J. Crew Group, Inc. Announces Second Quarter Fiscal 2010 Results
Second Quarter Revenues Rise 14% to $407.5 million
Second Quarter Diluted Earnings Per Share of $0.53
NEW YORK, Aug 26, 2010 /PRNewswire via COMTEX/ --
J. Crew Group, Inc. (NYSE: JCG) today announced financial results for the three months (second quarter) and six months (first six months) ended July 31, 2010.
Second Quarter highlights:
- Revenues increased 14% to $407.5 million. Store sales increased 14% to $295.0 million, with comparable store sales increasing 11%. Comparable store sales decreased 5% in the second quarter of fiscal 2009. Direct sales (Internet and Phone) increased 16% to $102.5 million. Direct sales increased 6% to $88.2 million in the second quarter of fiscal 2009.
- Gross margin increased to 44.6% of revenues from 41.2% of revenues in the second quarter of fiscal 2009.
- Operating income increased 83% to $59.0 million, or 14.5% of revenues, compared to $32.2 million, or 9.0% of revenues, in the second quarter of fiscal 2009. Operating income in the second quarter of fiscal 2010 includes a benefit of $3.2 million in share-based compensation for recognition of forfeited share-based awards resulting primarily from the resignation of our President of Retail and Direct. Operating income in the second quarter of fiscal 2009 included charges of $2.6 million related to underperforming stores and lease termination actions.
- Net income was $34.9 million, or $0.53 per diluted share, compared to net income of $18.6 million, or $0.29 per diluted share, in the second quarter of fiscal 2009.
Millard Drexler, J. Crew's Chairman and CEO stated: "While we are really pleased with the second quarter, it is more critical than ever to continue to move forward and invest in our business for quality, long term, earnings growth. It's about moving, doing, creating - it never stops."
First Six Months highlights:
- Revenues increased 17% to $821.4 million. Store sales increased 17% to $585.0 million, with comparable store sales increasing 13%. Comparable store sales decreased 5% in the first six months of fiscal 2009. Direct sales increased 18% to $216.9 million. Direct sales decreased 0.3% to $183.5 million in the first six months of fiscal 2009.
- Gross margin increased to 46.8% of revenues from 41.7% of revenues in the first six months of fiscal 2009.
- Operating income increased 99% to $134.4 million, or 16.4% of revenues, compared to $67.5 million, or 9.6% of revenues, in the first six months of fiscal 2009. Operating income in the first six months of fiscal 2010 includes a benefit of $3.2 million in share-based compensation for recognition of forfeited share-based awards resulting primarily from the resignation of our President of Retail and Direct. Operating income in the first six months of fiscal 2009 included charges of $4.9 million related to our workforce reduction, underperforming stores and lease termination actions.
- Net income was $79.6 million, or $1.21 per diluted share, compared to net income of $39.1 million, or $0.61 per diluted share, in the first six months of fiscal 2009.
Balance Sheet highlights as of July 31, 2010:
- Cash and cash equivalents were $340.5 million at the end of the second quarter compared to $204.3 million at the end of the second quarter in the prior year.
- Inventories at the end of the second quarter were $219.5 million compared to $195.3 million at the end of the second quarter of fiscal 2009. Inventory per square foot increased 10% as compared to the end of the second quarter of fiscal 2009.
- Debt was $49.2 million at the end of the second quarter compared to $99.7 million at the end of the second quarter in the prior year. On August 24, 2010 the Company provided notice under its credit agreement of its intent to make a voluntary prepayment on August 31, 2010 of the remaining outstanding loan balance.
Guidance
For fiscal 2010 the Company currently expects diluted earnings per share in the range of $2.25 to $2.35, which includes a benefit of $0.03 for recognition of forfeited share-based awards from the resignation of our President of Retail and Direct, as compared to its previous guidance range of $2.35 to $2.45 and fiscal 2009 diluted earnings per share of $1.91. For the third quarter of fiscal 2010 the Company expects diluted earnings per share in the range of $0.55 to $0.60.
Conference Call Information
A conference call to discuss second quarter results is scheduled for today, August 26, 2010, 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, 2010 and can be accessed by dialing (877) 660-6853 and entering account number 3055 and conference ID number 354793.
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 August 26, 2010, the Company operates 247 retail stores (including 220 J.Crew retail stores, 9 crewcuts stores and 18 Madewell stores), the J. Crew catalog business, jcrew.com, madewell.com and 81 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.
