The following is an interesting article from Fortune (click here for link) which discusses J.Crew's current financial situation.
J.Crew fumbles system upgradeAlthough the news is disappointing, it is also not unexpected. The system downgrade (including that $3 million in unexpected costs) had to impact J.Crew negatively. :(
By Colin Barr
August 26, 2008
J. Crew’s (JCG) latest makeover isn’t off to a good start. Shares in the New York-based apparel retailer swooned in after-hours trading Tuesday after the company missed its second-quarter earnings target and slashed third-quarter and full-year earnings guidance.
J. Crew made $18 million, or 28 cents a share, for the second quarter, down from the year-ago $21 million, or 32 cents a share. Analysts surveyed by Thomson Financial were looking for a 32-cent profit. But the weak second quarter isn’t all the bad news: The company said it now expects to make 28 to 33 cents a share for the third quarter, compared with a 46-cent analyst forecast.
J. Crew cited $3 million in unexpected upgrade costs tied to its Internet and phone ordering systems, which “limited our ability to leverage our multi-channel platform and resulted in incremental expenses.” The company also blamed “continued softness in our stores business due to the macro economic environment.”
The sour numbers come as CEO Mickey Drexler, the man who made the Gap (GPS) into a household name, is trying to push J. Crew upscale. Analysts see an opportunity for the purveyor of chinos and polo shirts to take younger customers from the likes of Abercrombie & Fitch (ANF). But as Fortune’s John Brodie recently noted, “As confident as Drexler is, the timing is risky.” With shares down 15% in after-hours trading, that much is clear.
What are your thoughts on this article? Disagree or agree?