J. Crew Group Inc. said it would be more aggressive in its store closures this year — shuttering 20 more than planned for a total of 50 in 2017 — as sales continued to slip.
In its third-quarter report late Tuesday, the retailer said its net losses widened to $17.6 million from $7.9 million a year ago. But adjusted earnings before interest, taxes, depreciation and amortization rose 27 percent to $67.9 million.
Total revenues for the quarter decreased 4.5 percent to $566.7 million from $593.2 million while comparable sales decreased 9 percent.
Madewell had plenty of momentum in the quarter, but not enough size to overcome the weakness felt at the company’s namesake brand. The J. Crew business saw its sales fall 11.8 percent to $430.4 million while Madewell grew by 22.2 percent to $107.5 million.
Chief executive officer James Brett, a former West Elm executive who took the baton from Millard “Mickey” Drexler in July, said: “Our goal is to reinvigorate the J. Crew brand to reflect the America of today and to continue to drive strong momentum in the Madewell brand. During the third quarter of fiscal 2017, we drove gross margin expansion and reduced [selling, general and administrative expenses] by delivering on our expense initiatives. As we solidify longer-term strategies, we will continue to leverage our strong brand equity and unique capabilities to expand our reach, accelerate growth and maximize profitability.”
The company’s gross profits tallied $227 million, with the gross margin rate expanding by 200 basis points to 40.1 percent. SG&A expenses were cut to $201 million from $205 million a year earlier.
On a conference call with analysts, president and chief operating officer Michael Nicholson added: “We recognize that in order to drive top-line growth, we must evolve our business model from a traditional brick-and-mortar specialty retailer to a digital-first omnichannel business. We are committed to driving outsized growth with our strong e-commerce capabilities, complemented with a more appropriately sized real estate footprint, which now includes the closure of approximately 50 stores in fiscal 2017.”
The company had previously projected that it would shutter 30 stores this year. The firm, which had 574 doors at the end of the third quarter, expects to end 2017 with 535 locations.
As J. Crew works to transform, it is also wrestling with a heavy debt load of $1.7 billion. The retailer bought more time on that this summer, reaching an agreement with debtholders for a swap, but still has to find a way to reconnect with consumers.