J. Crew Group is sticking with the formula — and it’s paying off.
The New York-based specialty retailer on Tuesday reported net income of $43.9 million, or 67 cents a diluted share, for the third quarter ended Oct. 31, more than twice the $19 million, or 30 cents, reported in last year’s period and 9 cents above analysts’ consensus estimates.
Revenues grew 14.1 percent, to $414.1 million from $363.1 million, as same-store sales advanced 8 percent. Included in revenues was 19.6 percent growth in store sales, to $300.1 million, and a 3.6 percent pickup in direct sales, to $105.5 million. Gross margins jumped to 48.4 percent of sales in the quarter, up from 41.6 percent a year ago.
On a conference call with analysts, Millard “Mickey” Drexler, chairman and chief executive officer, said, “Regardless of the economic environment, our long-term mission does not change — it’s about product, it’s about quality, it’s about design, it’s about service, it’s about creativity. It might sound simple, but in this business, sometimes the simplest things are the hardest to achieve.”
Although the third-quarter results were strong, the company is still being conservative in its holiday forecasting. Chief financial officer James Sculley said, “Our fourth-quarter outlook reflects comp-store sales growth in the high-single digits and direct sales growth in the mid- to high-single digits.”
Pressed by analysts to identify from whom J. Crew was taking market share, Drexler declined to name names, but said: “We’re not specifically looking at where our customer came from. You cannot buy J. Crew anyplace else but in our stores or online. We control our distribution and our pricing. I don’t know if we’re getting share or not, but I do know that if you sell a product that’s sold in other places today, you better be prepared to meet prices or lose customers.”
Drexler said that in his early days in department store retailing, “my inventories were, in fact, managed too often by my competition. So, as I look at it, if we can offer equivalent or better style, better value, better service, I don’t think the customer really leaves someone, but she will join someone else.”
Drexler said he was pleased with the Madewell line’s progress and said: “Customers are loving the tweaks we’ve made to our assortments.” Madewell has moved away from classic T-shirts and begun to offer more fashion merchandise — such as plaid and chambray shirts, denim leggings, rail-straight jeans, blazers and boots — and customers are responding.
Drexler said there are no plans for an aggressive rollout of Madewell, which he said was in a “somewhat incubation stage.” However, he added its e-commerce launch next year should “make a big difference” in getting more exposure for the brand.
Turning to opportunities for spring and beyond, Drexler said the company is determined to “own the men’s suit business” by stacking up its $650 Ludlow or Aldrich model against a $2,000 suit made in Italy. J. Crew also expects jewelry, new versions of art T-shirts, women’s blazers, an expanded assortment of dresses, slimmer-fit shirts and men’s dress shirts to continue to have traction next year.
There are no plans to expand internationally or open pop-up stores in the foreseeable future, he said.
The firm said it expects earnings per share in the crucial fourth quarter of 37 cents to 42 cents, effectively straddling the current consensus estimate of 40 cents.
For the nine months, J. Crew’s profits grew 22.6 percent to $82.9 million, or $1.29 a diluted share, from $67.7 million, or $1.06, in the first three quarters of 2008. Revenues expanded 7.5 percent to $1.12 billion from $1.04 billion. Comparable-store sales declined 0.4 percent, matching the performance of the prior year.
J. Crew’s numbers were disclosed after the close of the markets on Tuesday. Earlier in the day, American Eagle Outfitters Inc. met analyst expectations with a 38.9 percent increase in third-quarter profits.
For the three months ended Oct. 31, the Pittsburgh-based teen retailer reported net income of $59.2 million, or 28 cents a diluted share, compared with year-ago profits of $42.6 million, or 21 cents. Subtracting a tax benefit of 7 cents a share, the firm’s third-quarter profits equaled 21 cents a share, in line with the average estimates for adjusted earnings of analysts polled by Yahoo Finance.
Sales in the quarter fell 0.7 percent, to $749 million from $754 million, and declined 4 percent on a same-store sales basis. At AEO Direct, sales rose 10 percent. Gross margin declined to 40.1 percent of sales from 41 percent in the 2008 period.
“The AE brand showed improvement across key merchandise categories,” said ceo Jim O’Donnell, who described the quarterly results as “below our standards.” He lauded top-line growth at the firm’s aerie and Martin + Osa nameplates.
