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.
EXCLUSIVE: Two and half months after John Targon, cofounder and codesigner of Baja East, was hired as creative director of the contemporary division at Marc Jacobs, he has left the company, WWD has learned. Marc Jacobs International, which is owned by LVMH Moët Hennessy Louis Vuitton, confirmed Targon’s departure in a statement: “John Targon is a talented designer and we appreciate the work he has done here. Ultimately working together did not make sense for the brand and we wish him the best.” Read the story by @jessiredale, link in bio. #wwdnews
@theluxurycollection is officially launching a collection, tapping Sofia Sanchez de Betak for the capsule. Over 30 styles will be featured in the Chufy x The Luxury Collection, debuting next month at Bergdorf Goodman, The Webster, FiveStory and more. De Betak, known as “@chufy,” drew inspiration for the collection from her trips to Japan in the past year #wwdfashion
@lhd, founder and CEO of @thewebster, has teamed up with @lebonmarcherivegauche for the European launch of her ready-to-wear line, LHD. The launch will come with an exclusive pop-up opening today that’s set to run through May 20. Located on the second floor, it carries her debut Miami-themed resort collection, launched in November as see-now-buy-now. #wwdfashion
@longchamp, which marks its 70th anniversary this year, just opened its biggest U.S. store on Manhattan’s Fifth Avenue. On the lower level there’s a floor-to-ceiling display of the brand’s iconic Le Pliage bag – in all of its different colors, shapes and sizes. Customers can also have their product personalized in-store by imprinting names, initials or emblems. #wwdfashion (📷: @ericmtownsend)
“Whenever I’m in that place of sound and music, I don’t have fear or nervousness…This album has a lot of themes of courage and boldness and I want to be the soundtrack for people’s lives. I’ll be so happy if [my songs] evoke strength in people, which I know music has done for me,” says @kimbramusic of her newest album “Primal Heart.” The New Zealand-born singer sat down with WWD to talk about her music, newest tour and connecting with hear fans — read more on WWD.com #wwdeye (📷: @jilliansollazzo)
Luxury handbag resale company @rebagofficial is planning to sell a rare collectible for $70,000: the @hermes White Crocodile Himalayan Birkin. The exclusive Birkin sold for about $100,000 in 2008, when @davidbeckham bought one for his wife @victoriabeckham to add to her collection. Read more about the rare Birkin on WWD.com #wwdaccessories
With her costume pearl necklace and what-you-see-is-what-you-get style, Barbara Bush, who died Tuesday at age 92, was a straight-shooter from start to finish.
Born Barbara Pierce in New York City, Bush served as the 37th first lady, as well as the country’s second lady from 1981 to 1989. In addition to being part of the longest presidential marriage — 73 years — Bush also had the unlikely distinction of having one son, George W., become the 43rd president and another son, Jeb, run unsuccessfully in 2016. Having served as second lady during the Reagan administration’s two terms and lived all over the world during her own husband’s ascending political career, Barbara Bush made it clear that literacy — not fashion — was her priority. Read more from Rosemary Feitelberg’s obituary on the late First Lady in WWD.com, link in bio. #barbarabush #wwdnews
Western and ’90s trends have influenced denim for fall 2018. Think raw, dark and coated jeans mixed with bold prints and tough leather. #trendtuesdays #wwdfashion (Styled by @thealexbadia;📷: @ryanplett)