NEW YORK — J. Crew rolled through a robust spring season as ongoing efforts to elevate the quality, fit and luxury appeal of its collections paid off.
On Wednesday, the company raised its earnings outlook for the year and reported a swing into the black for the second quarter ended Aug. 4 on a net basis, as well as a healthy operating margin of 12.5 percent.
The multichannel brand, which touts much of its product as designer quality without the prices, reported net income of $20.6 million, or 32 cents a diluted share, compared with a net loss of $2.8 million, or 8 cents, in the second quarter of fiscal 2006 as result of interest and finance charges.
Operating income rose 38 percent to $37.1 million compared to $26.8 million in last year's quarter, while gross margin grew 160 basis points to 43.7 percent of revenues.
Total revenues increased 13 percent to $304.7 million, with store sales gaining 11 percent to $219.6 million; comparable-store sales were up 4 percent, and direct sales ahead 19 percent to $74.5 million. On a calendar-adjusted basis, comparable sales rose 6 percent.
J. Crew raised its outlook for the year to $1.42 to $1.46 per diluted share, from $1.37 to $1.41. Third-quarter profits are projected at 35 to 37 cents. J. Crew stock closed at $49.70, down $1.02, or 2 percent, from $50.72.
"When the goods are right, the customer responds," said Millard "Mickey" Drexler, chairman and chief executive, during a conference call. "It looks and sounds simple, but it's not actually so simple. We continue to push our design and quality to the next level."
For the half, revenues increased 18 percent to $602 million, with comparable-store sales rising 8 percent. Gross margins increased 140 basis points; operating income increased 48 percent to $81.5 million, and net income available to common stockholders was $45.3 million, or 71 cents a diluted share.
Drexler also said the company remains on track to open seven stores before the end of the year, including its first Madewell unit in New York later this fall, and continues to grow its retail square footage at a 7 percent to 9 percent annual rate.The company projects continued midsingle-digit comps going forward, but Drexler acknowledged the economic environment is "a little bumpy," and added, "We just buy conservatively, invest conservatively and plan conservatively."
He emphasized offering "creative, better, higher-quality product....We continue to make every effort to differentiate our product so there is reason to buy at J. Crew and perhaps not some other place. The drive is to continue to evolve and sharpen the edge on our goods," which he characterized as "interesting, wearable clothes, not intimidating, and higher quality. We are in the unique business. We are in the quirky business."
For holiday, the company is putting a stronger focus on "quirky gift assortments at good prices." J. Crew operates 189 stores, 55 outlets, the J. Crew catalogue and jcrew.com.
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@heriethpaul and @gracebol have a moment on the @victoriassecret fashion show 2017. See every look from the runway on WWD.com. Link in bio. (📷: @giovanni_giannoni_photo) #wwdfashion #victoriassecret #VSFashionShow
“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