The company said comparable-store sales were down 5 percent during the first three weeks of November, but because of the importance of the Thanksgiving weekend, fourth-quarter guidance would be provided as part of its November sales report on Dec. 3.
Todd Slater, retail analyst at Lazard Capital Markets, maintained his “hold” rating on the stock as well as his estimate for fourth-quarter EPS of 32 cents, assuming a low-single- to midsingle-digit increase in same-store sales. He said AEO’s inventory “could be a cause for concern” unless comps trend more positively in the quarter.
In the nine months, net income fell 25 percent to $109.7 million, or 53 cents a diluted share, as sales contracted 3.1 percent to $2.02 billion.
@fearofgod and @maxfieldla have teamed up on a pop-up installation. The store, located in the gallery space across from Maxfield’s Melrose Ave location, is the site of the brand’s House of God pop-up in which Fear of God founder @jerrylorenzo has created a church-inspired installation. A dozen vintage church pews sit in front of an LED screen playing 90s gospel singers in an effort to re-create an environment akin to a Southern Baptist Church, Lorenzo explained. Read more about the pop-up on WWD.com #wwdfashion (📷: Jennifer Johnson)
Known for his sleek, sophisticated American glamour, Norman Norell is the subject of an upcoming exhibition at @fitnyc. “Norell: Dean of American Fashion,” which runs from February 9 through April 14, will feature approximately 100 ensembles and accessories. His best work is exemplified by the designer’s glittering “mermaid” gowns frosted with thousands of hand-sewn sequins – like the one pictured. (📷: William Helburn) #wwdfashion
For pre-fall 2018, @balmain didn’t let go of the glitz. A crystal embroidered baseball jacket priced at around $40,000 hangs in the “couture” section of the brand’s first men’s pre-collection. Sporting the words “Balmain Army” across the back, the item took around two months to make. “When it was completed, it was like Christmas, it was like, ‘It’s done, it’s exactly what I wanted,’” said Balmain’s creative director @olivier_rousteing during a tour of the collection in a Paris showroom on Monday. #wwdfashion
Eighty degree temperatures and outdoor installations at the annual Art Basel Miami Beach called for bright, elevated beachwear. See more street style pictures on WWD.com. #theyarewearing #ABMB (📷: @lifeinreverie)
Following September’s emotional tribute to her brother Gianni, Donatella Versace wanted to bring the spring show’s deep sense of intimacy to her @versace_official pre-fall collection. Donatella found inspiration in Versace Palazzo in Milan and from Gianni’s opulent apartment. Archival patterns and new motifs were splashed on silk shirtdresses and fitted jersey frocks. See the rest of the photos on WWD.com. #wwdfashion
Demna Gvasalia continues to shake up the Paris fashion calendar — and experiment with new runway timetables for his @vetements_official brand. WWD has learned that Vetements plans to stage its next coed show for the fall 2018 season on January 19 during Men’s Fashion Week in the French capital. Details about the timing and venue have not been confirmed — stay tuned on WWD.com to catch the latest. #wwdnews (📷: @giovanni_giannoni_photo)
@zacposen's go-to holiday gift? Cookies! "I'll usually bake cookies and send them as a gift," said the designer, who recently released his cookbook "Cooking With Zac: Recipes from Rustic to Refined." Get the recipe for his Brown Butter-Chocolate Chip Cookies via link in bio 🍪🍪🍪 #wwdeye #cookingwithzac
For @monsemaison’s pre-fall 2018 collection, Fernando Garcia and Laura Kim honed in on the brand’s many signatures — men’s wear, which was tweaked and feminized through deconstruction, proportion play and lots of bare shoulders. See the rest of the photos on WWD.com #wwdfashion (📷: George Chinese)
On Friday night, @yohjiyamamotoofficial received the Design for Asia Lifetime Achievement Award in Hong Kong. The 75-year-old designer has been celebrated for many years and is best known for his dark and avant-garde tailoring. “In my long career, in design, architecture, [I’ve been to] so many parties, this is the very first time that I have such a warm feeling, I really appreciate this,” Yamamoto said. #wwdfashion (📷: @dominiquemaitre)