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News Release

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

August 26, 2008 at 4:02 PM EDT

Second Quarter Revenues Rise 10% to $336.3 million

Revises Guidance for Fiscal 2008

NEW YORK, Aug. 26 /PRNewswire-FirstCall/ -- J. Crew Group, Inc. (NYSE: JCG) today announced financial results for the three months (second quarter) and six months (first six months) ended August 2, 2008.

Second Quarter highlights:

-- Revenues increased 10% to $336.3 million. Store sales (Retail and Factory) increased 10% to $242.3 million, with comparable store sales decreasing 0.4%. Comparable store sales increased 6% in the second quarter of fiscal 2007. Direct sales (Internet and Phone) rose by 12% to $83.2 million. Direct sales increased 19% in the second quarter of fiscal 2007.

-- Gross margin decreased to 41.0% of revenues from 43.7% of revenues in the second quarter of fiscal 2007.

-- Operating income decreased 15% to $31.5 million, or 9.4% of revenues, compared to $37.1 million, or 12.2% of revenues, in the second quarter of fiscal 2007. Operating income in the second quarter of fiscal 2008 includes approximately $3.0 million of unanticipated costs related to our Direct channel systems upgrades.

-- Net income was $18.1 million, or $0.28 per diluted share, compared to a net income of $20.6 million, or $0.32 per diluted share, in the second quarter of fiscal 2007.

Millard Drexler, J. Crew's Chairman and CEO stated: "We are pleased with the fundamentals of our business and how we are positioned in this very challenging environment. That said, we are clearly disappointed by the impact that the transition to our new systems had on our business. We view this as a short term and temporary issue in continuing to build our long term success."

First Six Months highlights:

-- Revenues increased 12% to $676.9 million. Store sales (Retail and Factory) increased 12% to $471.4 million, with comparable store sales increasing 1%. Comparable store sales increased 7% in the first six months of fiscal 2007. Direct sales (Internet and Phone) rose by 14% to $184.1 million. Direct sales increased 25% in the first six months of fiscal 2007.

-- Gross margin decreased to 44.0% of revenues from 45.1% of revenues in the first six months of fiscal 2007.

-- Operating income increased 4% to $84.6 million, or 12.5% of revenues, compared to $81.5 million, or 13.5% of revenues, in the first six months of fiscal 2007.

-- Net income was $48.6 million, or $0.76 per diluted share, compared to a net income of $45.3 million, or $0.71 per diluted share, in the first six months of fiscal 2007.

Balance Sheet highlights as of August 2, 2008:

-- Cash and cash equivalents were $113.4 million at the end of the second quarter and include the impact of income taxes paid of $61.0 million and voluntary principal payments of debt of $75.0 million during the last 12 months.

-- Inventories at the end of the quarter were $197.8 million, reflecting the impact of 38 net stores opened since the second quarter of fiscal 2007 and 16 stores opened since the end of fiscal 2007. Inventory levels were also impacted by our Direct channel systems upgrade.

Guidance

Based upon the disruption to our Direct business, as well as the continued softness in our Stores business due to the macro economic environment, we are revising our guidance for fiscal 2008. The Direct systems upgrades impacted our Direct sales trend, limited our ability to leverage our multi-channel platform and resulted in incremental expenses. The Company is also introducing guidance for the third quarter of fiscal 2008. The Company currently expects third quarter diluted earnings per share in the range of $0.28 to $0.33. For fiscal 2008, the Company currently expects diluted earnings per share in the range of $1.44 to $1.54, as compared to its previous guidance range of $1.70 to $1.75 and fiscal 2007 diluted earnings per share of $1.52. The Company's revised expectations for the second half of fiscal 2008 include comparable store sales growth in the range of flat to slightly negative, Direct sales growth in the high single-digits and net square footage expansion of approximately 10% to 11%.

Conference Call Information

A conference call to discuss second quarter results is scheduled for today, August 26, 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 September 2, 2008 and can be accessed by dialing (877) 660- 6853 and entering account number 3055 and conference ID number 294898.

