NEW YORK — J. Crew Group Inc. said Monday that it expects third-quarter revenues to rise in the range of high-single to low-double digits from $555.8 million last year.
The retailer also expects comps to rise in the midsingle-digit range on top of a 10.4 percent increase in the same year-ago quarter. Direct net sales are estimated to rise in the high teens from $156.8 million last year.
J. Crew will post third-quarter earnings for the period ended Saturday in early December.
The company provided interim preliminary financial information for the two months ended Oct. 5, and said revenues rose 11.3 percent to $422.3 million from the year-ago figure of $379.4 million. Comparable company sales gained 4.3 percent and direct net sales increased 20.7 percent.
The company said capital expenditures are planned to be between $135 million and $145 million in fiscal 2013.
Also on Monday, J. Crew Group Inc.’s parent, Chinos Intermediate Holdings A Inc., revealed it is planning to offer $500 million in senior payment-in-kind toggle notes.
The notes have been priced at 7.75 percent and 8.50 percent, with a maturity date of May 1, 2019. Interest will be paid semiannually at a rate of 7.75 percent per year in cash interest, and 8.50 percent to PIK interest.
The offer for the PIK notes will be sold through a private placement. The PIK toggle note allows the issuer to either pay interest in cash or elect to defer interest payments through a promise to pay via additional notes that carry a higher interest rate.
Net proceeds from the placement will be used to distribute cash to Chinos to fund a dividend to equity holders TPG Capital and Leonard Green & Partners.
Ratings agency Moody’s Investors Service rated the toggle notes “Caa1.” The agency revised its outlook to “negative” from “stable,” stating that the move was due to the “meaningfully less financial flexibility for the company following the sizeable increase in debt, thus there is no significant cushion for the company to be impacted by negative trends in the market or any other weak trends in its business.” Moody’s did affirm J. Crew’s B2 Corporate Family rating, noting that it expects the company to “maintain a solid liquidity profile.”
Competing ratings agency Standard & Poor’s assigned a “CCC+” rating to the toggle notes, and also a negative outlook, with a “B” corporate credit rating. “The negative outlook reflects our view that the specialty apparel retail environment during the second half of the year will be characterized by weak consumer spending and an increase in promotional activity. As a result, we do not believe there will be any meaningful improvement in the company’s credit protection measures,” S&P said.
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