J. Crew profits decline in the fourth quarter

By

Bruno Joly

Published
Mar 25, 2014

In a year in which J. Crew may be getting a new owner, the company’s profits declined sharply in the last quarter of its fiscal year ending February 1.

From November through the end of January, J. Crew net income fell by more than 42% to only 4.2 million euros (USD 5.9 million). Its operating income dropped from around 30 million to 27.2 million.

On the other hand, quarterly revenues increased 7% to 496 million euros (USD 685 million), and comparable company sales increased 3%. Still, these increases were significantly less than in the past for the American group, which was rumored earlier this year to be coveted by Fast Retailing as a potential acquisition.

For the full fiscal year, J. Crew’s revenues increased 9%, following a jump of 13% in 2012. J. Crew is the owner of its same-name label, brand-related products and affiliated internet sites along with the Madewell label.

J. Crew’s comparable company sales advanced by only 3% to 2.428 billion euros. In-store sales increased by 6% as compared with a jump of 21% in 2012. Direct sales increased by 16%.

In terms of overall results, operating profit dropped slightly over the full 12 months, from 253 million to 249 million euros.

For the past three years, J. Crew has been owned by investment funds TPG Capital and Leonard Green & Partners LP. The company recently renegotiated existing credit facilities with its banks to extend out debt repayment and, according to Bloomberg, especially to actively prepare for an IPO later this year. Fast Retailing has officially indicated that it is no longer interested in the company.

The investment funds probably hope to nearly double their investment by targeting a 5 billion dollar valuation of the group. In the interim, J. Crew expects to open 60 new stores this year, including 11 internationally (8 stores and 3 outlets). The company currently has 451 stores, mostly in the U.S.