Tuesday, March 10, 2009

J.Crew Announces Latest Quarter Results

"Thanks!" to Julie who shared with us an interesting article (click here) over at MarketWatch that included the statement that "J.Crew Group Inc. shares jumped Tuesday evening after the apparel and accessories retailer posted a narrower-than-expected quarterly loss".

There is another article (click here for its entirety) that discusses the conference call held today by J.Crew that reviews their "financial results for the three months (fourth quarter) and fiscal year ended January 31, 2009 (fiscal 2008)".

J Crew's loss beats Street, expects solid Q1
By Reuters
March 10, 2009

J.Crew Group Inc slid into the red after quarterly sales dived, but unveiled a first-quarter outlook that may surpass Wall Street expectations, sending its shares up 8 percent on Tuesday. ....

But the apparel retailer, which announced a cost-saving plan last month that encompassed job cuts and fewer store openings, would not give an annual outlook given economic uncertainty and worsening consumption.

Chief Executive Millard Drexler told analysts on a call the company, which had resorted to holiday markdowns to clear inventory, was striving to adjust to "this new, not fun, retail reality." The fourth quarter was quite extraordinary in the clearance pressures we all had," he said. When asked about the current consumer environment, Drexler replied, "It kind of sucks, you know."

J.Crew was slower than most other apparel retailers to feel the negative effects of the U.S. recession. But in past months, J Crew cut its full-year outlook and scaled back its capital expenditure plan as traffic slowed at its stores, warning that a "sea-change" had occurred in customers' buying habits.

The net loss in J.Crew's fourth quarter came to $13.5 million, or 22 cents per share, compared with a year-ago profit of $25 million, or 39 cents per share. Its sales fell 3 percent in the holiday quarter to $388 million, while same-store sales, a key gauge of performance, fell 13 percent.
Gross margin fell in the quarter to 27.6 percent of revenues from 41.3 percent a year earlier due to more markdowns used to clear unsold items.

"Significant" margin pressure was expected to continue in the first half of 2009, Chief Financial Officer Jim Scully said. Scully said the company expected its small Madewell chain to incur a loss of $15 million to $16 million in 2009, compared to $11 million last year.

Drexler said inventory levels would be in line with current business trends by the end of the second quarter. Analysts have criticized what they have called too-high inventory levels at J Crew that have appeared out of whack with consumer buying patterns.

Costs also rose in the holiday quarter due to spending on J Crew's direct-to-consumer division, which has seen software glitches that affected order fulfillment.

J.Crew has so many issues to address: from external issues like the current economic climate which has been curbing consumer spending for clothing, to internal, J.Crew specific, issues like their high inventory levels and Madewell's performance. J.Crew has already reduced its workforce and suspended some of their benefits (refer to this post) to reduce costs... but will these actions be enough?

What do you think of these results- surprised or not surprised? Do you think the outlook for J.Crew will get better or worse (for the rest of the year?)


  1. I like this line:

    Costs also rose in the holiday quarter due to spending on J Crew's direct-to-consumer division, which has seen software glitches that affected order fulfillment.

    Software glithces? Ya think?!

  2. It's good to hear that they are performing better than expected. I had a feeling they were getting the inventory in line since we are not seeing the great promos lately. I sure would not want to see them go under because I do love me some J.Crew!

    Anyone know when the next rollout is coming online or in stores?

  3. OT: I received my 10% off coupon in the mail from Silver Lining today. THANK YOU SILVER LINING! That was SO nice of you :) :) :)

  4. Also OT: Alison is wearing a J.Crew coat on Biggest Loser right now!!

  5. Thanks for posting this Alexis! I always find the "inner workings" articles interesting.

    I hope J.Crew will only improve in the future (at least as much as a retailer can in this market). With inventory levels getting to a realistic number they will probably have more people buying items at full price or close to it.

  6. I just don't understand their inventory. When I buy something on full price, then it dips into a low sale and goes in and out of stock, I feel like they don't have loyalty to their customers. That is my problem with them.

  7. I am not surprised to see this at all, but it is good to see that their losses are less than that of other similar companies. I would expect them to do better later in the year, if only because they engage in cost-cutting measures.

