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News Release

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

November 29, 2007 at 4:03 PM EST

Third Quarter Operating Income Increases 44%

Third Quarter Diluted EPS of $0.42

Raises Fiscal 2007 Guidance

NEW YORK, Nov. 29 /PRNewswire-FirstCall/ -- J.Crew Group, Inc. (NYSE: JCG) today announced financial results for the three months (Third Quarter) and nine months (First Nine Months) ended November 3, 2007.

Third Quarter highlights:

  • Revenues increased 21% to $332.7 million. Store sales (Retail and Factory) increased 16% to $233.6 million, with comparable store sales increasing 8%. 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 5% in the third quarter of fiscal 2007. Comparable store sales increased 19% in the third quarter of fiscal 2006. Direct sales (Internet and Catalog) rose by 36% to $90.3 million. Direct sales increased 18% in the third quarter of fiscal 2006.
  • Operating income increased 44% to $47.7 million, or 14.3% of revenues, compared to $33.2 million, or 12.0% of revenues, in the third quarter of fiscal 2006.
  • Net income available to common stockholders was $26.8 million, or $0.42 per diluted share, compared to $26.0 million, or $0.40 per diluted share, in the third quarter of fiscal 2006. The current year period reflects an effective tax rate of 39.8% as compared to an effective tax rate of 7.1% in the third quarter of fiscal 2006.
  • Adjusted net income for the third quarter of fiscal 2006 totaled $17.2 million, or $0.27 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 third quarter results, which reflect the strength of both our Store and Direct businesses and our ongoing commitment to great style, quality and design. Our focus continues to be on driving high quality earnings growth by investing in the areas where we get superior returns -- improving quality and design, differentiating our assortments and expanding our Store and Direct businesses."

First Nine Months highlights:

  • Revenues increased 19% to $934.8 million. Store sales (Retail and Factory) increased 15% to $654.2 million, with comparable store sales increasing 8%. 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 6% in the first nine months of fiscal 2007. Comparable store sales increased 16% in the first nine months of fiscal 2006. Direct sales (Internet and Catalog) rose by 29% to $251.4 million in the first nine months of fiscal 2007. Direct sales increased 12% in the first nine months of fiscal 2006.
  • Operating income increased 46% to $129.2 million, or 13.8% of revenues, compared to $88.3 million, or 11.2% of revenues, in the first nine months of fiscal 2006.
  • Net income available to common stockholders was $72.1 million, or $1.13 per diluted share, compared to $27.7 million, or $0.62 per diluted share, in the first nine months of fiscal 2006.
  • Adjusted net income for the first nine months of fiscal 2006 totaled $44.7 million, or $0.70 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.

Balance Sheet highlights as of November 3, 2007:

  • Inventories at the end of the quarter were $210.8 million, reflecting the impact of 29 net stores opened since the end of the third quarter of fiscal 2006. Additionally, the 53rd week in fiscal 2006 causes each quarter in 2007 to begin and end one week later, resulting in non-comparable point in time inventory increases. The impact of the calendar shift increased inventory by approximately $15 million at the end of the quarter.
  • Long-term debt was reduced to $125 million, which reflects the Company's voluntary principal prepayments of $75 million and $50 million made during the first nine months of fiscal 2007 and the fourth quarter of fiscal 2006, respectively.

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%.

Based on better than anticipated third quarter results, the Company currently expects fiscal 2007 diluted earnings per share in the range of $1.50 to $1.52, as compared to its previous guidance range of $1.42 to $1.46.

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 and nine months ended October 28, 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 and nine months ended October 28, 2006 are included in Exhibit (3).

Conference Call Information

A conference call to discuss third quarter results is scheduled for today, November 29, 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 December 5, 2007 and can be accessed by dialing (877) 519-4471 and entering code 9473389.

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 November 24, 2007, the Company operates 198 retail stores (including four crewcuts and six Madewell stores), the J.Crew catalog business, jcrew.com, and 61 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        Three        Nine          Nine
    (Amounts in              Months       Months       Months        Months
     thousands, except        Ended        Ended        Ended         Ended
     percentages and        November      October     November      October
     per share amounts)      3, 2007      28, 2006     3, 2007      28, 2006

    Net sales
         Stores             $233,588     $202,174     $654,182      $566,708
         Direct               90,315       66,346      251,424       195,379
                             323,903      268,520      905,606       762,087
    Other                      8,841        7,055       29,181        23,343
    Total Revenues           332,744      275,575      934,787       785,430

    Costs of goods
     sold, buying and
     occupancy costs         180,909      147,703      511,224       434,944
    Gross profit             151,835      127,872      423,563       350,486
         As a percent
         of revenues           45.6%        46.4%        45.3%         44.6%

    Selling, general
     and administrative
     expenses                104,150       94,690      294,385       262,188
         As a percent
          of revenues          31.3%        34.4%        31.5%         33.4%
    Operating income          47,685       33,182      129,178        88,298
         As a percent
          of revenues          14.3%        12.0%        13.8%         11.2%

    Interest expense, net      3,077        5,172        9,377        40,028

    Loss on refinancing
     of debt                    ----         ----         ----        10,039

    Income before
     income taxes             44,608       28,010      119,801        38,231

    Provision for
     income taxes             17,771        2,000       47,683         4,400

