E-COMMERCE COSTS DRAG J. CREW NET DOWN 67.4%
Byline: Thomas J. Ryan
NEW YORK — Citing high marketing costs for its e-commerce site, J. Crew Group reported earnings slumped 67.4 percent in the third quarter to $1.1 million from $3.5 million.
The retailer spent $4.5 million in marketing expenses for Jcrew.com during the quarter, but the investment paid off in revenues, which vaulted 266 percent in the period, to $17.2 million from $4.7 million a year ago.
Results from the company appeared in a filing with the Securities & Exchange Commission. J. Crew is privately controlled, primarily by the Texas Pacific investment group. It files its figures because of publicly held debt.
Overall revenues in the three months ended Oct. 31 slid 20.6 percent to $174.4 million form $219.7 million, reflecting the sale of Popular Club and the discontinuance of Clifford & Wills catalogs.
J. Crew brand revenues increased 15.9 percent to $174.4 million from $150.5 million.
Revenues of J.Crew Retail full-price stores increased 18.8 percent to $79.7 million from $67.1 million as a result of store openings since the 1998 third quarter. Same-store sales dipped 3.8 percent. Three stores were added in the quarter for a count of 80.
At J. Crew Direct, which includes the J. Crew catalog and Jcrew.com, revenues rose 13.8 percent to $61.6 million from $54.1 million. The gains at Jcrew.com offset a 10.1 percent drop in revenues from J. Crew catalog to $44.4 million from $49.4 million. The decline came despite a 12 percent hike in pages circulated to 1.9 billion from 1.7 billion.
At J. Crew outlets, sales gained 13.3 percent to $32.4 million from $28.6 million.
The year-ago quarter also included $2.7 million in operating profits from Clifford & Wills and Popular Club. Excluding these operations, operating profits for the J. Crew brand fell 14.8 percent to $12.1 million from $14.2 million.
The bottom line was hurt by an increase in selling, general and administrative expenses at the J. Crew brand, to $66.5 million from $53.2 million, due to heavy marketing costs for Jcrew.com, costs tied to operating more full-price stores and more catalog pages and increased consulting fees and other costs tied to information technology initiatives.
Gross margins improved to 44.9 percent from 44.6 percent.
Interest expense was reduced to $9.9 million from $11 million as a result of the payment of $26 million of its term loan last year and a decrease in average borrowings under its revolving credit line to $43.1 million in the latest quarter from $80.1 million last year.
In the nine months, Crew sliced its loss to $13.5 million from $21 million. Revenues slid 17 percent to $466.1 million from $561.7 million, reflecting the absence of the Popular Club Plan and Clifford & Wills.
J. Crew brand revenues grew 21.2 percent to $466.1 million. By segment, sales at J. Crew Retail rose 23.1 percent to $215.7 million, with same-store sales up 2.9 percent; J. Crew catalog gained 4.5 percent to $134.8 million; J.Crew outlets increased 10 percent to $77 million, and Jcrew.com climbed to $36.5 million from $8.9 million.