J. Crew Group, citing “meaningful progress” in its turnaround efforts, narrowed its net loss in the first quarter to $16.2 million compared to $33.9 million in the first quarter last year.
Total revenues in the quarter ended May 4 increased 7 percent to $578.5 million. Comparable company sales increased 1 percent.
However, the corporation continues to be a tale of two divisions, with the J. Crew brand continuing to lose ground, while Madewell maintains strong momentum.
Total sales at the J. Crew brand decreased 4 percent to $376.1 million; comparable sales decreased 1 percent.
Madewell sales increased 15 percent to $132.9 million; comparable sales increased 10 percent.
Adjusted earnings before interest, taxes, depreciation and amortization, which executives characterize as the best barometer for gauging the company’s performance, increased $11.4 million, or 31 percent, to $48.3 million from $36.9 million in the first quarter last year.
“We are encouraged by the meaningful progress we have made in the first quarter, reporting a 31 percent increase in adjusted EBITDA driven by continued momentum at Madewell and the early impact of our swift actions to improve profitability at J. Crew,” said Michael J. Nicholson, interim chief executive officer.
“As we look ahead, we are optimistic about our plans to reignite the J. Crew brand with new designs, assortments and brand expressions, and remain steadfast in our commitment toward achieving Madewell’s long-term growth potential as a leading global brand.”
The company is also hopeful about a possible initial public offering for Madewell, which is among the strategic alternatives being evaluated to maximize value and generate “meaningful proceeds to address 2021 debt maturities,” as Nicholson said during a conference call Wednesday afternoon. He gave no details on the IPO plans or other strategic alternatives.
Also, the company has been searching for a ceo, but there are no signs that the firm is close to naming anyone.
“Madewell continues to outperform in a competitive marketplace,” Nicholson said. “We capitalized on our success of its rapidly growing denim business,” which represents one-third of overall sales.
He noted Madewell recently introduced its first men’s shop-in-shop, first swim assortment and first sneaker collection, among other maneuvers.
Selling, general and administrative expenses were $189.8 million, or 32.8 percent of revenues, compared with $200.8 million, or 37.2 percent of revenues in the first quarter last year.
This year includes transformation, transaction and severance costs of $6.4 million and a benefit of $6 million related to the lease termination payment in connection with relocating the headquarters.
Last year includes transformation, transaction and severance costs of $6.5 million.
Excluding these items, selling, general and administrative expenses were $189.4 million, or 32.7 percent of revenues, compared to $194.3 million, or 36 percent of revenues, in the first quarter of last year.
Operating income was $22.1 million, compared with an operating loss of $900,000 in the first quarter of last year.
Gross margin decreased to 37 percent from 38.3 percent in the first quarter of last year.
The company operates 195 J. Crew retail stores, 132 Madewell stores, jcrew.com, jcrewfactory.com, madewell.com, and 173 factory stores, including 41 J. Crew Mercantile stores.