Top-line and margin growth, along with product innovation, led J. Crew Group to a fourth-quarter performance that transcends the economic malaise pulling down most retailers.
J. Crew said profit fell to $25 million, or 39 cents a share in the quarter ended Feb. 2, from $44 million, or 71 cents a share, in the year-ago period. However, the year before had an extra week and a nonrecurring tax benefit of $10.9 million, and in the 2007 quarter, there was a severance charge of 2 cents a share.
On an adjusted basis, net income for the fourth quarter of fiscal 2007 totaled $26.3 million, or 41 cents a diluted share, compared with $20.5 million, or 33 cents a share, for the fourth quarter of fiscal 2006.
Revenues increased 9 percent to $399.9 million, with store and outlet sales up 8 percent to $260.6 million, and comparable- store sales flat. On a calendar-adjusted basis, comparable-store sales rose 4 percent.
Direct sales increased 11 percent to $126 million, and gross margin went up to 41.3 percent of revenues from 40.8 percent.
"It's all about inventory today and differentiation," Millard "Mickey" Drexler, chairman and chief executive officer, said during a conference call. "It's about the quality of goods, service and innovation. We are in a game right now of beating the competition. The winners will win not because they're cutting expense. Long term, they're winning because they are innovating their product.
"Looking at the recession, we are worried," Drexler added. "Day-to-day, [the business climate] changes. As long as we don't live with too much inventory, we are prepared for some downside."
Drexler said the key to J. Crew's continued success has been being "obsessively focused on our customers and our product," down to the stitching, the buttons, the colors and all the details.
Briefly commenting on last quarter's departure of former J. Crew president Jeff Pfeifle, Drexler said: "Nothing much has changed. It creates one less layer of management."
Addressing key merchandise initiatives this year and in the future, Drexler stressed the ongoing upgrade of merchandise. "As we continue to do that and concurrently look at the escalating prices of designer clothes and accessories, we see that as an important opportunity, frankly at prices that don't require you to take out a mortgage for a wardrobe."
Among other initiatives Drexler cited:
- "Much more definition" in women's and men's pants, meaning the assortments will be more clearly defined and edited.
- Intensified focus on women's suitings and costume jewelry.
- Greater editing in men's and a focus on the best 15 or 20 items.
- Continued buildup in cashmere, wedding and kids' brand Crewcuts, as well as shoes and accessories, especially online.
- More investment in Crewcuts mailings.
- Photo shoots in historically significant towns and places: "Not just where there's pretty blue water and a beach."
- A small men's shop opening at 335 West Broadway in New York's TriBeCa at the end of May, with a short-term lease.
- Opening a Collection store at Madison Avenue and 79th Street in Manhattan in June to showcase better products.
- Launching Madewell e-commerce in June.
"Madewell is a nice business," Drexler said, referring to the new division of J. Crew Group. "From a year ago to today, it's night and day on assortments and on the team. There is a renewed energy about making it work. I can't emphasize the importance of having a store about 10 blocks away," he noted, referring to the Madewell flagship at 486 Broadway that opened Feb. 20. "We are in there every day looking at it and we're living and breathing it, and still calling [Madewell] officially R & D [research and development]."
"New businesses are really hard to start. They only work if there is strong long-term vision and tremendous passion and a product that's focused on the consumer." he said. "We are really pleased with the progress....We are very conservative."
Five Madewell openings are planned for this year, giving the chain 11 by the end of the year.
For the fiscal year, revenues increased 16 percent to $1.33 billion, with comparable-store sales up 6 percent. Gross margin rose to 44.1 percent of revenues from 43.4 percent. Operating income jumped 37 percent to $172.5 million, compared with $125.6 million the previous year.
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews
“Stranger Things” is getting a new cast member for season 2. Meet @sadiesink_, the 15-year-old who will be joining the Netflix series for its new season. You may recognize her from “The Glass Castle” with Brie Larson and Woody Harrelson, but the Texas native’s next role goes in an entirely different direction. She describes her character, Max, as “a rough and tumble skater girl [who] becomes friends with the boys at school.” The second season debuts on October 27. (📷: @jgreenery) #wwdeye
Amid the Harvey Weinstein controversy, there’s another sector that’s being put under the spotlight for sexual abuse: the modeling industry. While rumors about abuse and sexual harassment of female and male models — and the photographers, agents and others who perpetrated it — have circulated within the fashion world for years, model @cameronrussell started posting stories from models on Instagram last week about abusive situations they’ve encountered — from sexual harassment and molestation to attempted rape. Over 75 have weighed in so far. Read more on WWD.com. Link in bio. #wwdnews
To celebrate its 16th anniversary, @dylanscandybar tapped designers and celebrities to create mosaics out of candy. The mosaics will be auctioned off to support the philanthropic cause of each participant’s choice. Pictured here is the mural created by @aliceandolivia's Stacey Bendet. For a first look at some of the other artwork being unveiled tonight, go to WWD.com. #wwdeye
The annual Veuve Clicquot Polo Classic in Pacific Palisades this weekend drew Kate Hudson, Tracee Ellis Ross, Laura Dern and more. See pictures of the star-studded event on WWD.com. (📷: @chelsealaurenla) #wwdeye
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye
"Nowadays when life is not so happy with everything going on in the world, I think people come to me for a little bit of whimsy and color and fun." - Designer Rebecca De Ravenel on her cult-favorite jewelry line. (📸 : @vsteves) #wwd40
“Everyone is talking about how the retail industry is struggling, but I think it’s an incredible time because brands who are doing something different and innovative are setting themselves up for the future,” said @adamgoldston, who founded the luxury athletic brand @apl with his brother @ryangoldsten. The Goldston’s are part of WWD’s 40 under 40: a group of industry notables. See the rest of the list on WWD.com. (📷: @vsteves) #wwd40
@eyeswoon blogger Athena Calderone debuted her first-ever cookbook, “Cook Beautiful,” which is heavily centered on the presentation and visual expression of food. Pictured here are her miso glazed carrots from the book. Get the recipe on WWD.com. (📷: @johnny_miller_) #wwdeye