J. Crew Group, Inc. Announces Third Quarter Fiscal 2006 Results
Third Quarter Revenues Rise 23% to $275.6 million
Operating Income Increases 51% to $33.2 million
Company Raises Fiscal 2006 Guidance
NEW YORK, Nov. 21 /PRNewswire-FirstCall/ -- J. Crew Group, Inc. (NYSE: JCG) today announced financial results for the three and nine months ended October 28, 2006.
For the three months ended October 28, 2006:
-- Revenues increased 23% to $275.6 million. Store sales (Retail and
Factory) increased 26% to $202.2 million, with comparable store sales
increasing 19%. Comparable store sales rose 3% in the third quarter of
fiscal 2005. Direct sales (Internet and Catalog) rose by 18% to
$66.3 million.
-- Operating income increased 51% to $33.2 million, compared to
$22.0 million in the third quarter of fiscal 2005.
-- Net income applicable to common stockholders was $26.0 million, or
$0.40 per diluted share, compared to a net loss of $(0.3) million, or
$(0.01) per diluted share, in the third quarter of fiscal 2005. Net
income in the third quarter of fiscal 2006 includes $0.5 million of
stock option expense related to the adoption of SFAS 123(R), which was
not applicable in fiscal 2005.
-- 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 to report a 51% increase in third quarter operating income. Our results were driven by better than expected sales gains across each of our channels, demonstrating solid execution and the strength of the J. Crew brand. Due to this better than expected performance, we are raising our outlook for fiscal 2006. We remain focused on satisfying our customers."
For the nine months ended October 28, 2006:
-- Revenues increased 18% to $785.4 million. Store sales (Retail and
Factory) increased 21% to $566.7 million, with comparable store sales
increasing 16%. Comparable store sales rose 16% in the first nine
months of 2005. Direct sales (Internet and Catalog) increased 12% to
$195.4 million.
-- Operating income increased 36% to $88.3 million, compared to
$65.1 million in the first nine months of fiscal 2005.
-- Net income applicable to common stockholders was $27.7 million, or
$0.62 per diluted share, compared to a loss of $(0.4) million, or
$(0.02) per diluted share in the first nine months of fiscal 2005. Net
income for the first nine months of fiscal 2006 includes pre-tax
charges of $10.0 million related to the refinancing of debt and
$1.5 million of stock option expense related to the adoption of SFAS
123(R), which was not applicable in fiscal 2005.
-- Adjusted net income for the first nine months of fiscal 2006 totaled
$44.7 million, or $0.70 per diluted share.
Guidance
The Company currently expects fiscal 2006 diluted earnings per share in the range of $0.95 to $0.97. This compares to the Company's previously announced earnings guidance range of $0.86 to $0.88 per diluted share.
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, loss on refinancing of debt, income taxes, net income, preferred stock dividends and earnings per share information for the three months 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, loss on refinancing of debt, income taxes, net income, preferred stock dividends and earnings per diluted share after excluding the effects of transactions which resulted from the Company's recent 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 excluding expenses that the Company believes are not indicative of the Company's 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 21, 2006, at 4:30 PM Eastern Time. Investors and analysts interested in participating in the call are invited to dial (800) 811-8824 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 November 28, 2006 and can be accessed by dialing (888) 203-1112 and entering code 7128427.
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 21, 2006, the Company operates 176 retail stores, the J. Crew catalog business, jcrew.com, and 51 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, 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.
