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NEW YORK — J. Crew Group, driven by strong revenue gains and a sharper focus on its historic bestsellers, reported Wednesday that profits practically doubled to $30.7 million in the first quarter ended April 28, from $16.2 million in the year-ago period.
This story first appeared in the May 31, 2012 issue of WWD. Subscribe Today.
The specialty retailer said revenues increased 23 percent to $503.5 million, with comparable company sales increasing 16 percent and gains pretty balanced across selling channels. Store sales increased 26 percent to $354 million. Direct sales increased 19 percent to $143.4 million.
Last year, the business had some fashion misfires, got too edgy and suffered for it. But in the first quarter of this year, “the business was firing on all pistons,” Stuart Haselden, J. Crew’s chief financial officer, told WWD. “Our approach was to narrow our assortments and take a strong point of view on key areas.”
He cited cashmere, ballet flats and the Ludlow men’s suit as some of the products that had “some directed marketing….Those were some of the big ideas. We also got a quality message out.”
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Haselden also cited stronger full-price selling last quarter, and noted that gross margins increased to 47.6 percent from 44.7 percent. Selling, general and administrative expenses increased to $164.2 million, or 32.6 percent of revenues, from $131.1 million, or 32 percent of revenues, in the first quarter of last year. Haselden attributed the expense increase to bonuses and share-based compensations that weren’t given the year before.
J. Crew’s operating income increased 45 percent to $75.7 million, or 15 percent of revenues, compared with $52 million, or 12.7 percent of revenues, in the first quarter last year. Adjusted earnings before interest, taxes, depreciation and amortization increased $26.9 million to $101.6 million compared with $74.7 million in the first quarter last year.
“We’re pleased with the results. We feel good about the business,” Haselden said. “One of the big priorities is building the global brand, in a disciplined, deliberate manner.” J. Crew has already begun opening stores in Canada, distributes to 106 countries around the world through online sales and is expected to soon come up with brick-and-mortar locations in the U.K. and Hong Kong.
The retailer reported cash and cash equivalents of $216.1 million last quarter, and total debt of $1.59 billion, consisting of the seven-year senior secured term loan of $1.19 billion and the eight-year senior unsecured notes of $400 million, incurred in connection with the acquisition. That compares with $1.6 billion in the first quarter of 2011.
Inventories were $250.6 million compared with $265.6 million in the year-ago quarter. J. Crew Group operates 229 J. Crew stores, nine Crewcuts stores, 39 Madewell stores, jcrew.com, the J. Crew catalogue, madewell.com, the Madewell catalogue and 96 outlets.
In March 2011, J. Crew was acquired by Chinos Holdings Inc., a company formed by investment funds affiliated with TPG Capital LP and Leonard Green & Partners LP.