NEW YORK — J. Crew, seeking a turnaround for the past year, issued its results Friday, and they suggest the retail and catalogue firm still has a way to go.
J. Crew, based here, said it slightly narrowed its fourth-quarter loss, even though its catalogue business suffered a 49.7 percent drop in revenue for the three months ended Jan. 31.
The company acknowledged it was too aggressive last year in its turnaround efforts, and blamed a reduction in catalogue circulation and promotional activities in its direct business for the $19.4 million loss in the quarter. That compared with a loss of $20.7 million in the same quarter last year.
Overall sales for the quarter fell 13.6 percent to $208.8 million from $241.8 million.
By channel, sales in J. Crew’s 154 retail stores rose 2.8 percent to $131.2 million from $127.6 million, with same-store sales rising 2 percent. The 42 outlets rang up another $22.6 million in sales, up 25.6 percent from $18 million last year, and up 26 percent on a comp-store basis.
However, direct sales eroded 43.3 percent to $48.7 million from $85.9 million, with Internet sales falling 38.2 percent to $29.6 million from $47.9 million and catalogue sales down 49.7 percent to $19.1 million from $38 million.
In 2003, J. Crew’s losses climbed to $47.4 million from $40.6 million in 2002. Sales for the year declined 10.2 percent to $688.3 million from $766.4 million. Nicholas Lamberti, the company’s interim chief financial officer, said on a conference call that the results in the direct division were negatively impacted by the “complex changes required to support the business transition.”
He specified that in 2003 the company established a “J. Crew-right merchandise assortment, which resulted in a 30 percent reduction in style count” that reduced both catalogue and online merchandise and profitability. In addition, he said the smaller merchandise assortment and new creative direction resulted in the elimination of three women’s-only catalogue editions.
Direct sales were also inhibited by the acceleration of the liquidation of prior-season inventory in the first half of 2003. First-half sales accelerated, but the second half got depressed and led to higher markdowns.Nevertheless, management remained upbeat and cited several initiatives to revive the brand.
Chairman and chief executive Millard Drexler, who joined J. Crew in January 2003 from Gap Inc., said in a statement, “During this transition, our products have been well received by customers, so that demand for some items outweighed supply during the fourth quarter, and that pattern continues in the first quarter. While it’s only March, early indications show that 2004 is off to a good start.” Based on positive customer response, inventories should rise in the second half.
Lamberti said he expects direct sales in the first half of 2004 to continue to flounder, though the decline would be offset by second-half gains.
“First-half initiatives are focused on mitigating the impact of certain actions taken in 2003, which in retrospect were too aggressive, [as well as] launching a marketing initiative to increase the acquisition and retention of names for our mailing list,” Lamberti said.
At retail, Lamberti said, comps-to-date are running up 6 percent, while inventory has fallen 30 percent. He expects comps to gain 10 percent for the year.
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