J. Crew Retail & Factory store sales up

27 Aug '08

4 min read

J. Crew Group Inc announced financial results for the three months (second quarter) and six months (first six months) ended August 2, 2008.

Second Quarter highlights:
• Revenues increased 10% to $336.3 million. Store sales (Retail and Factory) increased 10% to $242.3 million, with comparable store sales decreasing 0.4%. Comparable store sales increased 6% in the second quarter of fiscal 2007. Direct sales (Internet and Phone) rose by 12% to $83.2 million. Direct sales increased 19% in the second quarter of fiscal 2007.

• Gross margin decreased to 41.0% of revenues from 43.7% of revenues in the second quarter of fiscal 2007.

• Operating income decreased 15% to $31.5 million, or 9.4% of revenues, compared to $37.1 million, or 12.2% of revenues, in the second quarter of fiscal 2007. Operating income in the second quarter of fiscal 2008 includes approximately $3.0 million of unanticipated costs related to our Direct channel systems upgrades.

• Net income was $18.1 million, or $0.28 per diluted share, compared to a net income of $20.6 million, or $0.32 per diluted share, in the second quarter of fiscal 2007.

Millard Drexler, J. Crew's Chairman and CEO stated: "We are pleased with the fundamentals of our business and how we are positioned in this very challenging environment. That said, we are clearly disappointed by the impact that the transition to our new systems had on our business. We view this as a short term and temporary issue in continuing to build our long term success."

First Six Months highlights:
• Revenues increased 12% to $676.9 million. Store sales (Retail and Factory) increased 12% to $471.4 million, with comparable store sales increasing 1%. Comparable store sales increased 7% in the first six months of fiscal 2007. Direct sales (Internet and Phone) rose by 14% to $184.1 million. Direct sales increased 25% in the first six months of fiscal 2007.

• Gross margin decreased to 44.0% of revenues from 45.1% of revenues in the first six months of fiscal 2007.

• Operating income increased 4% to $84.6 million, or 12.5% of revenues, compared to $81.5 million, or 13.5% of revenues, in the first six months of fiscal 2007.

• Net income was $48.6 million, or $0.76 per diluted share, compared to a net income of $45.3 million, or $0.71 per diluted share, in the first six months of fiscal 2007.

Balance Sheet highlights as of August 2, 2008:

• Cash and cash equivalents were $113.4 million at the end of the second quarter and include the impact of income taxes paid of $61.0 million and voluntary principal payments of debt of $75.0 million during the last 12 months.

• Inventories at the end of the quarter were $197.8 million, reflecting the impact of 38 net stores opened since the second quarter of fiscal 2007 and 16 stores opened since the end of fiscal 2007. Inventory levels were also impacted by our Direct channel systems upgrade.

Guidance:

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