SEC Filing | J. Crew Group, LLC

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Form 8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 13, 2007


Commission File Number	Registrant, State of Incorporation Address and Telephone Number	I.R.S. Employer Identification No.

333-42427	J.CREW GROUP, INC. (Incorporated in Delaware) 770 Broadway New York, New York 10003 Telephone: (212) 209-2500	22-2894486

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On March 13, 2007, J.Crew Group, Inc. issued a press release announcing the Company’s financial results for the fourth quarter and fiscal year ended February 3, 2007. The Company is furnishing a copy of the press release hereto as Exhibit 99.1.

Item 9.01. Financial Statements and Exhibits.

(d) Press Release issued by J.Crew Group, Inc. on March 13, 2007.

The information in this Current Report is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), nor shall such information be deemed incorporated by reference into any filing under the Act, or the Exchange Act, except as expressly stated by specific reference in such filing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


J.CREW GROUP, INC.

By:		/s/ James S. Scully
Name:		James S. Scully
Title:		Executive Vice President and
		Chief Financial Officer

Date: March 13, 2007

Press Release issued by J. Crew Group, Inc. on March 13, 2007

Exhibit 99.1


				Company Contact:

				James Scully Chief Financial Officer (212) 209-8040

				Investor Contact:

				Allison Malkin/Chad Jacobs/Joe Teklits
				Integrated Corporate Relations
				(203) 682-8200

J. CREW GROUP, INC. ANNOUNCES FOURTH QUARTER AND FISCAL 2006 RESULTS

Fourth Quarter Revenues Rise 27% to $366.7 million

Fourth Quarter Operating Income Increases by $22.9 million to $37.3 million

New York, NY – March 13, 2007 – J. Crew Group, Inc. [NYSE:JCG] today announced financial results for the fourth quarter and fiscal year ended February 3, 2007 (fiscal 2006). The Company noted that fiscal 2006 consisted of 53 weeks, resulting in a 14-week fiscal fourth quarter. The 53^rd week is not included in comparable store sales calculations.

For the three months ended February 3, 2007:

•

Revenues increased 27% to $366.7 million. Store sales (Retail and Factory) increased 20% to $241.8 million, with comparable store sales increasing 7%. Comparable store sales rose 8% in the fourth quarter of fiscal 2005. Direct sales (Internet and Catalog) rose by 43% to $113.2 million. The impact of the 53^rd week of fiscal 2006 on Store and Direct sales was $8.2 million and $4.0 million, respectively.

•

Gross margin increased 400 basis points to 40.8% of revenues from 36.8% of revenues in the fourth quarter of fiscal 2005.

•

Operating income increased 160% to $37.3 million, or 10.2% of revenues, compared to $14.4 million, or 5.0% of revenues, in the fourth quarter of fiscal 2005.

•

Net income applicable to common stockholders was $44.0 million, or $0.71 per diluted share, compared to net loss of $9.2 million, or $(0.37) per diluted share, in the fourth quarter of fiscal 2005. Net income in the fourth quarter of fiscal 2006 includes $1.4 million of stock based compensation expense related to the adoption of SFAS 123(R), which was not applicable in fiscal 2005. Net income in the fourth quarter of fiscal 2006 also includes a non-recurring tax benefit of $10.9 million related to the recognition of deferred tax assets that were previously reserved.

•

Adjusted net income for the fourth quarter of fiscal 2006 totaled $20.5 million or $0.33 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’re very pleased with our fourth quarter results. We continue to re-define the designer business in America through our continued focus on quality, style and design along with endless attention to our customers’ needs. This has translated into strong topline growth and significant improvements in profitability, with our operating margin more than doubling to 10.2% in the fourth quarter.”

For the fiscal year ended February 3, 2007 (fiscal 2006):

•

Revenues increased 21% to $1,152.1 million. Store sales (Retail and Factory) increased 21% to $808.5 million, with comparable store sales increasing 13%. Comparable store sales rose 13% in fiscal 2005. Direct sales (Internet and Catalog) increased 22% to $308.6 million. As previously noted, the impact of the 53^rd week of fiscal 2006 on Store and Direct sales was $8.2 million and $4.0 million, respectively.

•

Gross margin increased 160 basis points to 43.4% from 41.8% in fiscal 2005.

•

Operating income increased 58% to $125.6 million, or 10.9% of revenues, compared to $79.5 million, or 8.3% of revenues, in fiscal 2005.

