60,346
         Diluted               61,991      64,003       64,027       63,748




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

    (In thousands)                         January 31,     February 2,
                                              2009            2008
    Assets
    Current assets:
       Cash and cash equivalents            $146,430        $131,510
       Inventories                           187,044         158,525
       Prepaid expenses and other
        currents assets                       34,926          33,293
       Prepaid and refundable income
        taxes                                 23,116           9,794
    Total current assets                     391,516         333,122

    Property and equipment, net              201,675         168,292

    Deferred income taxes, net                 8,862          20,188

    Other assets                              11,756          13,994
    Total assets                            $613,809        $535,596



    Liabilities and Stockholders' Equity

    Current liabilities:
       Accounts payable                     $119,719        $101,277
       Other current liabilities              83,889          91,414
       Deferred income taxes, net              4,049           2,382
    Total current liabilities                207,657         195,073

    Long-term debt                           100,000         125,000

    Deferred credits                          73,815          67,600

    Other liabilities                          7,388           7,601

    Stockholders' equity                     224,949         140,322
    Total liabilities and
     stockholders' equity                   $613,809        $535,596



    Exhibit (3)


               Actual and Projected Store Count and Square Footage

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

    1st Quarter            260            7              0            267
    2nd Quarter            267            9              0            276
    3rd Quarter            276           15              1            290
    4th Quarter            290           11              1            300


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

    1st Quarter        1,688,016       38,685       (2,261)     1,724,440
    2nd Quarter        1,724,440       41,949       (7,899)     1,758,490
    3rd Quarter        1,758,490       67,657      (10,304)     1,815,843
    4th Quarter        1,815,843       54,471       (6,181)     1,864,133


    Projected Fiscal
     2009
                       Total stores    Number of   Number of   Total stores
                         open at        stores       stores      open at
                         beginning      opened       closed      end of
                         of the         during       during     the quarter
    Quarter              quarter      the quarter  the quarter

    1st Quarter              300           11            2           309
    2nd Quarter              309            8            0           317
    3rd Quarter              317            4            0           321
    4th Quarter              321            2            0           323


    Projected Fiscal
     2009
                       Total gross  Gross square  Reduction   Total gross
                         square      feet for      of gross     square
                         feet at      stores      square feet   feet at
                         beginning   opened or    for stores    end of
                         of the      expanded     closed or   the quarter
                         quarter    during the    downsized
                                     quarter      during the
                                                   quarter
    Quarter

    1st Quarter        1,864,133       49,783       (8,358)    1,905,558
    2nd Quarter        1,905,558       32,392            0     1,937,950
    3rd Quarter        1,937,950       18,107            0     1,956,057
    4th Quarter        1,956,057        9,512            0     1,965,569

SOURCE J. Crew Group, Inc.

CONTACT:
Media,
James S. Scully,
Chief Administrative Officer and Chief Financial Officer of J. Crew Group, Inc.,
+1-212-209-8040;
or Investors,
Allison Malkin, or Chad Jacobs, or Joe Teklits,
all of Integrated Corporate Relations,
+1-203-682-8200,
for J. Crew Group, Inc.

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.