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Large impairment charge propels Q1FY16 net loss at J Crew
08
Jun '15
Net Loss at apparel marketer J Crew Group propelled massively as a result of non-cash impairment charges of $533.4 million in the first fiscal quarter ended May 2, 2015.

Net loss in the first quarter of fiscal 2016 totaled to $462.4 million compared to a net loss of $30.1 million in the first quarter of fiscal 2015.

“The quarter reflects impact of non-cash impairment charges, while first quarter of previous fiscal reflects impact of a loss on refinancing,” it said in a press release.

During the first quarter, J Crew Group experienced a further significant reduction in the profitability of its J Crew division, driven by performance of women's apparel and accessories.

As a result of current and expected future operating results, the Company concluded that the carrying value of the J Crew reporting unit exceeded its fair value and recorded an estimated non-cash goodwill impairment charge of $341 million.

“There has been no deterioration of the excess of fair value over the carrying value of its Madewell reporting unit,” it informed.

Additionally, the Company recorded non-cash impairment charge of $190 million to write down the intangible asset related to the J.Crew trade name.

After recording the non-cash goodwill charge of $341 million, the carrying value of goodwill is $676 million in the J Crew division and $108 million in the Madewell reporting unit.

After recording the non-cash intangible asset charge of $190 million, the carrying value of the J Crew trade name is $550 million.

In fiscal 2014, the Company recorded non-cash impairment charges of $562 million and $145 million to write down goodwill and the intangible asset related to the J Crew trade name.

It also added that if operating results continue to decline below the Company's expectations, additional impairment charges may be recorded in the future.

Total revenues in the reporting quarter declined 2 per cent year over year to $581.8 million, while comparable sales fell higher at 8 per cent following a decrease of 2 per cent in the first quarter last fiscal.

Of overall sales, J Crew sales slipped 5 per cent year on year to $508.7 million and comparable sales reduced 10 per cent following a decline of 3 per cent in the first quarter from earlier fiscal.

However Madewell sales surged 33 from the last fiscal’s first quarter to $61.9 million and the brand’s comparable sales too increased 12 per cent following an increase of 13 per cent in the first quarter last fiscal.

Gross margin in the quarter under review stood at 37.2 per cent as against 38.6 per cent in the first quarter of fiscal 2015.

Selling, general and administrative expenses reached $203.8 million or 35.0 per cent of revenues, compared to $194.2 million or 32.8 per cent of revenues in the first quarter of previous fiscal.

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