A growing sense of caution about the second half led J. Crew Group Inc. to issue soft third-quarter guidance despite achieving an 87.6 percent leap in second-quarter profits.
Reporting after the close of the markets Thursday, the retailer said that based on a “different current environment,” which it called a “step down versus the first quarter,” it expects third-quarter EPS in the range of 55 cents to 60 cents, below analysts’ projections of 71 cents a share. Shares fell 7.2 percent in the first hours of after-market trading following a 0.7 percent decline Thursday to $33.43.
J. Crew’s caution about the second half of the year mirrored the outlook of investors generally Thursday as the Dow Jones Industrial Average slid 74.25 points, or 0.7 percent, to 9.985.81, its first sub-10,000 close since July 6. The S&P Retail Index Thursday managed to hover and finish above 400, despite a 1 percent drop to 401.28.
“While we are pleased with our second-quarter results, the continued economic uncertainty that we’re all seeing is leading us to take a more conservative outlook for the back half of the year,” said chairman and chief executive officer Millard “Mickey” Drexler on the company conference call.
“What we see in our stores is that the customer is more selective with their purchases. More than ever, they are focused on newness…. As we cannot control the macroenvironment, we are always focused on what we can control: our product, our inventory and our expenses, our associates and our investment in the business for the long term.”
But the ceo admitted the retail landscape has changed, and that it’s not simply newness that draws in consumers.
“There’s a big world out there that’s playing the low-price game or lower-price game,” he said, adding that J. Crew, which is known for premium priced merchandise, is investing more in its outlet business, including the launch of an online channel, factory.com, in September. The company is also placing a greater emphasis on growing its direct business, which expanded 16 percent to $102.5 million.
The ceo said “it is more critical than ever to continue to move forward and invest in our business for quality, long-term earnings growth. It’s about moving, doing, creating — it never stops.” He identified its hip Madewell unit as another opportunity. The retailer, which currently operates 18 Madewell stores in addition to 220 J. Crew stores and nine Crewcuts children’s stores, said it expects to open 10 to 15 Madewell doors next year.
For the quarter ended July 31, the retailer posted profits of $34.9 million, or 53 cents a diluted share, compared with income of $18.6 million, or 29 cents a share, in the year-ago period. Revenues rose 14 percent to $407.5 million versus $357.6 million, in 2009. Analysts polled by Yahoo were looking for EPS of 46 cents on revenue of $403.3 million.
Same-store sales for the quarter rose 11 percent, the company said, as quarterly gross margin improved to 44.6 percent of revenues from 41.2 percent a year earlier.
During the first half, net income more than doubled to $79.6 million, or $1.21 a share, versus year-ago income of $39.1 million. Total revenues expanded 16.8 percent to $821.4 million, compared with $703.3 million. For the year, the retailer said it anticipates earnings of between $2.25 and $2.35 a share, which includes a 3-cent benefit for recognition of share-based awards from the resignation of the company’s president of retail and direct. Analysts had projected annual EPS of $2.46 a share.
The equity markets began the day on a strong note following word that first-time jobless claims fell after rising over the past three weeks, but pessimism returned in the afternoon as selling activity accelerated.
“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