J. Crew Group, Inc. Announces Fourth Quarter and Fiscal 2007 Results
Fourth Quarter Diluted EPS of $0.39, including impact of severance charge of $0.02
Introduces Guidance for Fiscal 2008 Diluted EPS Range of $1.85 to $1.87
NEW YORK, March 11 /PRNewswire-FirstCall/ -- J. Crew Group, Inc. (NYSE: JCG) today announced financial results for the fourth quarter and fiscal year ended February 2, 2008 (fiscal 2007). The Company noted that the prior year, fiscal 2006, consisted of 53 weeks, resulting in a 14-week fiscal fourth quarter in the prior year. The 53rd week is not included in comparable store sales calculations for fiscal 2006 periods.
For the three months ended February 2, 2008 (fourth quarter):
- Revenues increased 9% to $399.9 million. Store sales (Retail and Factory) increased 8% to $260.6 million, with comparable store sales remaining flat. 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 4% in the fourth quarter of fiscal 2007. Comparable store sales rose 7% in the fourth quarter of fiscal 2006. Direct sales (Internet and Catalog) rose by 11% to $126.0 million. Direct sales increased 43% in the fourth quarter of fiscal 2006. The impact of the 53rd week of fiscal 2006 on Store and Direct sales was $8.2 million and $4.0 million, respectively.
- Gross margin increased to 41.3% of revenues from 40.8% of revenues in the fourth quarter of fiscal 2006.
- Operating income increased 16% to $43.3 million, or 10.8% of revenues, compared to $37.3 million, or 10.2% of revenues, in the fourth quarter of fiscal 2006. Operating income in the fourth quarter of the current period includes the impact of the recognition of severance costs of $2.3 million. Operating income adjusted for severance costs increased 22% to $45.6 million, or 11.4% of revenues.
- Net income available to common stockholders in the fourth quarter of fiscal 2007 was $25.0 million, or $0.39 per diluted share and includes the impact of the recognition of severance costs of approximately $0.02 per diluted share. The current year period reflects an effective tax rate of 39.8%.
- Net income available to common stockholders in the fourth quarter of fiscal 2006 was $44.0 million, or $0.71 per diluted share, and 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 2007 totaled $26.3 million, or $0.41 per diluted share (see Exhibit 3), as compared to adjusted net income of $20.5 million, or $0.33 per diluted share for the fourth quarter of fiscal 2006 (see Exhibit 4).
- A reconciliation of net income on a GAAP basis to adjusted net income is included in Exhibits (3) and (4) of this press release.
Millard Drexler, J. Crew's Chairman and CEO stated: "We are very pleased with our fourth quarter and fiscal year results. It's our mission that every single customer who shops with us knows the lengths we are willing to go in order to satisfy them. We couldn't be happier with what our customers are saying about our quality, our design and their experience with us. At the end of the day, when they are happy we see the results."
For the fiscal year ended February 2, 2008 (fiscal 2007):
- Revenues increased 16% to $1,334.7 million. Store sales (Retail and Factory) increased 13% to $914.8 million, with comparable store sales increasing 6%. 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 6% in fiscal 2007. Comparable store sales rose 13% in fiscal 2006. Direct sales (Internet and Catalog) increased 22% to $377.4 million. As previously noted, the impact of the 53rd week of fiscal 2006 on Store and Direct sales was $8.2 million and $4.0 million, respectively.
- Gross margin increased to 44.1% of revenues from 43.4% of revenues in fiscal 2006.
- Operating income increased 37% to $172.5 million, or 12.9% of revenues, compared to $125.6 million, or 10.9% of revenues, in fiscal 2006. Operating income in fiscal 2007 includes the impact of the recognition of severance costs of $2.3 million. Operating income adjusted for severance costs increased 39% to $174.7 million, or 13.1% of revenues.
- Net income available to common stockholders for fiscal 2007 was $97.1 million, or $1.52 per diluted share, and includes the impact of the recognition of severance costs of approximately $0.02 per diluted share. The current year period reflects an effective tax rate of 39.8%.
- Net income available to common stockholders for fiscal 2006 was $71.6 million, or $1.49 per diluted share and includes pre-tax charges of $10.0 million related to the refinancing of debt and 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 2007 totaled $98.5 million, or $1.54 per diluted share (see Exhibit 3), as compared to adjusted net income of $65.2 million, or $1.05 per diluted share, for fiscal 2006 (see Exhibit 4).