ForwardLooking 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)
(Amounts in thousands,
except percentages and per
share amounts) Three Months Three Months
--------------------------- Ended Ended
July 31, August 1,
2010 2009
--------- ----------
Net sales
Stores $294,999 $259,080
Direct 102,511 88,171
------- ------
397,510 347,251
Other 10,009 10,304
------ ------
Total Revenues 407,519 357,555
Costs of goods sold, buying
and occupancy costs 225,967 210,327
------- -------
Gross Profit 181,552 147,228
As a percent of revenues 44.6% 41.2%
---- ----
Selling, general
administrative expenses 122,540 115,016
As a percent of revenues 30.1% 32.2%
---- ----
Operating income 59,012 32,212
As a percent of revenues 14.5% 9.0%
---- ---
Interest expense, net 632 1,078
-----
Income before income taxes 58,380 31,134
Provision for income taxes 23,471 12,524
------ ------
Net income $34,909 $18,610
=======
Income per share:
Basic $0.55 $0.30
Diluted $0.53 $0.29
Weighted average shares
outstanding:
Basic 63,242 62,323
Diluted 65,917 64,326
(Amounts in thousands,
except percentages and per
share amounts) Six Months Six Months
--------------------------- Ended Ended
July 31, August 1,
2010 2009
--------- ----------
Net sales
Stores $584,980 $499,806
Direct 216,866 183,531
------- -------
801,846 683,337
Other 19,552 19,988
------ ------
Total Revenues 821,398 703,325
Costs of goods sold, buying
and occupancy costs 437,248 410,160
------- -------
Gross Profit 384,150 293,165
As a percent of revenues 46.8% 41.7%
---- ----
Selling, general
administrative expenses 249,719 225,685
As a percent of revenues 30.4% 32.1%
---- ----
Operating income 134,431 67,480
As a percent of revenues 16.4% 9.6%
---- ---
Interest expense, net 1,259 2,155
-----
Income before income taxes 133,172 65,325
Provision for income taxes 53,537 26,270
------ ------
Net income $79,635 $39,055
=======
Income per share:
Basic $1.26 $0.63
Diluted $1.21 $0.61
Weighted average shares
outstanding:
Basic 63,240 62,227
Diluted 65,993 63,864
Exhibit (2)
J. Crew Group, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
July 31, January 30, August 1,
(In thousands) 2010 2010 2009
-------------- --------- ------------ ----------
Assets
Current assets:
Cash and cash equivalents $340,489 $298,107 $204,274
Inventories 219,526 190,231 195,295
Prepaid expenses and other
current assets 29,203 29,522 32,158
Prepaid Income taxes 7,876 1,455 963
----- ----- ---
Total current assets 597,094 519,315 432,690
Property and equipment, net 188,476 194,615 203,223
Other assets 24,428 24,628 19,857
------ ------ ------
Total assets $809,998 $738,558 $655,770
======== ======== ========
Liabilities and
Stockholders' equity
Current liabilities:
Accounts payable $131,311 $127,733 $116,110
Other current liabilities 89,204 106,652 82,207
Current portion of long-
term debt (Note A) 49,229 - 1,028
Deferred income taxes, net 958 958 4,049
--- --- -----
Total current liabilities 270,702 235,343 203,394
Long-term debt (Note A) - 49,229 98,715
Deferred credits 64,548 67,646 72,185
Other liabilities 10,486 10,462 7,001
Stockholders' equity 464,262 375,878 274,475
------- ------- -------
Total liabilities and
stockholders' equity $809,998 $738,558 $655,770
======== ======== ========
Note A - On August 24, 2010, the Company notified its lenders that it would make a voluntary prepayment of the remaining outstanding balance on its credit agreement on August 31, 2010. As a result, debt amounts have been classified as current portion of long-term debt as of July 31, 2010.
(Exhibit (3)
Actual and Projected Store Count and Square Footage (Note 1)
Fiscal 2010
(Note 2)
Total stores Number of Number of
Quarter open stores stores Total stores
at beginning opened closed open at
------- of the during during end of
quarter the quarter the quarter the quarter
------- ----------- ----------- -----------
1st Quarter
(Actual) 321 4 0 325
2nd Quarter
(Actual) 325 3 1 327
3rd Quarter
(Projected) 327 4 0 331
4th Quarter
(Projected) 331 4 0 335
------------ --- --- --- ---
Fiscal 2010
Total gross Gross square Reduction of Total gross
Quarter square feet for stores gross square square feet
feet at opened or feet for stores at end of
------- beginning of expanded during closed or the quarter
the quarter the quarter downsized
during the
quarter
----------- ----------- ----------- -----------
1st Quarter
(Actual) 1,958,140 20,168 (615) 1,977,693
2nd Quarter
(Actual) 1,977,693 12,631 (7,822) 1,982,502
3rd Quarter
(Projected) 1,982,502 14,257 0 1,996,759
4th Quarter
(Projected) 1,996,759 25,102 0 2,021,861
Note 1 - Store count and square footage summary excludes three clearance store locations. Above summary also includes one factory store that is temporarily closed at the time of this announcement due to flooding.
Note 2 - Actual and Projected number of stores opened during Fiscal 2010 by quarter:
1st Quarter - two retail and two factory stores (Actual).
2nd Quarter - one retail, one factory and one Madewell store (Actual).
3rd Quarter -two retail, one factory and one Madewell store (Projected).
4th Quarter-two factory, one factory crewcuts and one Madewell stores (Projected).
SOURCE J. Crew Group, Inc.