    I'm hoping the overall economic landscape improves towards the end of the year, like everyone else. If it does, then JCrew's earnings reports will probably improve along with it! :)

  8. Alexis,
    Thanks so much for the update; keep up the great workl I will continue to support JCrew as much as possible as I do not want to see them go into the red; they have been getting much press lately; the March issue of Vogue demonstrated not only Michelle Obama affinity for JCrew, but there were other references to the retailer in that issue as well.

  9. There is a lot of double speak in the words JCrew put out. I find it is best just to say things in plain English. The difficulties facing JCrew are the same that all specialty stores are facing. Those consumers who are still spending want excellent quality at a good price, with as little hassle as possible. JCrew just has not performed in that arena. Online fulfillment has been a disaster and sizing and quality subpar. Mr. Drexler should contact every cardholder, offer a coupon for % off and free shipping. That would be a good beginning. Revamping the online site should be next.

  10. Hi Bekah! Glad the coupon got to you quickly. :)

    Jodi, you are so right on about quality at a decent price without the hassle. Placing an order at JC is a gamble from trying to find a size/color, putting it into your cart and making it to checkout before it disappears (all the while quickly trying to figure out which coupon code will give you the biggest bang for your buck), only to hope that you receive the item and that it's true to what you see online (and even that is a gamble!). The online shopping process should not be this risky, and on top of that, being prohibited from returning items makes it even less customer-friendly. We'll see how things go in the future - I used to think if I got a subpar item it was just me, but seeing that most JCA's have had an issue at some point or another has me questioning whether I want to "risk" ordering anything.

    Finally, if anybody see the S120's Jayne dress in their B&M in the tea rose color, size 2, could you please let me know? Word on the street is that they're $69.99 in stores while still FP online - I'd love to get one. Thanks!

  11. I think the site has been better lately. Granted, it has a long way to go but it is not crashing regularly, as it used to not so long ago. Could be just that there are fewer users online, but I like it anyway. Maybe they can start to add some improvements now, like giving us more than one view of each handbag!

  12. Reading here and on the blogroll that a number of people are on a shopping ban. Even the number of posters has decreased, a good indication that interest, if nothing else, is down.

  13. Since we all enjoy the products it's good to hear that the company is performing well under these very difficult conditions.

    I feel J.Crew has some serious work ahead of them. They have people becoming used to sale prices quite quickly after items are released. There is also a growing concern that quality of fabrics and construction is not what it should be considering the prices asked.

    I still love this company and it makes up over 75% of my wardrobe; but I expect better form J.Crew and hope they can pull it together and bring their A game.

  14. jcrew guy in Canada - did you get your Sperry boots yet? I'd love to hear how you like them as I may purchase for my husband. Thanks!

  15. Anonymous I'm still waiting. My PS told me they are waitlisted, but are expected to ship on the 28th of this month; then it'll take about ten days to make the trek north. I will definitely let you know when they arrive. After GQ featured them this month as an item to buy my expectations are high. Fingers crossed I hope they're great.

  16. Items that are final sale now show up with a red "final sale" listed when placed in your shopping cart. This never happened before. I think that for the past few weeks nothing was marked final sale from the sale section. Also, I have noticed more and more "promos" that end in .00 intermixed with final sale stuff. Very confusing to me.

  17. A followup thanks to the JCA who recommended a number of Land's End items on her wishlist a while back.

    I did purchase a couple of silk scarves, which are functional and reasonable.

    The other items suggested were pieces I already have and need not replace just yet, but I did examine the products and will consider them in the future. In fact I will check out the website regularly.

    Thank you for your advice and for not just writing me off because I had never purchased LE before. Always nice to hear new opinions and get good advice.

    Have a wonderful day everyone.

  18. jcrew guy in Canada I hear you on the wait for delivery. I'm in Calgary and I usually give it 2 weeks from the date of order, IF the items are in stock. Not a big deal, it's usually well worth the wait. ;)

  19. Anony 9:32 - I'm also confused about the promos. They used to always end in .50 and now it is difficult to tell whether it is a permanent or temporary reduction.