Exhibit (1)
J. Crew Group, Inc. and Subsidiaries
Condensed Statements of Operations
(Unaudited)
(Amounts in thousands,
except percentages
and per share
amounts) Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
October 28, October 29, October 28, October 29,
2006 2005 2006 2005
Net sales
Stores $202,174 $160,825 $566,708 $468,692
Direct 66,346 56,407 195,379 174,457
268,520 217,232 762,087 643,149
Other 7,055 6,130 23,343 20,114
Total Revenues 275,575 223,362 785,430 663,263
Costs of goods sold,
buying and occupancy
costs 147,703 125,513 434,944 371,948
Gross Profit 127,872 97,849 350,486 291,315
As a percent of
revenues 46.4% 43.8% 44.6% 43.9%
Selling, general
administrative
expenses 94,690 75,843 262,188 226,180
As a percent of
revenues 34.4% 34.0% 33.4% 34.1%
Operating income 33,182 22,006 88,298 65,135
As a percent of
revenues 12.0% 9.9% 11.2% 9.8%
Interest expense, net 5,172 18,478 40,028 53,878
Loss on refinancing
of debt ---- ---- 10,039 ----
Income before income
taxes 28,010 3,528 38,231 11,257
Provision for income
taxes 2,000 500 4,400 1,600
Net income 26,010 3,028 33,831 9,657
Preferred stock
dividends ---- (3,364) (6,141) (10,092)
Net income (loss)
applicable to common
shareholders $26,010 ($336) $27,690 ($435)
Income (loss) per
share:
Basic $0.45 ($0.01) $0.69 ($0.02)
Diluted $0.40 ($0.01) $0.62 ($0.02)
Weighted average shares
outstanding:
Basic 58,036 24,726 39,968 24,364
Diluted 64,657 24,726 44,846 24,364
Exhibit (2)
J. Crew Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Amounts in thousands) October 28, October 29,
2006 2005
(Unaudited) (Unaudited)
Assets
Current assets:
Cash and cash equivalents $72,475 $28,421
Inventories 174,687 160,669
Prepaid expenses and other currents assets 38,744 35,898
Total current assets 285,906 224,988
Property and equipment, net 113,925 112,090
Other assets 14,074 13,220
Total assets $413,905 $350,298
Liabilities and Stockholders' deficit
Current liabilities:
Accounts payable $85,334 $97,446
Other current liabilities 64,341 62,613
Income taxes payable 5,087 1,620
Current portion of long-term debt 2,850 ----
Total current liabilities 157,612 161,679
Long-term debt 247,150 617,423
Deferred credits 64,278 56,751
Preferred stock ---- 92,800
Stockholders' deficit (55,135) (578,355)
Total liabilities and stockholders' deficit $413,905 $350,298
Exhibit (3)
Reconciliation of net income on a GAAP basis to "Adjusted net income"
Three Months Ended October 28, 2006
(Amounts in thousands,
except percentages and
per share amounts) GAAP Basis Adjustments As Adjusted
Total Revenues $275,575 ---- $275,575
Cost of goods sold,
buying and occupancy
costs 147,703 ---- 147,703
Gross profit 127,872 ---- 127,872
Selling, general
administrative expenses 94,690 ---- 94,690
Operating income 33,182 ---- 33,182
Interest expense, net 5,172 ---- 5,172
Loss on refinancing of
debt ---- ---- ----
Income before income
taxes 28,010 ---- 28,010
Provision for income
taxes 2,000 8,812 (c) 10,812
Net income 26,010 (8,812) 17,198
Preferred stock
dividends ---- ---- ----
Net income applicable to
common shareholders $26,010 ($8,812) $17,198
Earnings per share:
Basic $0.45 ($0.15) $0.30
Diluted $0.40 ($0.13) $0.27
Weighted average shares
outstanding:
Basic 58,036 ---- 58,036
Diluted 64,657 ---- 64,657
Nine Months Ended October 28, 2006
(Amounts in thousands,
except percentages and
per share amounts) GAAP Basis Adjustments As Adjusted
Total Revenues $785,430 ---- $785,430
Cost of goods sold,
buying and
occupancy costs 434,944 ---- 434,944
Gross profit 350,486 ---- 350,486
Selling, general
administrative expenses 262,188 ---- 262,188
Operating income 88,298 ---- 88,298
Interest expense, net 40,028 (24,556) (a) 15,472
Loss on refinancing of
debt 10,039 (10,039) (b) ----
Income before income
taxes 38,231 34,595 72,826
Provision for income
taxes 4,400 23,711 (c) 28,111
Net income 33,831 10,884 44,715
Preferred stock dividends (6,141) 6,141 (c) ----
Net income applicable to
common shareholders $27,690 $17,025 $44,715
Earnings per share:
Basic $0.69 $0.08 $0.77
Diluted $0.62 $0.08 $0.70
Weighted average shares
outstanding:
Basic 39,968 17,911 (e) 57,879
Diluted 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%. The expected
increase in the Company's effective tax rate occurs primarily because
the net operating loss carryovers which were generated primarily as a
result of the Company's highly leveraged capital structure prior to
the IPO should be substantially utilized by the end of fiscal 2006 and
therefore the current effective tax rate is not reflective 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)
Projected Store Count and Square Footage
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) 203 5 2 206
2nd Quarter
(Actual) 206 10 0 216
3rd Quarter
(Actual) 216 11 1 226
4th Quarter
(Projected) 226 3 1 228
Total Gross Reduction of Total
gross square gross square gross
square feet for feet for square
feet at stores stores closed feet at
beginning opened or downsized end of
of the during during the the
Quarter quarter the quarter quarter quarter
1st Quarter
(Actual) 1,478,384 25,474 (14,500) 1,489,358
2nd Quarter
(Actual) 1,489,358 42,147 (2,137) 1,529,368
3rd Quarter
(Actual) 1,529,368 43,280 (10,768) 1,561,880
4th Quarter
(Projected) 1,561,880 11,481 (14,190) 1,559,171
SOURCE J. Crew Group, Inc.
CONTACT: James Scully, Chief Financial Officer, J. Crew Group, +1-212-
209-8040; or Investor Contact: Allison Malkin/Chad Jacobs/Joe Teklits,
Integrated Corporate Relations, +1-203-682-8200/