- A reconciliation of net income on a GAAP basis to adjusted net income is included in Exhibits (3) and (4) of this press release.
Balance Sheet highlights as of February 2, 2008:
- Inventories were $158.5 million, reflecting the impact of 33 net stores opened since the end of fiscal 2006.
- Long-term debt was reduced to $125 million, which reflects the Company's voluntary principal prepayments of $75 million made during fiscal 2007.
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%.
The Company currently expects fiscal 2008 diluted earnings per share in the range of $1.85 to $1.87.
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. The Company has provided non-GAAP adjusted selling, general and administrative expenses, operating income, income taxes, net income and earnings per share information for the three months and fiscal year ended February 2, 2008. This information reflects, on a non-GAAP adjusted basis, the Company's adjusted SG&A, operating income, income taxes, net income and earnings per share after excluding the severance costs recorded in connection with the departure of a senior executive. 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 2, 2008 and the three months and fiscal year ended February 3, 2007 are included in Exhibits (3) and (4), respectively.
Conference Call Information
A conference call to discuss fourth quarter results is scheduled for today, March 11, 2008, at 4:30 PM Eastern Time. Investors and analysts interested in participating in the call are invited to dial (877) 407-0784 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 26, 2008 and can be accessed by dialing (877) 660-6853 and entering account number 3055 and conference ID number 276618.
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 8, 2008, the Company operates 203 retail stores (including four Crewcuts and seven Madewell stores), the J. Crew catalog business, jcrew.com, and 63 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.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, Three Months Three Months Fiscal Year Fiscal Year
except Ended Ended Ended Ended
percentages February 2, February 3, February 2, February 3
and per share 2008 2007 2008 , 2007
amounts) (13 weeks) (14 weeks) (52 weeks) (53 weeks)
Net sales
Stores $260,627 $241,832 $914,810 $808,542
Direct 126,020 113,233 377,444 308,611
386,647 355,065 1,292,254 1,117,153
Other 13,288 11,605 42,469 34,947
Total Revenues 399,935 366,670 1,334,723 1,152,100
Costs of goods
sold, buying
and occupancy
costs 234,956 216,886 746,180 651,748
Gross Profit 164,979 149,784 588,543 500,352
As a percent
of revenues 41.3% 40.8% 44.1% 43.4%
Selling,
general
and
administrative
expenses 121,678 112,463 416,064 374,738
As a percent
of revenues 30.4% 30.7% 31.2% 32.5%
Operating
income 43,301 37,321 172,479 125,614
As a percent
of revenues 10.8% 10.2% 12.9% 10.9%
Interest
expense, net 1,847 3,965 11,224 43,993
Loss on
refinancing
of debt - - - 10,039
Income before
income taxes 41,454 33,356 161,255 71,582
Provision
(benefit) for
income taxes 16,497 (10,600) 64,180 (6,200)
Net income 24,957 43,956 97,075 77,782
Preferred
stock
dividends - - - (6,141)
Net income
applicable to
common
shareholders $24,957 $43,956 $97,075 $71,641
Income per
share:
Basic $0.41 $0.75 $1.61 $1.61
Diluted $0.39 $0.71 $1.52 $1.49
Weighted
average
shares
outstanding:
Basic 60,752 58,328 60,346 44,558
Diluted 64,003 62,144 63,748 48,039
Exhibit (2)
J. Crew Group, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands) February 2, 2008 February 3, 2007
Assets
Current assets:
Cash and cash equivalents $131,510 $88,900
Inventories 158,525 140,670
Prepaid expenses
and other currents assets 33,293 30,728
Refundable income taxes 9,794 8,600
Deferred income taxes, net - 8,200
Total current assets 333,122 277,098
Property and equipment, net 168,292 121,814
Deferred income taxes, net 20,188 15,600
Other assets 13,994 13,554
Total assets $535,596 $428,066
Liabilities and Stockholders' equity
Current liabilities:
Accounts payable $101,277 $77,836
Other current liabilities 91,414 76,666
Income taxes payable - 5,496
Deferred income taxes, net 2,382 -
Total current liabilities 195,073 159,998
