NEW YORK — Waning sales conspired with gross margin erosion to throw J. Crew Group Inc. into the red in the third quarter.
For the three months ended Nov. 2, the New York-based retailer and direct merchant sustained a net loss of $700,000. That compares with the year-ago quarter when the company realized profits of $300,000. Earnings before interest, taxes, depreciation and amortization, EBITDA, fell 9.4 percent to $17.3 million from $19.1 million last year, and the loss before taxes was $1 million versus earnings of $400,000 a year ago.
Sales for the period declined 2.9 percent to $189.9 million from $195.6 million last year, as comparable-store sales plunged 11 percent and sales at J. Crew’s direct business decreased 8.7 percent. While privately held, J. Crew reports its results because the company has public debt.
"Despite the strengthening of our trend in October, we enter the holiday season with a cautious outlook given the difficult macro environment," said chief executive officer Ken Pilot in a statement.
Pilot, former president of Gap International, succeeded Mark Sarvary in his current post on Sept. 9. Texas Pacific owns about 60 percent of J. Crew while Emily Woods, chairwoman, owns a stake of about 19 percent.
Gross margin deflation outpaced the slimming sales, falling 230 basis points to 39.8 percent of sales from 42.1 percent of sales a year ago. Other cost comparisons included a 7.3 percent decline in selling, general and administrative expenses, SG&A, to $67.1 million from $72.4 million last year, while interest expense grew 2.1 percent to $9.8 million from $9.6 million in the prior-year quarter.
Overall, for the first nine months of the year, J. Crew reported a wider net loss of $19.9 million. Last year, the company sustained a loss of $17.7 million. In a lone bright spot, EBITDA did gain for the period, rising 5.1 percent to $22.8 million from $21.7 million a year ago. The loss before taxes also widened to $30.6 million from last year’s $29.7 million loss.
Sales for the period were down 1.3 percent to $524.6 million from $531.3 million last year, as comp-store sales plummeted 11.7 percent and J. Crew’s direct sales decreased 2.7 percent.Gross margin for the period also eroded, falling 90 basis points to 38.9 percent of sales from 39.8 percent of sales a year ago. SG&A came down 3.7 percent to $205.6 million from $213.5 million last year, but interest expense rose 5.1 percent to $28.9 million from $27.5 million a year ago.
@chanel and @pharrell dropped what’s being dubbed as the world’s most exclusive sneakers yesterday. The Adidas Originals NMD Hu, which Williams designed in collaboration with Chanel and @adidasoriginals, has a waiting list of over 120K people who pre-registered online at chanelatcolette.fr –– and only 500 pairs are on sale. The singer predicted the resale value of the shoes could reach $40K. Read the full interview on WWD.com. Link in bio. #wwdfashion (📷: Dominique Maître)
@imanshumpert is diving deeper into his creative endeavors and relaunching his clothing line, Post 90s, and is helping to raise money for the hurricane victims in St. Maarten with a jersey he’s designed with his brother. The Cleveland Cavaliers player talked to WWD about kneeling during the national anthem, working with fashion brands and how he wants to be more than an @nba player. Read the interview on WWD.com #wwdfashion (📷: George Chinese)
Not only does #TheProfit return to CNBC tonight, but @marcuslemonis has launched @shopmarcus, a new shopping and lifestyle retail experience in Aspen and Chicago, with more locations to come. The retail stores offer in-store stylists and a variety of contemporary womenswear selections.
“It’s life, I’m going to face it,” @mingxi11 sighed. “I fell, but you know, I think the most important thing is that I get back up. I had the love, the help from my sister — the girl next to me Gizele [Oliveira] — she’s so nice. When I went backstage everybody was trying to comfort me like ‘Oh Ming, it’s OK.’ I’m really, really touched. I think it’s them who gave me the courage to go back on stage for the finale,” Xi told WWD of her fall at the @victoriassecret fashion show. (📷: David Fisher) #wwdfashion #vsfashionshow #victoriassecret
@louisvuitton tapped @therealpeterlindbergh for its latest city-centric photo book, which is part of a series called Fashion Eye. The primarily black and white book captures the spirit of Berlin in 57 images shot between 1989 and 2019. “Berlin is an inspiration for me, more than a city. I mean @millajovovich is simply Berlin!” said Lindbergh. #wwdfashion
“You know, I think audiences expect a certain performance so I have to deliver to them what they’re expecting to a certain degree. But I’m also a different actor and a different person, I have my own spin on the character,” says @noahegalvin of his takeover of the leading role in “Dear Evan Hansen” following the departure of @bensplatt, who originated the role. Read WWD’s interview with the 23-year-old actor on WWD.com #wwdeye (📷: @jilliansollazzo)
For pre-fall 2018, @etro created richly-colored wonderland, using tapestries, textiles and wallpapers from the Eastern world at large. The line featured floral and graphic prints and jacquard motifs, like this two-piece look featured here. #wwdfashion (📷: Giovanna Pavesi)
@kith is moving into children’s. The men’s and women’s streetwear brand has launched Kidset, a Kith kids line located in New York at 64 Bleecker Street. The line includes mini versions of staple Kith pieces like the Astor bomber jacket and the Kith box logo sweatshirts, along with a wall that can display up to 120 pairs of shoes from @adidas, @newbalance, @timberland and more. #wwdfashion
“I just wanted to create this fully rounded character, but I do think what excited me most was just the opportunity to give a group of people representation that I feel needs it. I like to do characters in projects that stand for something and Karolina definitely does, so that was really exciting to me,” @ginnygardner says of her new role in @hulu’s “The Runaways.” Gardner plays Karolina Dean, a queer superhero, which is a rarity for @marvel. Read more about Gardner’s character on WWD.com #wwdeye (📷: @dandoperalski)