NEW YORK — J. Crew Group Inc. sees plenty of room for expansion.
The retailer plans to open more stores in the U.S., even in markets where it already has a presence; ramp up growth in Canada, where it has eight stores; open a handful of units in London, the first of which on Regent Street will bow before the holidays, and unveil locations in Hong Kong and Tokyo.
Its men’s retail concept, with 10 units, is also ripe for growth, Stuart C. Haselden, chief financial officer, told WWD following the company’s first-quarter conference call with analysts on Thursday.
Generally, in the U.S., “we’re still identifying opportunities to densify,” he said. “Beyond that, we’re looking at markets where we’re underrepresented and continue to evaluate the men’s business, which has exciting growth potential.”
The retailer opened its first men’s factory store on Long Island during the quarter.
The expansion plans come as J. Crew’s sales continued to grow in double digits in the first quarter even as profits were pressured by markdowns and higher expenses.
For the three months ended May 4, net income declined 4.5 percent to $29.3 million from $30.7 million in the prior-year quarter.
Adjusted earnings before interest, taxes, depreciation and amortization was $101 million, compared to $101.6 million in the first quarter of last year.
Total revenues rose 12 percent to $564.1 million from $503.5 million as store sales were up 7.4 percent, to $380.2 million, and direct marketing revenues grew 22.8 percent, to $176.2 million. Comparable sales, including direct revenues and those for stores open at least a year, were up 5.5 percent.
Gross margin declined to 44.7 percent of sales from 47.6 percent in the 2012 quarter as the cost of goods sold rose 18.4 percent to $312.1 million. The bottom line was affected less by an 8.7 percent increase in selling, general and administrative expenses, to $178.4 million. Higher markdowns led to a $15.9 million decline in the merchandise margin while buying and occupancy costs were up $8 million.
Libby Wadle, president of the J. Crew brand, said the promotional pitch of the first quarter took a toll on gross margins. “It was a tough macroeconomic environment out there,” she said during the call with analysts. “With the J. Crew [brand], we had a very tough full-price comparison [over last year’s quarter]. We had to change how we planned to do business. It was about navigating through the environment in the healthiest way we could.”
Wadle said there was “frankly, a lot of competition on some of our franchise items — at lower prices. We feel good about our fashion and newness. We remain focused on innovating and inventing new franchises and looking ahead.”
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