J. Crew Group Inc.’s profits slipped in the first quarter but not management’s confidence in the strategy.

This story first appeared in the May 29, 2009 issue of WWD. Subscribe Today.

“We think we are in the right place,” Millard “Mickey” Drexler, chairman and chief executive officer, said in a conference call where analysts commended the company for beating expectations. “I don’t think we have a crystal ball but it certainly feels better than it did in the fourth quarter.”

In the three months ended May 2, profits slid 33 percent to $20.4 million, or 32 cents a diluted share, from $30.5 million, or 48 cents a share, in the 2008 quarter. The net income figure included severance and asset impairment charges of roughly 2 cents a share.

Sales in the quarter edged up 1.5 percent to $345.8 million from $340.6 million but declined 5 percent on a same-store basis.

Analysts polled by Yahoo Finance had anticipated earnings per share of 11 cents on $322.1 million in revenues.

Store sales picked up 5.1 percent to $240.7 million, while direct revenues fell 5.5 percent to $95.4 million.

For the second quarter, the company said it expects EPS to be between 8 and 12 cents.

Drexler said the company continues to push innovation in its designs, details, fabrications and fits, and “everyday consistency in style” while striving to appeal to broader audiences. “As long as we provide style and point of view that’s not available anywhere else, it gives us a very strong competitive advantage….In a very perverse way, the bad environment was a big wake-up call. I kind of like it. The customer has become so much more acute and educated about buying goods. That just makes us do our job so much better.”

He also outlined some changes and growth strategies, including:

• Getting more aggressive on marketing the new Crewcuts catalogue. The first edition made its debut earlier this month; the second comes out in August.

• Possibly opening additional J. Crew Collection stores and men’s wear stores, noting this week he scouted locations in Los Angeles and San Francisco.

• Adjusting investments in higher-priced goods, including the range on Madewell jeans to emphasize those under $100 such as Madewell 37, priced at $59.50, and the “ex-boyfriend” style, priced at $95. Premium jeans can go as high as $198.

• Adjusting Crewcut prices downward.

• Continuing to cultivate relationships with “authentic iconic brands” such as MacIntosh, Red Wing and Timex.

A total of 24 store openings are planned for 2009, versus 42 in 2008. “We are not going to accelerate store openings,” Drexler said. “We are not seeing landlords become flexible enough.”

Drexler said at J. Crew, the best categories recently have been wedding, T-shirts, feminine women’s shirts, jackets and jewelry.

As far as Madewell, launched three years ago, “We continue to be very pleased with this business,” though the business got “much too basic in knits and underbought fashion and novelty.”