•

Net income applicable to common stockholders was $71.6 million, or $1.49 per diluted share, compared to a net loss of $9.7 million, or $(0.39) per diluted share, in fiscal 2005. Net income for fiscal 2006 includes pre-tax charges of $10.0 million related to the refinancing of debt and $2.9 million of stock based compensation expense related to the adoption of SFAS 123(R), which was not applicable in fiscal 2005. Net income for fiscal 2006 also includes a non-recurring tax benefit of $10.9 million related to the recognition of deferred tax assets that were previously reserved.

•

Adjusted net income for fiscal 2006 totaled $65.2 million, or $1.05 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.

“I am also pleased with our full year results,” Mr. Drexler continued. “We increased sales productivity as evidenced by our comparable store sales gain of 13% with sales per square foot improving to $526 from $457 last year on a 52 week basis. We accelerated our store expansion, opening 24 net new stores and introducing two new concepts, Crewcuts and Madewell. Importantly, we strengthened our financial flexibility by successfully completing our initial public offering. This provides us with a strong capital base for the continued execution of our growth plans.”

Guidance

The Company’s long-term 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, loss on refinancing of debt, income taxes, net income, preferred stock dividends and earnings per share information for the three months and fiscal year ended February 3, 2007 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 share after excluding 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 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 months and fiscal year ended February 3, 2007 are included in Exhibit (3).

Conference Call Information

A conference call to discuss fourth quarter results is scheduled for today, March 13, 2007, at 4:30 PM Eastern Time. Investors and analysts interested in participating in the call are invited to dial (800) 418-7236 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 March 20, 2007 and can be accessed by dialing (877) 519-4471 and entering code 8448564.

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 March 13, 2007, the Company operates 178 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)


(In thousands, except percentages and per share amounts)	Three Months Ended February 3, 2007 *(14 weeks)*			Three Months Ended January 28, 2006 *(13 weeks)*			Fiscal Year Ended February 3, 2007 *(53 weeks)*			Fiscal Year Ended January 28, 2006 *(52 weeks)*
Net sales
Stores	$	241,832		$	201,792		$	808,542		$	670,447
Direct		113,233			79,226			308,611			253,682

		355,065			281,018			1,117,153			924,129
Other		11,605			8,908			34,947			29,059

Total Revenues		366,670			289,926			1,152,100			953,188

Costs of goods sold, buying and occupancy costs		216,886			183,245			651,748			555,192

Gross Profit		149,784			106,681			500,352			397,996
As a percent of revenues		40.8	%		36.8	%		43.4	%		41.8	%

Selling, general and administrative expenses		112,463			92,319			374,738			318,499
As a percent of revenues		30.7	%		31.8	%		32.5	%		33.4	%

Operating income		37,321			14,362			125,614			79,497
As a percent of revenues		10.2	%		5.0	%		10.9	%		8.3	%
Interest expense, net		3,965			19,025			43,993			72,903
Loss on refinancing of debt		—			—			10,039			—

Income (loss) before income taxes		33,356			(4,663	)		71,582			6,594
Provision (benefit) for income taxes		(10,600	)		1,200			(6,200	)		2,800

Net income (loss)		43,956			(5,863	)		77,782			3,794
Preferred stock dividends		—			(3,364	)		(6,141	)		(13,456	)

Net income (loss) applicable to common shareholders	$	43,956		($	9,227	)	$	71,641		($	9,662	)

Income (loss) per share:
Basic	$	0.75		($	0.37	)	$	1.61		($	0.39	)
Diluted	$	0.71		($	0.37	)	$	1.49		($	0.39	)

Weighted average shares outstanding:
Basic		58,328			24,856			44,558			24,472
Diluted		62,144			24,856			48,039			24,472

Exhibit (2)

J. Crew Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)


(In thousands)	February 3, 2007		January 28, 2006
Assets
Current assets:
Cash and cash equivalents	$	88,900	$	61,275
Inventories		140,670		116,191
Prepaid expenses and other currents assets		39,328		37,732
Deferred income taxes, net		8,200		—

Total current assets		277,098		215,198
Property and equipment, net		121,814		109,408
Deferred income taxes, net		15,600		—
Other assets		13,554		12,715

Total assets	$	428,066	$	337,321

Liabilities and Stockholders’ equity (deficit)
Current liabilities:
Accounts payable	$	77,836	$	75,833
Other current liabilities		76,666		64,031
Income taxes payable		5,496		2,677

