Costs related to its March acquisition by TPG Capital and Leonard Green & Partners led J. Crew Group Inc. to a $10.5 million net loss in the second quarter while net, comparable and same-store sales registered gains in the period.
The company disclosed in its Form 10-Q, filed with the Securities and Exchange Commission Thursday, that it had settled a series of shareholder claims regarding the pricing of its acquisition by adding $6 million to the $10 million settlement agreed upon in January. The company said that it “or its insurers” and the two acquiring parties would make a one-time settlement payment of $16 million to be distributed on a pro-rated basis among members of the class who challenged the purchase in Delaware Chancery Court and other state and federal courts. J. Crew recorded a $10 million litigation settlement expense in last year’s fourth quarter and expensed the remaining $6 million in the second quarter.
During the three months ended July 30, the New York-based specialty retailer recorded a net loss of $10.5 million compared to net income of $34.9 million during the prior-year period. Stripping out costs and amortization related to the acquisition as well as interest, taxes, depreciation and amortization, adjusted EBITDA fell 7.6 percent to $64.2 million from the predecessor company’s year-ago level of $69.5 million.
Overall revenues in the quarter rose 6.7 percent to $435 million, from $407.5 million, with store sales up 5.4 percent to $311 million and direct sales up 13.1 percent to $116 million. Comparable-store sales were up 1 percent and comparable sales, which include direct marketing revenues, rose 12 percent. Gross margin declined to 36.5 percent of sales from 44.6 percent with acquisition-related costs, including $23 million in store lease amortization costs related to its acquisition.
On the firm’s quarterly earnings call, James Scully, chief financial and administrative officer, said that the women’s business improved during the second quarter versus the first quarter while there was sustained strength in men’s, accessories and its Crewcuts division. He said the company made “more significant adjustments” to the women’s assortment in the second half, “and we are beginning to see the benefit of those adjustments.”
A company spokeswoman said women’s pants, schoolboy blazers, cashmere, shoes and handbags were among the bestsellers in the period.
Scully also said J. Crew is “moving forward on a number of key strategic initiatives,” including growth internationally, in the direct channel, as well as in the full-line and factory outlet stores. The Madewell division is seen as an expansion vehicle.
The first women’s-only store outside the U.S. opened in Toronto on Aug. 18 and Scully said the company was “really pleased with the results in customer feedback so far.”
He said the firm will open nine new retail stores this year, including one Crewcuts unit. A men’s-only store will open at Columbus Circle in the fourth quarter. Eleven new outlet stores are planned for 2011.
“Our long-term plans remain to grow our factory square footage by approximately 10 percent a year over a three- to five-year horizon through a combination of new units and expansions in existing centers where we see potential upside,” Scully said.
“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