J. Crew Group, Inc. Announces First Quarter Fiscal 2007 Results
First Quarter Revenues Rise 24% to $297.3 million First Quarter Operating Income Increases 57% to $44.4 million
NEW YORK, May 31 /PRNewswire-FirstCall/ -- J. Crew Group, Inc. (NYSE: JCG) today announced financial results for the three months ended May 5, 2007 (first quarter fiscal 2007).
First quarter highlights:
- Revenues increased 24% to $297.3 million. Store sales (Retail and Factory) increased 20% to $201.0 million, with comparable store sales increasing 13%. 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 8% in the first quarter of fiscal 2007. Comparable store sales increased 12% in the first quarter of fiscal 2006. Direct sales (Internet and Catalog) rose by 31% to $86.6 million. Direct sales increased 12% in the first quarter of fiscal 2006.
- Gross margin increased 110 basis points to 46.6% of revenues from 45.5% of revenues in the first quarter of fiscal 2006.
- Operating income increased 57% to $44.4 million, or 14.9% of revenues, compared to $28.3 million, or 11.8% of revenues, in the first quarter of fiscal 2006.
- Net income available to common stockholders was $24.6 million, or $0.39 per diluted share, compared to $4.4 million, or $0.12 per diluted share, in the first quarter of fiscal 2006.
- Adjusted net income for the first quarter of fiscal 2006 totaled $14.2 million, or $0.22 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 first quarter results which reflect the hard work of our team in always doing our best to satisfy our customers. Our customers have come to expect from J. Crew the kind of quality, style and design that we work hard to consistently provide."
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%.
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 months ended April 29, 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 months ended April 29, 2006 are included in Exhibit (3).
Conference Call Information
A conference call to discuss first quarter results is scheduled for today, May 31, 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 June 7, 2007 and can be accessed by dialing (877) 519-4471 and entering code 8810378.
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 May 31, 2007, the Company operates 186 retail stores, the J. Crew catalog business, jcrew.com, and 53 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)
(In thousands, except percentages
and per share amounts) Three Months Three Months
Ended Ended
May 5, 2007 April 29, 2006
------------------- ------------------
Net sales
Stores $201,009 $167,124
Direct 86,570 66,211
------------------- ------------------
287,579 233,335
Other 9,733 7,352
------------------- ------------------
Total Revenues 297,312 240,687
Costs of goods
sold, buying and
occupancy costs 158,774 131,293
------------------- ------------------
Gross Profit 138,538 109,394
As a percent of revenues 46.6 % 45.5 %
Selling, general
and administrative
expenses 94,165 81,100
As a percent of revenues 31.7 % 33.7 %
------------------- ------------------
Operating income 44,373 28,294
As a percent of revenues 14.9 % 11.8 %
Interest expense, net 3,442 19,196
------------------- ------------------
Income before
income taxes 40,931 9,098
Provision for
income taxes 16,282 1,300
------------------- ------------------
Net income 24,649 7,798
Preferred stock
dividends - (3,364)
------------------- ------------------
Net income
available to
common
stockholders $24,649 $4,434
=================== ==================
Income per share:
Basic $0.41 $0.17
Diluted $0.39 $0.12
Weighted average
shares outstanding:
Basic 59,731 25,434
Diluted 63,248 37,880
Exhibit (2)
J. Crew Group, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands) May 5, 2007 February 3, 2007
-------------- ------------------- ------------------
Assets
Current assets:
Cash and cash
equivalents $81,321 $88,900
Inventories 144,759 140,670
Prepaid expenses and
other current assets 45,842 47,528
------------------- ------------------
Total current assets 271,922 277,098
Property and equipment, net 125,208 121,814
Other assets 31,792 29,154
------------------- ------------------
Total assets $428,922 $428,066
=================== ==================
Liabilities and Stockholders'
equity
Current liabilities:
Accounts payable $66,358 $77,836
Other current
liabilities 65,883 76,666
Income taxes payable 5,675 5,496
------------------- ------------------
Total current
liabilities 137,916 159,998
Long-term debt 175,000 200,000
Deferred credits 64,489 62,448
Other liabilities 6,435 -
Stockholders' equity 45,082 5,620
------------------- ------------------
Total liabilities and
stockholders' equity $428,922 $428,066
=================== ==================
Exhibit (3)
Reconciliation of net income on a GAAP basis to "Adjusted net income"
Three Months Ended April 29, 2006
(In thousands, except percentages GAAP As
and per share amounts) Basis Adjustments Adjusted
Total Revenues $240,687 - $240,687
Cost of goods sold,
buying and
occupancy costs 131,293 - 131,293
Gross profit 109,394 - 109,394
Selling, general
administrative
expenses 81,100 - 81,100
Operating income 28,294 - 28,294
Interest expense, net 19,196 (14,096) (a) 5,100
-------- -------- -------
Income before income taxes 9,098 14,096 23,194
Provision for income taxes 1,300 7,653 (b) 8,953
-------- --------- -------
Net income 7,798 6,443 14,241
Preferred stock dividends (3,364) 3,364 (c) -
-------- --------- -------
Net income
available to common
stockholders $4,434 $9,807 $14,241
======== ========= =========
Earnings per share:
Basic $0.17 $0.08 $0.25
Diluted $0.12 $0.10 $0.22
Weighted average
shares outstanding:
Basic 25,434 32,366 (d) 57,800
Diluted 37,880 26,220 (d) 64,100
(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 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 months ended April 29, 2006 is not
representative of the Company's ongoing effective tax rate.
(c) to reflect the redemption of $92.8 million of Series A preferred
stock.
(d) 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 open Number of Number of Total stores
at beginning of stores stores open at the
the quarter opened closed end of the
during the during the quarter
quarter quarter
Quarter
1st Quarter
(Actual) 227 6 0 233
2nd Quarter
(Projected) 233 10 2 241
3rd Quarter
(Projected) 241 14 1 254
4th Quarter
(Projected) 254 7 0 261
Fiscal 2007
Total gross Gross square Reduction Total gross
square feet feet for of gross square feet
at stores square feet at end of
beginning opened during for stores the quarter
of the the quarter closed or
quarter downsized
during the
quarter
Quarter
1st Quarter
(Actual) 1,543,904 22,615 0 1,566,519
2nd Quarter
(Projected) 1,566,519 45,215 (15,164) 1,596,570
3rd Quarter
(Projected) 1,596,570 68,298 (6,700) 1,658,168
4th Quarter
(Projected) 1,658,168 37,923 0 1,696,091
SOURCE J. Crew Group, Inc.
CONTACT:
James Scully, Chief Financial Officer
1-212-209-8040
or
Investor Contacts
Allison Malkin
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