Exhibit 99.1
For: J. Crew Group, Inc.
Contact: Scott Gilbertson
Chief Operating Officer
(212) 209-2535
Owen Blicksilver PR
(516) 742-5950
For Immediate Release
J. CREW GROUP REPORTS SECOND QUARTER FINANCIAL RESULTS
NEW YORK (August 22, 2003) - J. Crew Group, Inc. today announced
financial results for the thirteen weeks ended August 2, 2003. These results
reflect a new inventory management strategy as well as strategic changes in the
Direct business, including the discontinuance of Clearance and Sale catalogs and
reductions in pages circulated. The new inventory strategy contributed to a
significant improvement in cash flow.
Revenues for the second quarter of 2003 were $167.1 million compared to
$167.6 million last year. Comparable store sales increased 2% in the second
quarter, while net sales in the Direct business decreased 17%. Net income was
$15.2 million for the quarter compared to a loss of $7.1 million last year. The
2003 quarter includes a gain on the exchange of debt of $41 million.
The operating results for the second quarter reflect a $12 million
decrease in gross profit with a decline in gross margin from 36.4% in 2002 to
29.4% in 2003. The margin decrease resulted from atypical and accelerated
markdowns related to Spring 2003 and prior season merchandise.
Revenues for the twenty-six weeks ended August 2, 2003 were $328.6
million, a decrease of 2% from last year. Comparable store sales declined 4% in
the period while sales of Direct decreased 9%. Net loss for the six month period
was $4.4 million compared to a $19.2 million loss last year.
The operating results for the six month period reflect a $23 million
decrease in gross profit with a decline in gross margin from 38.2% in 2002 to
32.0% in 2003. This decrease was partially offset by a decline in selling,
general and administrative expenses (excluding severance charges) of $7 million.
Selling expense decreased by $4 million due to reduced circulation. The decrease
in general and administrative expenses of $3 million resulted primarily from the
effect of cost reduction initiatives in the first quarter and a $1.6 million
insurance recovery in the second quarter. Interest expense was up $4 million for
the six month period reflecting the increased interest rate and accretion in
fair value on the new discount notes.
The balance sheet at August 2, 2003 includes $31 million of cash and
cash equivalents, an $18 million increase from August 3, 2002; inventories were
$85 million, down 39%. There were no working capital borrowings at August 2,
2003 compared to $48 million last year. Cash flow from operations for the six
month period, after capital expenditures, improved by $40 million from last
year.
J. Crew Group, Inc. is a leading retailer of men's and women's apparel,
shoes and accessories. At August 2, 2003, the Company operated 155 retail
stores, the J. Crew catalog business, jcrew.com, and 42 factory outlet stores.
Second Quarter Conference Call
The Company's second quarter investor conference call with be held
today, August 22, 2003 at 11 a.m. eastern time. The event will be available
through an audio webcast at www.jcrew.com (click on "Help" and "Investor
Relations") and www.companyboardroom.com, and will be archived on those
websites. A telephone replay will also be available through August 29, 2003 at
(888) 286-8010, reference #14561916.
Certain statements herein are "forward-looking statements" made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements reflect the Company's current expectations or
beliefs concerning future events and actual results of operations may differ
materially from historical results or current expectations. Any such
forward-looking statements are subject to various risks and uncertainties,
including the strength of the economy, changes in the overall level of consumer
spending or preferences in apparel, the performance of the Company's products
within the prevailing retail environment, trade restrictions, political or
financial instability in countries where the Company's goods are manufactured,
postal rate increases, paper and printing costs, availability of suitable store
locations at appropriate terms and other factors which are set forth in the
Company's Form 10-
K and in all filings with the SEC made by the Company subsequent to the filing
of the Form 10-K. The Company does not undertake to publicly update or revise
its forward-looking statements, whether as a result of new information, future
events or otherwise.
(tables to follow)
J.Crew Group, Inc.
Summary Income Statement Data
Thirteen weeks Twenty-six weeks
--------------------------------- ---------------------------------
08/02/2003 08/03/2002 08/02/2003 08/03/2002
--------------- -------------- -------------- ----------------
[$ in millions] [$ in millions]
Revenues $ 167.1 $ 167.6 $ 328.6 $ 334.7
Gross profit 49.1 61.0 105.0 128.0
Selling, general and administrative expenses 61.4 62.3 126.3 133.4
Severance costs 0.5 0.2 1.4 5.0
Interest expense 13.1 9.5 22.8 19.1
Gain on exchange of debt (net of expenses of $3.0 million) 41.1 - 41.1 -
Income/(loss) before income taxes 15.2 (11.0) (4.4) (29.5)
Net income/(loss) $ 15.2 $ (7.1) $ (4.4) $ (19.2)
======= ====== ====== =======
Summary of Revenues Thirteen weeks Twenty-six weeks
- ------------------- --------------------------------- ---------------------------------
08/02/2003 08/03/2002 08/02/2003 08/03/2002
--------------- -------------- -------------- ----------------
Retail $ 100.7 $ 94.1 $ 182.5 $ 179.8
Direct
Internet 26.9 25.3 63.5 56.5
Catalog 11.3 20.6 29.7 45.6
------- ------- ------- -------
38.2 45.9 93.2 102.1
------- ------- ------- -------
Factory 20.3 20.9 36.1 36.9
Other 7.9 6.7 16.8 15.9
------- ------- ------- -------
$ 167.1 $ 167.6 $ 328.6 $ 334.7
======= ======= ======= =======
Comp store sales:
Retail 2.0% -4.3%
Factory -3.6% -4.6%
Number of stores
Retail 155 146
Factory 42 43
J.Crew Group, Inc.
Summary Balance Sheet Data
As of
--------------------------
Assets 08/02/2003 08/03/2002
- ------ ---------- ----------
[$ in millions]
Cash $ 31.5 $ 14.0
Inventories 84.8 138.9
Property & equipment, net 155.9 185.1
Other 45.1 51.2
---------- ----------
Total $ 317.3 $ 389.2
========== ==========
Liabilities and Stockholders' deficit
Notes payable - bank $ - $ 48.0
Accounts payable and other current liabilities 96.7 93.8
Deferred credits 61.1 66.5
Long term debt (including current portion) 291.5 288.3
Redeemable preferred stock 283.6 247.4
Stockholders' deficit (415.6) (354.8)
---------- ----------
Total $ 317.3 $ 389.2
========== ==========
Summary Cash Flow
26 weeks ended
--------------------------
08/02/2003 08/03/2002
---------- ----------
[$ in millions]
EBITDA (excluding the gain on exchange of debt) (a) $ (6.3) $ 5.5
Cash interest (10.1) (9.1)
Taxes paid (0.3) (0.5)
Changes in working capital 11.7 (30.6)
---------- ----------
Cash flow from operations (5.0) (34.7)
Capital expenditures (4.8) (15.5)
Cash flow from financing activities 22.4 48.0
---------- ----------
Change in cash $ 12.6 $ (2.2)
========== ==========
(a) Earnings before interest, taxes and depreciation and amortization (EBITDA)
should not be considered as an alternative to any measure of operating
results as promulgated under generally accepted accounting principles,
including operating income and net income. The Company uses EBITDA as a
supplemental measure of cash flow. Management and investors often use EBITDA
as a measure of our ability to service our debt. Other companies may
calculate EBITDA differently and therefore, our calculations are not
necessarily comparable with similarly titled figures for other companies.
EBITDA for the 26 weeks ended August 2, 2003 excluded the $41.1 million gain
on exchange of debt.