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NEW YORK — The Mickey Drexler magic has yet to cast its spell at J. Crew Group.

This story first appeared in the May 30, 2003 issue of WWD.  Subscribe Today.

The firm said Thursday its loss for the first quarter ended May 3 widened to $19.6 million, just slightly less than the $19.9 million of cash it has on hand. In the year-ago period, a $6.5 million tax benefit cut the loss to $12.1 million.

Sales fell 3.4 percent to $161.5 million from $167.1 million. The company said same-store sales decreased by 11 percent in the quarter, while sales in the direct business dipped by 2 percent.

Merchandise margins dropped to 34.6 percent of sales from 40.1 percent in last year’s quarter, primarily because of higher markdowns. J. Crew said it expects the “current trend in merchandise margins will continue through the second quarter.” As reported, the company implemented a new strategy of disposing of slow-moving merchandise during the season, which also reduces the stock held by its factory division stores for disposition in future seasons.

At the end of the quarter, inventories were down by 30 percent versus year-ago figures, despite the addition of 11 stores. Comparable-store inventories were down 10 percent.

At the end of the quarter, J. Crew had $19.9 million in cash, versus $15.3 million a year ago. Inventories were listed at $100.3 million, compared with $143.4 million last year. Its total assets fell to $330.2 million from $404.8 million, mostly attributable to a decline in valuation for property and equipment.

During the quarter the company also posted a severance charge of $900,000, compared with a pre-tax charge of $5 million a year ago for severance in connection with headcount reductions and the departure of its former chief executive officer. As reported, Millard “Mickey” Drexler succeeded his former Gap Inc. colleague Ken Pilot as ceo of J. Crew in January.

The company completed its offer to exchange 16 percent senior discount contingent principal notes due in 2008 for its outstanding 13 1/8 percent senior discount debentures due 2008, and noted the exchange will increase total interest expense by $3 million this year but decrease cash interest by $16 million.