Long-term debt 125,000 200,000
Deferred credits 67,600 62,448
Other liabilities 7,601 -
Stockholders' equity 140,322 5,620
Total liabilities and
stockholders' equity $535,596 $428,066
Exhibit (3)
Reconciliation of net income on a GAAP basis to
"Adjusted net income" -- Fiscal 2007
(In thousands,
except Three Months Ended Fiscal Year Ended
percentages February 2, 2008 February 2, 2008
and per share GAAP Adjust- As GAAP Adjust- As
amounts) Basis ments Adjusted Basis ments Adjusted
Total Revenues $399,935 - $399,935 $1,334,723 - $1,334,723
Cost of goods
sold, buying
and occupancy
costs 234,956 - 234,956 746,180 - 746,180
Gross profit 164,979 - 164,979 588,543 - 588,543
Selling,
general
and
administrative
expenses 121,678 (2,300)(a) 119,378 416,064 (2,300)(a) 413,764
As a percent
of revenues 30.4% 29.8% 31.2% 31.0%
Operating
income 43,301 2,300 45,601 172,479 2,300 174,779
As a percent
of revenues 10.8% 11.4% 12.9% 13.1%
Interest
expense, net 1,847 - 1,847 11,224 - 11,224
Income before
income taxes 41,454 2,300 43,754 161,255 2,300 163,555
Provision for
income taxes 16,497 916(b) 17,413 64,180 916(b) 65,096
Net income 24,957 1,384 26,341 97,075 1,384 98,459
Preferred
stock
dividends - - - - - -
Net income
applicable to
common
shareholders $24,957 $1,384 $26,341 $97,075 $1,384 $98,459
Earnings
per share:
Basic $0.41 $0.02 $0.43 $1.61 $0.02 $1.63
Diluted $0.39 $0.02 $0.41 $1.52 $0.02 $1.54
Weighted
average
shares
outstanding:
Basic 60,752 - 60,752 60,346 - 60,346
Diluted 64,003 - 64,003 63,748 - 63,748
(a) to adjust selling, general and administrative expenses for severance
costs recorded in connection with the departure of a senior
executive.
(b) to adjust provision for income taxes to reflect the tax impact of the
adjustment described in (a) above.
Exhibit (4)
Reconciliation of net income on a GAAP basis to
"Adjusted net income" -- Fiscal 2006
(In thousands,
except Three Months Ended Fiscal Year Ended
percentages February 3, 2007 February 3, 2007
and per share GAAP Adjust- As GAAP Adjust- As
amounts) Basis ments Adjusted Basis ments 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
and
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(c) 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 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 (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 (5)
Actual and Projected Store Count and Square Footage
Actual Fiscal
2007
Total stores
open at Number of Number of Total stores
beginning stores opened stores closed open at
of the during the during the end of
Quarter quarter quarter quarter the quarter
1st Quarter 227 6 0 233
2nd Quarter 233 7 2 238
3rd Quarter 238 18 1 255
4th Quarter 255 6 1 260
Actual Fiscal
2007 Reduction of
Gross square gross square
Total gross feet for feet for Total gross
square feet stores opened stores closed square feet
at beginning or expanded or downsized at end
of the during the during the of the
Quarter quarter quarter quarter quarter
1st Quarter 1,543,904 22,615 0 1,566,519
2nd Quarter 1,566,519 33,961 (20,939) 1,579,541
3rd Quarter 1,579,541 87,645 (6,662) 1,660,524
4th Quarter 1,660,524 36,399 (8,907) 1,688,016
Projected
Fiscal 2008 Total stores
open at Number of Number of Total stores
beginning stores opened stores closed open at
of the during the during the end of
Quarter quarter quarter quarter the quarter
1st Quarter 260 8 0 268
2nd Quarter 268 8 1 275
3rd Quarter 275 14 0 289
4th Quarter 289 13 0 302
Projected
Fiscal 2008 Reduction of
Gross square gross square
Total gross feet for feet for Total gross
square feet stores opened stores closed square feet
at beginning or expanded or downsized at end
of the during the during the of the
Quarter quarter quarter quarter quarter
Quarter
1st Quarter 1,688,016 43,712 (2,261) 1,729,467
2nd Quarter 1,729,467 28,340 (16,368) 1,741,439
3rd Quarter 1,741,439 69,271 0 1,810,710
4th Quarter 1,810,710 69,307 0 1,880,017
SOURCE J. Crew Group, Inc.
CONTACT: Company: James Scully, J. Crew Group, Inc., Chief Financial
Officer, +1-212-209-8040; Investors: Allison Malkin, Chad Jacobs or Joe
Teklits, all of Integrated Corporate Relations for J. Crew Group, Inc.,
+1-203-682-8200
Web site: http://www.jcrew.com
(JCG)