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.
“Azzedine has been one of the biggest influences in my life. He has always been such a strong, loving, fatherly figure to me. I call him Papa. His designs are indescribably unique, they are pieces of art. He knew how to make the female form look its loveliest. I have so many memories of him; my favorite might be during my first show with him in Paris. He liked me and he wanted to help me get more work. He called all his friends at Kenzo and Comme des Garcons, and asked them to book me. They said, ‘But she can’t walk!’ And he said, ‘but she has such a great ass!' His friendship and support has been the great privilege of my career. I can't imagine life without him. Repose en paix mon Papa.” - @stephanieseymour tells @wwd. #wwdfashion (📷: @steveeichner) #alaia #azzedinealaia
Azzedine Alaïa, flanked by two of his closest friends, models Stephanie Seymour and Naomi Campbell.
He designed Seymour’s dress for her 1995 wedding to Peter Brant, and treated Campbell (who famously called him Papa), like a daughter. For more on the legendary designer, tap the link in bio. #wwdfashion #alaia #azzedinealaia
Azzedine Alaïa's “I-did-it-my-way” ethos stood out starkly at a time when brands are experimenting with consumer-facing fashion shows, coed formats and trans-seasonal collections – anything to perk up lackluster sales of ready-to-wear in an age of Insta-everything. “It’s not creation anymore. This becomes a purely industrial approach,” the late designer told WWD in an interview last year. “But anyway, the rhythm of collections is so stupid. It’s unsustainable. There are too many collections.” Read more about the iconic designer’s life and work on wwd.com, link in bio. #wwdfashion #azzedinealaia (📷: @WWD Archive, 1986) #alaia
Sneaker reselling app @goat’s latest exhibit, "The Greatest: New York," tells the story of New York's sneaker culture. To celebrate the exhibit, an intimate crowd gathered on Thursday night at the pop-up gallery space, located at Platform in Culver City, to hear guest speaker and illustrator @esymai talk about her own rise in streetwear and women in the business. "For me I'm just someone who is creative. I like to create things," said Chang. #wwdfashion
Azzedine Alaïa, one of the most iconic couturiers of the modern era whose body-con designs defined Eighties fashion, has died in Paris. The diminutive Tunisian-born designer, known for his structured knitted dresses with fitted waists and impeccably cut, figure-hugging second skin silhouettes was deeply admired by his peers, and counted supermodel Naomi Campbell - his adoptive daughter - among his inner circle, one of a gang of glamazons including Farida Khelfa, Carla Bruni and Stephanie Seymour who became ambassadors of his style. (📷: Alexandre Guirkinger) #wwdblast