    Like no other retailer, JCrew is an online gamble since the website upgrade. Not that it's tied to the upgrade, I think it goes deeper. Some of the questions that go through my mind when adding items to my cart:

    Should I buy now at full price?
    Will the price go lower or is it a temporary promo?
    Will it sell out or show up later on final sale?
    Does it fit TTS or should I SU/SD?
    Is it final FINAL sale, or could I return it if it doesn't fit?
    Are there any weird fit issues that they are photoshopping to hide?
    Why are there so many of these left, is it a design or fit dud?
    Am I paying too much?
    Will I get what I ordered?
    Will it be NWT or a badly used return?
    And on and on and on.

    Some consistency would likely help their bottom line. Or, maybe not. Maybe those of use die-hards are getting something out of the gamble. I've seen a few posts where people are jacked over a great deal in final sale - SCORE! Nothing wrong with that and I love a great deal as much as the next person but sometimes I feel like I'm part of a Pavlovian experiment.

    All my blathering aside, I love J.Crew! Hope they continue for another 25+ years.

  20. OT: but have some of you closely examined the shoes now arriving at the stores? It's worse than the fall shoes. The suede and fabric ballet flats have canvas inner lining with man made inner sole and outer sole. I mean, I was really stunned to see that on suede shoes. I've never seen anything like that. I think I once saw fabric shoes like that at a discount store, maybe Target or Old Navy. My heart sank. I'm so bummed. I need to find new places to buy my shoes. Please, please, Mr. Drexler, why are you doing this? I would expect this at Old Navy, not J.Crew.

  21. Wahoo! I got my card from silver_lining in the mail today, too! Thanks again, ever so much! Kitty

  22. ^ I agree with the declining quality of the shoes. I refuse to purchase JC shoes. I would rather decline two pairs of >$200/pair of crap shoes and buy an expensive pair of quality shoes instead. The markup is ridiculous for the very poor quality it is.

  23. And no mention of a Michelle Obama sales bump!

  24. Hey J Crew here's a tip to get numbers up again:

    Quit making crazy bedazzled zebra, crab, shrimp t shirts and selling them for 60 or 70 bucks. First off people that shop there are not 5. Second take that money you put into making those hideous tees and start putting it towards quality....I used to be a avid shopper there until the "critter craze" and the quality is just not what it used to be. :-(

    J Crew I am begging you stop with the animals. I love Zebra's that does not mean I want to be one.

    me xoxox

  25. Weird, I haven't had any problems with the shoes lately- but I've only bought the metallic lulu's and the perfectly patent pumps. But I've loved both pairs- they've been well made and oh-so-very comfy.

    I have a pair of the rosette flips coming to me soon, so hopefully they won't be shoddy (especially at $78!)

    Online ordering has been much improved, too. I would still like to see a "SORRY" from J Crew, but I've had no problems ordering from them in the past few months. :)

  26. Well, now we're sure that J.Crew will be around for at least one more year.

  27. Anony@9:32 re Land's End

    I am the one that wrote the wish list...glad you tried some things...and will consider them in the future. They are really trying to update their look and come out with better styles each year.

    If you or anyone else has kids my daughter loves their clothes as well. Very well made. They are the only maker that I know of that makse SLIM swimsuits as well. The leg openings fit very well. Crewcuts suits are too big for her slim frame. Hope this helps someone else out there!

    Also no time limit return policy cannot be beat.

    I love JCrew the best but LE makes some great products and I knew them first:)

  28. "It kind of sucks, you know?"

    Ummm...as an English teacher that is just pathetic coming from a CEO of a company...shame shame and double shame shame some more!

    While I am a fan of JCrew I have never been a fan of Mickey and this is as good of a reason as any...

  29. My biggest concern is the CEO couldn't manage a more articulate response to a query about current economic conditions than "It sucks." Wow. This guy's at the helm? Explains a lot.

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Dear J.Crew Aficionadas & Aficionados: Please feel free (and encouraged) to share your thoughts and opinions. :) However, please note that this is still a personal blog. So comments that are considered inappropriate (e.g. obscene, racist, homophobic, personal attacks, rude, and just plain mean) will be removed.

And now back to J.Crew! :)