J.Crew is Doin' Alright {as in "cha-ching!"}

Today's conference call with J.Crew has been nicely summed-up over at the Wall Street Journal (click here).

WSJ UPDATE: J Crew Swings To 4Q Profit On Higher Margins
By Elizabeth Holmes
March 9, 2010
Of THE WALL STREET JOURNAL

J.Crew Group Inc. (JCG), purveyor of oft-copied applique T-shirts and ruffled tank tops, swung back into the black in its fiscal fourth quarter and posted full-year profits that surpassed prerecession levels.

The New York company, led by well-known merchant Millard "Mickey" Drexler, resuscitated its gross margin in the fourth quarter by tightening inventory controls and cutting back on discounts.

The result was a profit of $40.4 million, or 61 cents per share, compared with a loss of $13.5 million, or 22 cents a share, a year earlier. For the three months ended Jan. 30, total revenue rose 19% to $460.6 million. Sales at stores open at least a year rose 17%, which erased the 13% decline seen in the same period a year earlier.

With solid results in pocket, Drexler is looking afresh at expanding his fleet. J.Crew, which also operates the denim-focused Madewell brand, will open 15 stores this year and says opportunities in real estate are improving.

"We're looking at real estate much more seriously again for growth," Drexler said Tuesday on a conference call with analysts. Drexler also spoke much more favorably about international growth than he has in the past, revealing that the company has been looking for opportunities.

J.Crew's profit for the year rose to $123.4 million, up from $54.1 million a year earlier and $97.1 million for fiscal 2007. The company's outlook for the current quarter and year were better than Wall Street analysts had expected. Shares were down 14 cents in after-market trading at $46.85.

J.Crew's popular offerings have bred a slew of copycat merchandise. The embellished graphic T-shirts and tank tops that J.Crew sold last spring, as well as its chunky accessories, were echoed by mall retailers including AnnTaylor Stores Corp.'s Loft division and Gap Inc.'s Old Navy brand.

For spring, retailers with different age targets, including women's retailer Coldwater Creek Inc., have a J.Crew vibe, says Ann Poole, retail analyst with Stephens Inc.

"J.Crew's merchandise has lost a little bit of its luster due to an abundance of knock-off product in the mall," says Poole, adding that it would need to "push the fashion envelope further and provide more newness in its collections to remain ahead of the competition."

The issue is weighing on Drexler. Earlier this year, he said, he called the heads of three competitors selling similar products and suggested they cut the salaries of their creative staffs.

"They weren't too happy," he said at a conference in California in mid- January. On Tuesday, he said, "As we look at the long term, you just have to out-product your competitors."

One would-be competitor dropped out Tuesday. American Eagle Outfitters Inc. announced that it has decided to close its long-struggling Martin + Osa brand. The 28-store chain targeted 20-somethings and was designed to compete with J.Crew and Gap Inc.'s Banana Republic.

American Eagle said the chain lost $44 million after taxes in fiscal 2009 and doesn't "warrant further investment." Its stores should all be shut by the end of the fiscal second quarter, resulting in pretax charges of as much as $106 million for American Eagle.

J.Crew, meanwhile, continues to expand. The company announced last month that it is testing international waters. In May, J.Crew product will appear on Net- a-Porter.com, a London-based online retailer that sells primarily designer and contemporary women's apparel.

Net-a-Porter sells to customers in over 150 countries, a far wider reach than the current J.Crew ecommerce sales in North America and Japan. J.Crew said it will offer a limited portion of its assortments on the Web site, as well as create a small range of product exclusively for Net-a-Porter. One hope is that the Web site's fashion cachet will rub off. "Hanging out with all those other people will show well for us," Drexler said, speaking of designers, such as Prada and Jimmy Choo, that appear on the site.

Great {financial} news for J.Crew! They had a stellar performance, which is clearly being rewarded. This article had all sorts of juicy bits to read. The following are a few of my thoughts...

1. J.Crew is raking it in!
2. I totally have noticed that other retailers are copying J.Crew's style. Sometimes I will see an add for Banana Republic, Ann Taylor, or even Talbots, and think to myself that it eerily resembles something from J.Crew.
3. The following quote stood out for me: "push the fashion envelope further and provide more newness in its collections to remain ahead of the competition". I am always excited to see what new items J.Crew will roll-out. They always manage to entice me with several of their latest offerings. However, a part of me is worried a bit that J.Crew will become so fashion-forward that it will leave me behind.
   
4. When I read the line about Mickey calling the competitors... dayum! Don't mess with Drex! Loves it!
5. Sad to hear Martin + Osa isn't going to make it.
   

What are your thoughts on the results? Any tidbits in the article that you found particularly interesting? If so, please share! :)