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J. CREW NET DROPS 61.9%

Byline: Dan Burrows

NEW YORK — Merchandising missteps combined with the weak retail environment to take a heavy toll on J. Crew Group Inc.’s quarterly and yearly earnings.
For the 13-week quarter ended Feb. 2, the company reported net income plummeted 61.9 percent to $6.7 million. That compares with the $17.6 million net earnings the New York-based specialty retailer posted in last year’s 14-week final quarter.
Total revenues for the period slumped 14 percent to $246.7 million from $286.7 million last year. Same-store sales fell 18.7 percent in the fourth quarter, while net sales in J. Crew’s direct business shrunk 12.6 percent on a comparable basis.
“This was a tough year from many perspectives,” said chief executive officer Mark Sarvary in a conference call with analysts. “The economy was weak, the retail landscape was challenging and, in particular, our products didn’t meet the needs of the J. Crew customer. That said, we have been working aggressively to bring new, more effective merchandise to the business.”
To that end, the company reported on March 5 it is seeking a chief merchant who also could assume the chief executive position, succeeding Sarvary. Named ceo in May 1999 after serving as president of Nestle Frozen Foods, Sarvary has been credited with improving management of the company’s design and merchandising areas, including hiring Blair Gordon as executive vice president and creative director. However, as Sarvary said in the call, J. Crew needs a “top caliber merchant with the background and expertise to help [the company] drive sustainable growth over the long term.”
Additionally, J. Crew will strive to improve its merchandising and product themes through increased use of greater visuals in stores, including bigger graphics, greater use of video and more mannequins.
Anticipating a difficult year ahead, Sarvary said the company remains conservative in its forecasts, with the first quarter being the hardest and the first half of the year being bearish as well. Expecting positive comps in the second half, J. Crew expects full-year revenue growth in the midsingle-digit range, with positive second-half same-store sales in the low-single-digit range.
Overall, in 52-week fiscal 2001, the company flipped to red from black, posting a net loss of $11 million compared with net income of $11.9 million in last year’s 53-week year. Total revenues slid 5.8 percent to $778 million from $826 million. Comp-store sales declined 15.5 percent on the year, while net sales in the J. Crew Direct segment fell 8.8 percent. The company opened 34 new stores over the course of the year to bring the total number of retail units to 136. The company also operates the J. Crew catalog business Jcrew.com and 41 factory outlet stores.
J. Crew is privately held, but reports quarterly and yearly figures because of public debt.

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