Exhibit 99.1
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For: J. Crew Group, Inc.
Contact: Scott Gilbertson
Chief Operating Officer
(212) 209-2535
Owen Blicksilver PR
(516) 742-5950
For Immediate Release
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J. CREW GROUP REPORTS THIRD QUARTER FINANCIAL RESULTS
NEW YORK (December 5, 2003) - J. Crew Group, Inc. today announced
financial results for the thirteen weeks ended November 1, 2003. The results
reflect the Company's continuing transition in upgrading the quality and style
of its merchandise assortments, the elimination of promotional programs and the
aggressive liquidation of carryover inventory.
Revenues for the third quarter of 2003 were $151.0 million, compared to
$189.9 million last year, a decrease of 20%. Retail comparable store sales
decreased 9% for the quarter due largely to the elimination of last year's
aggressive promotional activities. Direct sales decreased 47% as the company
strategically reduced catalog page counts and circulation and eliminated
clearance and unprofitable books.
"From my experience, a turnaround requires tough medicine that is not
without painful side effects. These results are a necessary cost of our
turnaround, " said Millard Drexler, Chairman and CEO. "Most significantly,
strategic changes in our promotional practices cost us markdown sales. However,
third quarter sales of full price merchandise were up 30% on a comparable store
basis.
"The turnaround at J. Crew is a work in progress," continued Drexler.
"We remain absolutely focused on upgrading the quality and style of our
merchandise and we are pleased with initial customer response. They are clearly
noticing the improvements in our merchandise, catalogs, online and stores."
The company noted other encouraging signs: merchandise margins for the
third quarter were up 200 basis points, free cash flow was $20 million ahead of
a year ago, and inventories are down by $46 million.
The loss from operations in the third quarter was $5 million compared
to $7 million of income in the same quarter last year. The operating results for
the third quarter reflect a $17 million decrease in gross profit attributable to
the decrease in net sales, partially offset by a $5 million decrease in selling
expense. Because of negative leverage on buying and occupancy costs, gross
margins decreased from 40% in 2002 to 39% in 2003.
Net loss was $23.6 million for the quarter, compared to a net loss of
$0.7 million last year. Effective in the third quarter, the Company adopted SFAS
No. 150, "Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity," which required reclassification of the Company's
mandatorily redeemable preferred stock as long-term debt and the related $7
million of preferred stock dividends as interest expense. Interest expense was
up an additional $4 million related to the Company's senior discount notes.
Nine Month Results
Revenues for the thirty-nine weeks ended November 1, 2003 were $479.5
million, a decrease of 9% from last year. Comparable store sales declined 6% in
the period, while sales of Direct decreased 23%.
The loss from operations for the nine month period was $30 million,
compared to $4 million last year. These results reflect a $40 million decrease
in gross profit, which was partially offset by a decline in selling, general and
administrative expenses of $14 million. Gross margins were 34.2% in 2003,
compared to 38.9% in 2002, comprised principally of a 310 basis point decline in
merchandise margin arising from the accelerated liquidation of prior year
inventories during the first half of 2003. Net loss for the nine month period
was $28.0 million, compared to a net loss of $19.9 million last year. The 2003
year to date results include a $41 million gain on the exchange of debt. At
November 1, 2003, working capital borrowings were $3 million compared to $55
million last year.
The Company's offer to exchange $193 million aggregate principal of
registered senior discount notes for the same principal amount of unregistered
notes expired on December 1, 2003 at 5 p.m. Eastern time. Upon the offer's
expiration, 100% of the principal amount of unregistered notes were validly
tendered and accepted for exchange by the Company.
J. Crew Group, Inc. is a leading retailer of men's and women's apparel,
shoes and accessories. The Company operates 154 retail stores, the J. Crew
catalog business, jcrew.com, and 42 factory outlet stores.
Third Quarter Conference Call
The Company's third quarter investor conference call with be held
today, December 5, 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. A replay of the call will be archived
on those websites and will also be available by telephone through December 12,
2003 at (888) 286-8010, reference 12386215.
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.
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Summary Income Statement Data
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Thirteen weeks Thirty-nine weeks
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11/01/03 11/02/02 11/01/03 11/02/02
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[$ in millions] [$ in millions]
Revenues $ 151.0 $ 189.9 $ 479.5 $ 524.5
Gross profit 58.9 76.0 163.9 203.9
Selling, general
and administrative expenses (64.3) (69.0) (192.2) (201.7)
Severance costs - - (1.4) (5.7)
Operating (5.4) 7.0 (29.7) (3.5)
income/(loss)
Interest expense (a) (20.4) (9.8) (43.2) (28.9)
Insurance proceeds 2.2 1.8 3.8 1.8
Gain on exchange of debt (net
of expenses of $3.0 million) - - 41.1 -
Loss before income (23.6) (1.0) (28.0) (30.6)
taxes
Net loss $ (23.6) $ (0.7) $ (28.0) $ (19.9)
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(a) includes $7.0 million of preferred stock dividends
Summary of Revenues Thirteen weeks Thirty-nine weeks
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11/01/03 11/02/02 11/01/03 11/02/02
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Retail $ 94.4 $ 100.6 $ 276.9 $ 280.4
Direct
Internet 19.0 35.0 82.5 91.5
Catalog 12.6 25.0 42.3 70.6
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31.6 60.0 124.8 162.1
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Factory 20.3 21.3 56.4 58.2
Other 4.7 8.0 21.4 23.8
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$ 151.0 $ 189.9 $ 479.5 $ 524.5
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Comp store sales:
Retail -8.7% -5.9%
Factory -3.3% -4.1%
Number of stores
Retail 154 152
Factory 42 43
J.Crew Group, Inc.
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Summary Balance Sheet Data
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As of
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Assets 11/01/03 11/02/02
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[$ in millions]
Cash $ 9.8 $ 15.0
Inventories 118.9 164.4
Property & equipment, net 148.2 180.2
Other 45.5 58.5
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Total $ 322.4 $ 418.1
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Liabilities and Stockholders' deficit
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Notes payable - bank $ 3.0 $ 55.0
Accounts payable and other current liabilities 108.8 111.3
Deferred credits 60.5 67.7
Long term debt 499.6 (a) 292.0
Redeemable preferred stock 92.8 (a) 256.4
Stockholders' deficit (442.3) (364.3)
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Total $ 322.4 $ 418.1
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(a) includes reclassification of $190.8 of mandatorily redeemable preferred
stock as of the beginning of the third quarter of 2003.
Summary Cash Flow
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39 weeks ended
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11/01/03 11/02/02
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[$ in millions]
EBITDA (excluding the gain on exchange
of debt) (a) $ (1.6) $ 22.8
Cash interest (15.5) (14.7)
Taxes paid (0.3) (0.5)
Changes in working capital (11.2) (45.8)
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Cash flow from operations (28.6) (38.2)
Capital expenditures (6.1) (18.0)
Cash flow from financing activities 25.6 55.0
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Decrease in cash $ (9.1) $ (1.2)
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(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 39 weeks ended November 1, 2003 excluded the $41.1 million
gain on exchange of debt.