J. Crew Group, helped by the ongoing momentum at Madewell, showed progress in its turnaround by cutting its net loss to $33.9 million for the first quarter ended May 5, from $121 million in the year-ago period.
This year and last year include the impact of noncash impairment charges, transformation costs, transaction costs and severance costs.
While Madewell excels, the J. Crew brand continues to show negative results. But officials said a “relaunch” of the J. Crew brand is being planned for September.
For the corporation, adjusted earnings before interest, taxes, depreciation and amortization increased 28 percent, or $8 million, to $36.9 million from $28.9 million in the first quarter last year.
Total revenues increased 3 percent to $540.5 million. Comparable company sales increased 1 percent following a decrease of 8 percent in the first quarter last year.
“2018 represents a pivotal year for the company and we are encouraged by our strong start, delivering a 28 percent increase in adjusted EBITDA for the first quarter. J. Crew brand sales continue to sequentially improve toward positive comp, and Madewell had a record quarter with a 31 percent comp increase,” said Jim Brett, chief executive officer. “Most significantly, for the first time since 2014, the company achieved comparable sales growth. As our strategy continues to unfold, we will deliver an expanded and enhanced product range along with the launch of a data-driven personalization engine and point-based loyalty program, culminating in the J. Crew brand relaunch in September, just in time for the most important fall and holiday seasons.”
Madewell’s sales increased 39 percent to $115.8 million. Madewell’s comparable sales increased 31 percent following an increase of 11 percent in the first quarter last year.
“Since Day One, our goal has been to scale Madewell in an authentic way by maintaining the brand love we’ve fostered with our customers,” Libby Wadle, president of Madewell, told WWD. “We always consider customer experience first and foremost when making decisions for the brand and will continue to as we look to the future.”
However, sales at J. Crew decreased 7 percent last quarter to $391.9 million. Comparable sales decreased 6 percent following a decrease of 11 percent in the first quarter of last year.
Madewell’s momentum is credited to its strength in denim, the two-and-a-half-year-old loyalty program that keeps getting enhanced, personalization efforts, social media and building community ties through such programs as denim recycling and volunteer work. Madewell introduced new fits and fabrications, including fade-resistant black denim and “magic pockets,” which flatten and lift the physique, and denim extends up to size 35. For Madewell and J. Crew, wholesaling is on the rise domestically and abroad. Nordstrom is J. Crew Group’s most important partner, selling J. Crew and Madewell at 117 domestic and six Canadian doors. Other retail partners include Net-a-porter and John Lewis.
Turnaround efforts include expense-cutting, increased digital penetration, sourcing changes involving cost negotiations, and introducing subbrands such as Playa for swimwear, all of which officials said offer a younger appeal and more accessible prices and fits. J. Crew is also putting greater emphasis on its Heritage Collection of its most iconic products such as rugby shirts and roll-neck sweaters.
Gross margin increased to 38.3 percent from 36.3 percent in the first quarter last year. Selling, general and administrative expenses were $200.8 million, or 37.2 percent of revenues, compared to $210.5 million, or 40 percent of revenues in the first quarter last year.
The operating loss was $900,000 compared with $151 million in last year’s quarter.
Total debt, net of discount and deferred financing costs, was $1.71 million compared to $1.5 million at the end of the first quarter last year. In July, the company completed a debt exchange and refinancing.
J. Crew Group operates 228 J. Crew stores, 121 Madewell stores, jcrew.com, jcrewfactory.com, madewell.com, and 175 factory stores, including 42 J. Crew Mercantile stores. This year, the company is closing 20 stores, opening one J. Crew store and 10 Madewell stores.
Beginning in the fall and over the course of a year, the company plans to relocate its corporate offices at 770 Broadway in the East Village to 225 Liberty Street in Brookfield Place in lower Manhattan.