    Net income                26,837       26,010       72,118        33,831

    Preferred stock dividends   ----         ----         ----        (6,141)

    Net income applicable
     to common
     shareholders            $26,837      $26,010      $72,118       $27,690

    Income per share:
         Basic                 $0.44        $0.45        $1.20         $0.69
         Diluted               $0.42        $0.40        $1.13         $0.62

    Weighted average shares
     outstanding:
         Basic                60,725       58,036       60,257        39,968
         Diluted              64,195       64,657       63,923        44,846



                                                                  Exhibit(2)

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

                                      November 3,   February 3,    October 28,
    (In thousands)                       2007          2007           2006

    Assets
    Current assets:
       Cash and cash
        equivalents                     $63,760       $88,900        $72,475
       Inventories                      210,774       140,670        174,687
       Prepaid expenses and
        other current assets             50,721        47,528         38,744
    Total current assets                325,255       277,098        285,906
    Property and equipment, net         156,524       121,814        113,925
    Other assets                         29,941        29,154         14,074
    Total assets                       $511,720      $428,066       $413,905

    Liabilities and Stockholders' equity
    Current liabilities:
       Accounts payable                $106,811       $77,836        $85,335
       Other current liabilities         80,310        76,666         64,341
       Income taxes payable              13,401         5,496          5,087
       Current portion of long-term
        debt                                  -             -          2,850
    Total current liabilities           200,522       159,998        157,613
    Long-term debt                      125,000       200,000        247,150
    Deferred credits                     69,140        62,448         64,278
    Other liabilities                     6,689             -              -
    Stockholders' equity (deficit)      110,369         5,620        (55,136)
    Total liabilities and
     stockholders' equity (deficit)    $511,720      $428,066       $413,905



                                                                  Exhibit (3)

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

    (Amounts in
     thousands,
     except
     percentages      Three Months Ended               Nine Months Ended
     and per           October 28, 2006                 October 28, 2006
     share        GAAP     Adjust-      As        GAAP      Adjust-      As
     amounts)    Basis      ments   Adjusted     Basis      ments    Adjusted

    Total
     Revenues  $275,575     ----    $275,575   $785,430      ----     $785,430

    Cost of
     goods sold,
     buying and
     occupancy
     costs      147,703     ----     147,703    434,944      ----      434,944

    Gross
     profit     127,872     ----     127,872    350,486      ----      350,486

    Selling,
     general and
     administ-
     rative
     expenses    94,690     ----      94,690    262,188      ----      262,188

    Operating
     income      33,182     ----      33,182     88,298      ----       88,298

    Interest
     expense, net 5,172     ----       5,172     40,028   (24,556)( a ) 15,472

    Loss on
     refinancing
     of debt       ----     ----        ----     10,039   (10,039)( b )   ----
    Income before
     income
     taxes       28,010     ----      28,010     38,231    34,595       72,826

    Provision
     for income
     taxes        2,000    8,812( c ) 10,812      4,400    23,711( c )  28,111

    Net income   26,010   (8,812)     17,198     33,831    10,884       44,715

    Preferred
     stock
     dividends     ----     ----        ----     (6,141)    6,141( d )    ----
    Net income
     applicable
     to common
     stockhold-
     ers        $26,010 ($8,812)     $17,198    $27,690   $17,025     $44,715

    Earnings per share:
       Basic      $0.45  ($0.15)       $0.30      $0.69     $0.08       $0.77
       Diluted    $0.40  ($0.13)       $0.27      $0.62     $0.08       $0.70

    Weighted
     average
     shares
     outstanding:
       Basic     58,036    ----       58,036     39,968    17,911( e ) 57,879
       Diluted   64,657    ----       64,657     44,846    19,439( e ) 64,285


     ( 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 eliminate the loss on refinancing of debt.
     ( c ) 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 and nine months ended October 28,
           2006 is not representative of the Company's ongoing effective tax
           rate.
     ( 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 IPO on
           a basic and diluted basis.



                                                                   Exhibit(4)

             Actual and Projected Store Count and Square Footage

    Fiscal 2007
                        Total stores    Number of    Number of    Total stores
                           open at        stores       stores        open at
                        beginning of  opened during closed during    end of
    Quarter              the quarter   the quarter   the quarter   the quarter

    1st Quarter (Actual)     227            6            0            233
    2nd Quarter (Actual)     233            7            2            238
    3rd Quarter (Actual)     238           18            1            255
    4th Quarter (Projected)  255            7            1            261



     Fiscal 2007
                                Gross square   Reduction of
                   Total gross   feet for      gross square
                     square       stores     feet for stores   Total gross
                    feet at      opened or      closed or        square
                   beginning     expanded       downsized      feet at end
    Quarter          of the     during the      during the       of the
                    quarter       quarter        quarter         quarter
    1st Quarter
     (Actual)      1,543,904       22,615             0         1,566,519
    2nd Quarter
     (Actual)      1,566,519       33,961       (20,939)        1,579,541
    3rd Quarter
     (Actual)      1,579,541       87,645        (6,662)        1,660,524
    4th Quarter
     (Projected)   1,660,524       42,459        (7,290)        1,695,693

SOURCE J.Crew Group, Inc.

CONTACT: James Scully, 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.
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.