Total current liabilities		159,998		142,541
Long-term debt		200,000		631,867
Deferred credits		62,448		57,956
Preferred stock		—		92,800
Stockholders’ equity (deficit)		5,620		(587,843	)

Total liabilities and stockholders’ equity (deficit)	$	428,066	$	337,321

Exhibit (3)

Reconciliation of net income on a GAAP basis to “Adjusted net income”


	Three Months Ended February 3, 2007								Fiscal Year Ended February 3, 2007
(In thousands, except percentages and per share amounts)	GAAP Basis			Adjustments			As Adjusted		GAAP Basis			Adjustments			As Adjusted
Total Revenues	$	366,670			—		$	366,670	$	1,152,100			—		$	1,152,100
Cost of goods sold, buying and occupancy costs		216,886			—			216,886		651,748			—			651,748
Gross profit		149,784			—			149,784		500,352			—			500,352
Selling, general administrative expenses		112,463			—			112,463		374,738			—			374,738
Operating income		37,321			—			37,321		125,614			—			125,614
Interest expense, net		3,965			—			3,965		43,993			(24,556	)^(a)		19,437
Loss on refinancing of debt		—			—			—		10,039			(10,039	)^(b)		—

Income before income taxes		33,356			—			33,356		71,582			34,595			106,177
Provision (benefit) for income taxes		(10,600	)		23,475	^(c)		12,875		(6,200	)		47,184	^(c)		40,984

Net income		43,956			(23,475	)		20,481		77,782			(12,589	)		65,193
Preferred stock dividends		—			—			—		(6,141	)		6,141	^(d)		—

Net income applicable to common shareholders	$	43,956		$	(23,475	)	$	20,481	$	71,641		$	(6,448	)	$	65,193

Earnings per share:
Basic	$	0.75		$	(0.40	)	$	0.35	$	1.61		$	(0.48	)	$	1.13
Diluted	$	0.71		$	(0.38	)	$	0.33	$	1.49		$	(0.44	)	$	1.05
Weighted average shares outstanding:
Basic		58,328			—			58,328		44,558			13,339	^(e)		57,897
Diluted		62,144			—			62,144		48,039			14,242	^(e)		62,281

(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 13¹/8% debentures, (iv) the repayment of $275.0 million aggregate principal amount of 9³/4% 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 (benefit) for income taxes which includes a one-time benefit related to the recognition of deferred tax assets that were previously reserved for and to reflect the Company’s estimated future ongoing effective tax rate of 38.6% as the effective tax rate in the three months and fiscal year ended February 3, 2007 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


Actual Fiscal 2006
Quarter	Total stores open at beginning of the quarter	Number of stores opened during the quarter	Number of stores closed during the quarter	Total stores open at end of the quarter
1^st Quarter	203	5	2	206
2^nd Quarter	206	10	0	216
3^rd Quarter	216	11	1	226
4^th Quarter	226	3	2	227


Actual Fiscal 2006

Quarter	Total gross square feet at beginning of the quarter	Gross square feet for stores opened during the quarter	Reduction of gross square feet for stores closed or downsized during the quarter	Total gross square feet at end of the quarter
1^st Quarter	1,478,384	25,474	(14,500)	1,489,358
2^nd Quarter	1,489,358	42,147	(2,137)	1,529,368
3^rd Quarter	1,529,368	43,280	(10,768)	1,561,880
4^th Quarter	1,561,880	11,481	(29,457)	1,543,904


Projected Fiscal 2007

Quarter	Total stores open at beginning of the quarter	Number of stores opened during the quarter	Number of stores closed during the quarter	Total stores open at end of the quarter
1^st Quarter	227	7	0	234
2^nd Quarter	234	11	2	243
3^rd Quarter	243	15	1	257
4^th Quarter	257	4	0	261


Projected Fiscal 2007

Quarter	Total gross square feet at beginning of the quarter	Gross square feet for stores opened during the quarter	Reduction of gross square feet for stores closed or downsized during the quarter	Total gross square feet at end of the quarter
1^st Quarter	1,543,904	27,188	0	1,571,092
2^nd Quarter	1,571,092	52,057	(14,191)	1,608,958
3^rd Quarter	1,608,958	70,418	(3,991)	1,675,385
4^th Quarter	1,675,385	19,605	(1,303)	1,693,687