Thursday, June 9, 2011

J.Crew Announces Latest Quarter Results {Q1 loss}

The following is an article over at Wall Street Journal (click here for the article in its entirety):
JCrew Swings To 1Q Loss On Buyout Costs, Added Promotions
By Tess Stynes
June 9, 2011

J.Crew Group Inc. swung to a loss in its fiscal first quarter on costs related to its takeover in March and as the apparel retailer's results were hurt by increased markdowns and promotions.

The company was taken private in early March in a $3 billion acquisition by a group of investors including private-equity firms TPG Capital--a former owner of J.Crew--and Leonard Green & Partners LP.

J.Crew became the darling of Wall Street in the recession as penny-pinching shoppers continued to snap up its embellished cardigans, skinny jeans and cargo pants. The brand has several high-profile fans, including First Lady Michelle Obama.

For the quarter ended April 30, J.Crew reported a loss of $29.9 million, compared with prior-year earnings of $44.7 million. The latest period included $32.2 million of costs related to the takeover.

Revenue decreased 1% to $409.5 million as store sales fell 3% and were partly offset by 5% growth in its Internet and phone business. Same-store company sales declined 3%, compared with 16% growth a year earlier.

Gross margin fell to 44.3% from 49% on increased markdowns and promotions as well as on acquisition-related costs.

J.Crew said the latest period figures include results from before and after the acquisition, and while not directly comparable, the numbers provide a meaningful view of its operating results.
Interesting... especially the increase in markdowns and promotions. The article never really states what the reason behind the increase is. I have some suspicions behind it, but it would be interesting to hear what J.Crew believes is causing it.

As for the takeover, at least it is over! Not sure what to expect though now that it is done.

What are your thoughts on this latest news? Do you think J.Crew will "turn things around" now that they are private?

11 comments:

  1. Well, the normalized earnings don't seem like they would be bad (so, pull out the acquisition costs etc). And a same store sales decline of 3% after 16% growth in the previous year is really to be expected. We need cash flow numbers in order to actually assess how the company is doing. So in short, I'm not convinced the company needs to be 'turned around'.

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  2. I've been thinking that the completely lack of promos lately means they are giving up that tactic. I've noticed lower stock numbers so if you want something you have to snap it up at full price or hope for a pop back. I have had to adjust from my usual wait for a promo before I buy. In truth if I really want something I will pay full price. I try not to buy something just because it goes on sale. At least there seems to be a constant free shipping code.

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  3. I hope there is a steady stream of free ship, as I can't make it to a store in time before they sell out. I have noticed the small small sizes are selling out pronto, and thought similarly.

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  4. I hate to say it but the glut of merchandise on deep discount cannot be good for the bottom line. Witness the huge restock this morning. Where did all this stuff come from? Returns and B&Ms where items are not selling? Consumers may like the markdowns but it does not translate to profits when retail margins are so slim already. And the items are still sitting on the store rack/shelf for a reason.

    Unfortunately the economy is still fragile and consumers are very cautious. It seems to me that J.Crew is now trying to limit the promos and encourage full price purchases. In order to influence that behavior they need to ensure that quality design, materials and construction are part of every garment above a certain price. I would happily pay for a darling piece that is made with premium materials, well-constructed and designed to flatter. I hope that is part of the "going private" plan.

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  5. @xoxo: I agree, seems like there might be some inventory management problems.

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  6. I sure hope they turn things around, for our sakes. I was at my B&M this week and they had a bunch of sale stock that was not previously in the store or had not been there for quiet some time. I was told they were shipped a huge number of boxes. I don't see this strategy making sense since they supposedly make the most money on their internet sales. It was mostly t-shirts and mini skirts. You know things are bad when I can't find anything to buy. I tend to like just about anything from uber traditional to modern and trendy. I am holding my breath for the Fall release and hope there is enough of the coveted items to go around!

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  7. In order to grow revenue, you have to have a compelling product. If you look at their clothing now, it's all button-ups, crew neck sweaters and capri pants all in varying fabrics. I don't want to wear the same outfit every day nor do I enjoy wearing clothes that i wore in the 80's - hence the reason why my wallet hasen't been contriburing to their revenue.

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