JCrew Swings To 1Q Loss On Buyout Costs, Added PromotionsInteresting... 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.
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.
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?