- Total revenues increased 12% in the first quarter, with the total company comparable sales increasing 3% on a realigned basis. This was on top of a 23% total revenue increase in the first quarter last year and a 16% increase in total company comparable sales.
- Total revenues increased 12% to $564 million.
- Our store sales increased 7% to $380 million, with net square footage increasing 9% versus last year, driven by 8 new store openings during the first quarter.
- Direct sales increased 23% and includes our J. Crew Factory and Madewell direct businesses.
- Gross profit was $252 million, with gross profit margin of 44.7% compared to 47.6% last year. The results reflect a promotional environment that we saw during the quarter, which led to a 280 basis point reduction in our merchandise margin year-over-year.
- Our inventory balance was $308 million at the end of the first quarter compared to $251 million at the end of the first quarter last year. Inventory increased 23% versus last year or 13% on a per square foot basis.
- ...we are preparing for the opening of our first store in London on Regent Street prior to the holiday, which represents an exciting milestone for us in our international expansion efforts.
- Question: When we look at the promotional environment and the hit on gross margin, I mean, do you feel that, that was driven by the need to clear out some of that more let's say cold-weather inventory? And how do you feel that that's going to trend going forward?
Answer (from Libby Wadle): ...I don't really -- it really doesn't have to do with clearing through, I'd say, cold-weather inventory. I think a few things going on: a tough sort of macro environment out there. I think everyone was feeling the pressure. And with J.Crew specifically, we have a very tough full price comparison, so had some pressure there. And we had to change really how we had planned to do business based on the environment, and we did have to be more promotional. But it wasn't really about sort of leftover inventory as much as it was about sort of navigating through the environment in the healthiest way we could with the inventory we owned.
- Question: I am certainly not much of a fashionista, but can you talk a little bit about your fashion trends and how you feel about this summer's versus last year, whether there's enough newness that's going to get consumers shopping, anything you could provide there?
Answer (from Libby Wadle): Of course. We feel good about our product and our fashion and our newness. What I will say is that, to be frank, we had a lot of competition on our franchise items at much lower price points this year. So what we did really well last year and we had been doing, we invented a lot of great franchise businesses. We saw a lot of that out there in the market and less expensive. So we are -- we remain focused really on innovation, moving forward, inventing new franchises and looking ahead, we feel good about our fashion. So that would be my answer about how we feel about our fashion.
I did find it interesting that J.Crew's competition is starting to impact them though. For the longest time they seemed kind of invincible to the alternative offerings at lower price points. I guess it finally caught up with them. For example, how many of J.Crew's jewelry pieces are getting knocked off for a fraction (and I do mean, a fraction) of the price?
What are your thoughts on this latest news? Any points you found interesting?
I always love to read about the business side of J. Crew, thanks Alexis!
ReplyDeleteThe "competitive pressure-reduced inventory turnover-sales promotion" cycle seems to be a growing issue. I think it's something JCAs have noticed for the past few seasons and rollouts ... with the exception of some new prints lately, the J. Crew "uniform" (capris, stripes, pencil skirts, neon brights, chunky jewelry) has resulted in very similar offerings at ever-rising price points. How many striped tees does a girl need?
It only takes a Target or an F21 6 months or so to knock something off and have it in stores as an alternative for much less. Add in a strategic misstep or two by J. Crew (hello, endless cashmere sweaters in June) and you have a whole lotta stuff in the Sale section.
I appreciate the great buys I've gotten lately, but there isn't a whole lot of new design to make me shell out FP. Fall is my favorite J. Crew season, so I am hoping for some lovely NEW jackets, skirt lengths, etc. in the coming months!
I still think J Crew can remain competitive to other retailers who offer similar looks by providing good quality items that last. I find that I can often find "keep it season after season"-type items in terms of looks at J Crew...but the quality isn't always there. I could go to AT or Loft or wherever for something done in rayon or polyester, but I definitely don't want to pay FP for that at J Crew!
ReplyDeleteI bet with the franchise stuff that they're referring to their Liberty prints. It used to be J.Crew (with the exception of Target's special offering) was the only place in the U.S. that you could get Liberty prints. This year they have collaborations with Levis, Lord & Taylor, etc. Liberty is such a high-end store (I highly recommend it to anyone visiting London, it's so interesting) - I'm surprised they are doing so many collaborations.
ReplyDeleteI think when she says competition she means lower-price retailers knocking off their stuff. I swear when you go into the Gap now or get their emails, you'd think they were Crew. And we all know why that is. But the fact is they run better promos and certainly have a better cardholder program.
ReplyDeleteMy JC spending is off about 85% from 6 months to a year ago, and it's not only because my finances aren't great. I'd rather eat PB&J daily and love my clothes, but the fact is I just haven't been into much of what they've put out.
It will be interesting to see how or if they reverse course strategically speaking.
Elaine, it's wonderful to see your smiling face!
DeleteI agree - stick around, Elaine! :)
DeleteI agree it has to do with the repeat lackluster offerings, quality issues, and yes, too high prices--I think these are not only sending people to places where they can get similar items more cheaply, but that they are also pushing people to higher-end retailers. Why spend $225 (wait--who am I fooling--$500+) on a Collection dress made of synthetic materials that will develop a myriad of problems upon wearing when you can get much more elsewhere in terms of design and quality for that price or less?
ReplyDeleteHa! My verification word was "eschew." Ahem.
Amy, that's a super interesting point about pushing customers to higher-end retailers.
DeleteFor those who don't bat an eye at FP and Collection $200+ price tags, J. Crew has inadvertently added "real" designers to the top end of their competitive set in a big way. And for the rest of us, the moderately-priced similar items at Gap etc. are squeezing them from the bottom.
Result: a steady stream of 30/40/50% off promos to move the merch at disappointing margins for them.
Agreed. JCrew used to be one of my "go-to" brands when searching for a special dress, but since their nicer dresses are priced so high, I do eschew them in favor of 1) DVF full price and the like, or 2) theoutnet.com, Century 21, Nordie's sales, or anywhere else I can find a designer dress at the same price point as a Collection item.
DeleteI'm just wondering why Mickey & Jenna were conspicuously absent during the investors' call when margins and profits were down?
ReplyDeleteI agree why pay full price for the jewelry when you can get knock offs for so cheap. I bought a rhinestone bracelet a month or so ago and one of the rhinestones already fell out. I bought it on sale and used a gift card, so I only paid $20, but it was originally $120!
ReplyDelete