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J. Crew to Restate Results, Posts Loss

As J. Crew said it will be restating its financials, the retailer swung to a second-quarter loss from a profit a year ago and widened its loss for the first half.

NEW YORK — As J. Crew said it will be restating its financials, the retailer swung to a second-quarter loss from a profit a year ago and widened its loss for the first half.

The wider loss was mostly due to additional interest expenses relating to $8 million of preferred stock dividend payouts, the company said Tuesday. Total interest expense increased to $22 million from $13 million last year, the company said on a subsequent conference call.

J. Crew noted on the call that it filed a Form 8-K with the Securities and Exchange Commission on Sept. 9, saying it will restate its financial results for fiscal year 2003 and the first quarter of 2004 to reflect “the write-offs of certain prepaid sample costs” that should have been taken during those periods. As a result, the company’s full-year 2003 loss will be widened by $2.9 million to $50.2 million. The first-quarter 2004 loss will be widened by $500,000 to $23.8 million.

For the quarter ended July 31, the company’s net loss came in at $14 million, which compares with earnings of $15 million in the year-earlier period. J. Crew said the bottom line was impacted by additional interest expense of $9 million, relating to the dividend payout.

Total consolidated revenue for the second quarter increased 12.6 percent to $188 million from $167 million a year ago, while same-store sales jumped 12 percent. By division, retail sales rose 14.9 percent to $139 million, while Internet and catalogue sales were $44 million, up 15.8 percent. Other revenue fell 33.3 percent to $6 million.

The company touted the momentum of its turnaround campaign and reported operating income in the quarter climbing to $8 million from a loss of $15 million in the year-ago quarter.

“We couldn’t be more pleased with the customer’s response to our intense focus on improving the quality, fit, design, style, color and fabrication of our merchandise, which is reflected in gains across all of our businesses,” said Millard Drexler, chief executive officer of J. Crew, in a statement.

The gross margin rate in the quarter rose to 39 percent from 31 percent last year, the company said, citing lower markdowns and less clearance sales.

This story first appeared in the September 15, 2004 issue of WWD.  Subscribe Today.

The company said inventory at July 31 was up 11 percent due to seasonal merchandise in all channels, but was offset by less aged inventory.

In the six months ended July 31, the retailer had a net loss of $38 million, which compares to a loss of $5 million last year. But on an operating income basis, the company posted a profit of $5 million, from a loss of $25 million last year. Total revenue in the six-month period was $334 million, up 1.5 percent.