By  on December 14, 2005

NEW YORK — Propelled by sales and margin increases, the J. Crew Group Inc. on Tuesday reported healthy improvements in operating and net earnings for the third quarter.

Operating income for the 13 weeks ended Oct. 29 increased by 69 percent to $22 million from $13 million in the year-ago period.

Net income rose to $3 million compared with a $10 million loss in the prior year, due to the higher operating income and a $4 million decrease in interest expense from debt refinancing in the fourth quarter of 2004.

Revenues rose 8 percent to $223 million from $206 million last year. Store sales, including J. Crew's 158 full-price units and 45 outlets, gained 5 percent to $161 million. Comp-store sales were up 3 percent, but the firm noted that was compared with a "particularly strong" 30 percent hike in the third quarter of 2004.

Direct sales, which include Internet and catalogue results, increased 19 percent to $56 million compared with $47 million last year.

Gross margins in the quarter increased to 44 percent versus 43 percent last year, primarily because of lower markdowns in all channels, J. Crew said.

For the past year, J. Crew has been on a roll, largely due to the turnaround efforts of its chairman and chief executive, Millard "Mickey" Drexler, and the brand's president, Jeff Pfeifle. The merchandise and catalogue have been reengineered and costs have been cut. Assortments are livelier, more colorful and reflect greater attention to detail and quality. New categories and higher-priced items have been added, including a greater selection of accessories, and soon, children's wear will join the mix.

A strong Christmas season on top of the third-quarter results would help J. Crew in its drive to go public and give it a good valuation. However, an initial public offering was postponed recently and is now expected sometime early next year. The company never gave a reason for the delay, but analysts believe it had more to do with Wall Street losing its affection for retail shares and concerns over consumer spending than anything specific to J. Crew. Analysts maintain their favorable outlook on the retailer and its growth prospects.Elsewhere in the results, J. Crew revealed that selling, general and administrative expenses in the third quarter of this year and last year came to $76 million, representing 34 percent of revenues in 2005 and 37 percent in 2004.

The company did not hold a conference call and officials could not be reached for comment Tuesday on the performance.

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