J.Crew Group Reports Preliminary Fourth Quarter And Fiscal Year Financial Results; Announces Fourth Quarter Operating Income Of $20MM Compared To $1MM In 2003
Amanda J. Bokman
Chief Financial Officer
Owen Blicksilver PR
J.CREW GROUP REPORTS PRELIMINARY FOURTH QUARTER AND FISCAL YEAR FINANCIAL RESULTS; ANNOUNCES FOURTH QUARTER OPERATING INCOME OF $20MM COMPARED TO $1MM IN 2003
NEW YORK (April 6, 2005) - J.Crew Group, Inc. today announced its preliminary financial results for the fourth quarter and fiscal year ended January 29, 2005.
Millard Drexler, Chairman and CEO, said, "We are pleased with both our fourth quarter and full year results. Our obsessive focus on quality, style and design along with endless attention to our customers' needs, is reflected in J.Crew's performance."
Fourth Quarter Results
Consolidated revenues for the thirteen weeks ended January 29, 2005 were $264 million, an increase of 26% from the same period last year. Retail sales (including Factory) for the quarter increased to $183 million from $154 million last year with comparable store sales up 17%. Revenues of the Direct business (Internet and catalog) increased by 47% to $72 million from $49 million last year.
Gross margin for the fourth quarter of 2004 was 39%, comparable to last year. Selling, general and administrative expenses during the quarter were $82 million, or 31% of revenues, compared to $80 million, or 38% of revenues in the prior year. The decrease as a percentage of revenues was driven primarily by operating leverage due to the significant increase in comparable store sales.
Operating income increased to $20 million, an increase of $19 million over the corresponding period in fiscal 2003.
During the fourth quarter, the Company redeemed $319 million of its long-term debt consisting of $150 million of 10 3/8% Senior Subordinated Notes due 2007 and $169 million of 16% Senior Discount Contingent Principal Notes due 2008. Funds used for the redemption consisted of $275 million in new term loans borrowed by the Company and internally available funds. The new term loans were subsequently converted into equivalent 9 3/4% Senior Subordinated Notes due in 2014. These transactions will reduce annual interest expense by $16 million in 2005. As a result of these transactions, the Company recognized a loss of $50 million resulting from early redemption fees, and the write-off of unamortized debt issuance discount and related fees.
Net loss for the fourth quarter was $52 million (including the $50 million loss from the debt refinancing) compared to a loss of $20 million last year. Adjusted for the loss on debt refinancing, the fourth quarter net loss would have been $2 million, an $18 million decrease in the loss over the fourth quarter last year.
Full Year Results
For the full year, consolidated revenues increased 17% to $804 million from $690 million last year. Retail sales increased to $580 million from $487 million, primarily as a result of a comparable store sales increase of 16%. Revenues of the Direct business increased by 14% to $198 million in fiscal 2004.
Gross margin for the fiscal year increased to 40% from 36% last year due to improvements resulting from higher full price sell-through. Last year's gross margin was negatively impacted by the liquidation of obsolete inventories.
Selling, general and administrative expenses during the year were $287 million, or 36% of revenues, compared to $281 million, or 41% of revenues in the prior year. The decrease as a percentage of revenues was driven primarily by operating leverage due to the significant increase in comparable store sales and a reduction in catalog selling expenses.
For the fifty-two weeks ended January 29, 2005, operating income increased by $69 million to $38 million compared to an operating loss of $31 million last year.
Net loss for 2004 was $100 million compared to a loss of $50 million last year. However, fiscal 2004 included a loss from debt refinancing of $50 million, while 2003 included a gain on exchange of debt of $41 million. Adjusted for these financing transactions, the net loss in 2004 would have been $50 million, compared to a net loss of $91 million last year.
Accounting for Lease Transactions
As previously reported, the Company will classify proceeds from landlord construction allowances as operating activities in its consolidated statement of cash flows in fiscal 2004 and will restate its prior year cash flow statements to reclassify such allowances from investing activities to operating activities to conform to the 2004 presentation. This change will not have any material effect on the Company's balance sheet or consolidated statement of operations.
Fourth Quarter Conference Call
The Company's fourth quarter investor conference call will be held today, April 6, 2005 at 11 a.m. eastern time. The event will be available through an audio webcast at www.jcrew.com (click on "Help" and "Investor Relations") and www.companyboardroom.com. A replay of the call will be archived on those websites and will also be available by telephone through April 13, 2005 at (888) 286-8010, reference #55747681.
J. Crew Group, Inc. is a leading multi-channel retailer of women's and men's apparel, shoes and accessories. The Company operates 157 retail stores, the J. Crew catalog business, jcrew.com, and 41 factory outlet stores.