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 August 26, 2008, the Company operates 212 retail stores (including 4 crewcuts and 10 Madewell stores), the J. Crew catalog business, jcrew.com, and 68 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, systems upgrades, 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 Six Months  Six Months
    (Amounts in thousands,      Ended         Ended        Ended       Ended
     except percentages and   August 2,      August 4,   August 2,   August 4,
     per share amounts)         2008          2007         2008        2007

    Net sales
      Stores                  $242,280     $219,586     $471,389    $420,595
      Direct                    83,213       74,538      184,146     161,108
                               325,493      294,124      655,535     581,703
    Other                       10,782       10,607       21,318      20,340
    Total Revenues             336,275      304,731      676,853     602,043

    Costs of goods sold,
      buying and occupancy
      costs                    198,543      171,554      379,234     330,303

    Gross Profit               137,732      133,177      297,619     271,740
      As a percent of revenues    41.0%        43.7%        44.0%       45.1%

    Selling, general
      administrative expenses  106,199       96,054      213,040     190,244
      As a percent of revenues    31.6%        31.5%        31.5%       31.6%

    Operating income            31,533       37,123       84,579      81,496
      As a percent of revenues     9.4%        12.2%        12.5%       13.5%

    Interest expense, net        1,430        2,858        3,800       6,300

    Income before income taxes  30,103       34,265       80,779      75,196

    Provision for income taxes  11,980       13,630       32,155      29,912

    Net income                 $18,123      $20,635      $48,624     $45,284

    Income per share:
      Basic                      $0.29        $0.34        $0.79       $0.75
      Diluted                    $0.28        $0.32        $0.76       $0.71

    Weighted average shares
      outstanding:
      Basic                     61,693       60,316       61,443      60,024
      Diluted                   64,346       63,806       64,171      63,698


                                                                  Exhibit (2)

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

    (In thousands)                     August 2,    February 2,      August 4,
                                          2008         2008             2007

    Assets
    Current assets:
      Cash and cash equivalents        $113,438       $131,510       $119,672
      Inventories                       197,833        158,525        158,560
      Prepaid expenses and other
        current assets                   39,086         33,293         44,033
      Prepaid income taxes               12,025          1,194              -
      Refundable income taxes             8,600          8,600          8,600
    Total current assets                370,982        333,122        330,865

    Property and equipment, net         183,892        168,292        138,031

    Other assets                         32,798         34,182         31,248

    Total assets                       $587,672       $535,596       $500,144


    Liabilities and Stockholders' equity
    Current liabilities:
      Accounts payable                 $117,009       $101,277        $92,350
      Other current liabilities          75,994         93,796         71,579
      Income taxes payable                    -              -          7,756
    Total current liabilities           193,003        195,073        171,685

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

    Deferred credits                     73,484         67,600         67,159

    Other liabilities                     7,829          7,601          6,603

    Stockholders' equity                213,356        140,322         79,697

    Total liabilities and
      stockholders' equity             $587,672       $535,596       $500,144



                                                                  Exhibit (3)

             Actual and Projected Store Count and Square Footage

    Fiscal 2008
                                  Total     Number of   Number of     Total
                                  stores     stores      stores      stores
                                 open at     opened      closed       open
                                beginning    during      during      at end
                                 of the       the         the        of the
                                 quarter    quarter      quarter     quarter
    Quarter
    1st Quarter (Actual)           260          7          0           267
    2nd Quarter (Actual)           267          9          0           276
    3rd Quarter (Projected)        276         13          0           289
    4th Quarter (Projected)        289         13          2           300


    Fiscal 2008
                                  Total       Gross     Reduction     Total
                                  gross      square      of gross     gross
                                 square     feet for      square      square
                                 feet at     stores      feet for     feet at
                                beginning   opened or     stores    end of the
                                  of the     expanded   closed or    quarter
                                 quarter    during the  downsized
                                             quarter    during the
                                                         quarter
    Quarter
    1st Quarter (Actual)        1,688,016     38,685     (2,261)     1,724,440
    2nd Quarter (Actual)        1,724,440     41,949     (7,899)     1,758,490
    3rd Quarter (Projected)     1,758,490     56,424     (4,304)     1,810,610
    4th Quarter (Projected)     1,810,610     65,780    (12,181)     1,864,209

SOURCE J. Crew Group, Inc.

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