The following article from the Wall Street Journal & Market Watch (click
here &
here to read in its entirety):
J Crew 3Q net slumps 43% on higher debt costs
By Mia Lamar
December 1, 2011
J. Crew Group Inc.'s fiscal third-quarter earnings slumped 43% as debt costs related to the clothing retailer's buyout earlier this year masked improved sales.
The company went private in 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 a favorite on Wall Street during the economic downturn as penny-pinching shoppers continued to buy the company's embellished cardigans, skinny jeans and cargo pants.
For the quarter ended Oct. 29, J.Crew reported a profit of $21.6 million, compared with prior-year profit of $37.8 million. The latest period included $25.3 million in interest expense, compared with $2.1 million a year earlier.
Revenue improved 12% to $479.6 million. Same-store company sales--which include comparable store sales, direct sales, and shipping and handling revenue--were up 5%.
Gross margin narrowed to 42.1% from 43.5%. Inventories at the end of the third quarter totaled $291.7 million--including $1.7 million of inventory step-up from purchase accounting--compared with $261 million last year.
Over at Seeking Alpha (click
here), there is the transcript of the conference call on the Q3 2011 Results. Interesting conversation below:
Karen Eltrich - Goldman Sachs Group Inc., Research Division
And how was traffic for you guys on Thanksgiving weekend?
James S. Scully
We actually don't comment on that Karen.
Um, okay... (I thought that was a fair question to ask.) Some other note worthy tidbits:
- "merch margin was negatively impacted by a $2.8 million reduction in shipping revenues versus last year... If you were to exclude shipping revenues from both this year and last year, we would have experienced an 80-basis-point improvement in merchandise margin"
- "in our future plans, to actually take factory.com and have a separate site for factory.com"
- "our factory store strategy remains to grow our square footage by approximately 10% a year over the next 3 to 5 years through a combination of new units and expansions in existing centers where we see potential upside"
- "we continue to be very pleased with the results in customer feedback from our Yorkdale Centre store in Toronto, and we are now completing plans to open additional stores in Canada next year"
- "we also expanded our direct reach in the third quarter, launching international shipping to the U.K. in August, followed by France, Italy and Germany in mid-November"
- "saw improved results from our women's business, while we continue experience strong performance in men's and accessories"
- "as always, our #1 focus remains our products"
What are your thoughts on this news from J.Crew? Anything surprised you from their third quarter earnings?
The following article from the Wall Street Journal & Market Watch (click here & here to read in its entirety):
"Penny-pinching shoppers?" This must one who pays full price all the time.
ReplyDeleteIt was expected that the buy-back would distort the numbers. Let's see what Q3 2012 brings.
Why have a separate Factory site? That struck me as kind of odd.
ReplyDelete"We don't comment on that."?!
ReplyDeleteThat is because they stuck their noses up in the air and refused to participate in any real Black Friday sale. My Anthropologie is right next door to J Crew, and my husband was furious when he saw that they were not participating. I agree. That type of strategy turns customers off.
"Shipping revenues"? We always suspected it, now it's confirmed. No wonder their shipping is so high, it's part of their business plan to make money on shipping. Sour face.
ReplyDelete@Rose, I totally agree about the buy back and seeing what 2012 (Q3) brings. I'm not surprised at the shipping revenue (similar to banks with fee revenue from ATM surcharges, etc...)Because I buy so JC I feel like a true 'investor'-lol
ReplyDelete@ xoxo: Yeah, I thought the "shipping revenue" comment was interesting as well. For the first time in 6 years, I'm not living within 2 miles of a B&M and the shipping costs for online orders and returns really start to add up.
ReplyDeleteRemember the saying " A camel is a horse designed by a committee"?
ReplyDeleteLooks to me like both the report and the script for the conference call are the product of a dream team of accountants, attorneys, and PR consultants. I forecast for spring -- patchwork.
Mickey said the company goes to private is for the best. Hope it's all working out for j crew.
ReplyDeletewith all the additional % off sales, I'm assuming they aren't doing so hot...
ReplyDelete"J. Crew became a favorite on Wall Street during the economic downturn as penny-pinching shoppers continued to buy the company's embellished cardigans, skinny jeans and cargo pants."
ReplyDeleteHA. This article is so out of touch. I've certainly gotten great deals on some J. Crew items and I don't have a big clothing budget but the suggestion that you're penny pinching by shopping at J. Crew is laughable! And cargo pants? J. Crew offers a few styles but I doubt that's a hot buy for the Wall Street crowd.
I understand J. Crew is a business and businesses need to make money to stay in business (and innovate as they do business) but the fact that they gouge customers on shipping costs is really tacky. I kind of hope people withhold signing up for a J. Crew Card unless J. Crew offers low/no shipping minimums for cardholders and figures out a more fair shipping price model.
nomoneyfun, maybe I am reading your comment wrong but I believe the article mentioned J.Crew as a favorite on Wall Street because of their financial results - results due to brisk sales of "embellished cardigans, skinny jeans and cargo pants", not that people on Wall Street were specifically buying these items.
ReplyDeleteThere was discussion and article in the news about jcrews high profit from shipping last year so nothing new to me. They have always made a very large profit from their shipping charges. that's why it's taken so long to get a flat rate.
ReplyDelete