J.Crew Group, Inc. Releases Third Quarter Fiscal 2019 Results

Third Quarter highlights:
•Total revenues increased 1% to $625.6 million. Comparable company sales increased 3% following an increase of 8% in the third quarter last year.
•J.Crew sales decreased 4% to $415.8 million. J.Crew comparable sales were flat following an increase of 4% in the third quarter last year.
•Madewell sales increased 13% to $151.6 million. Madewell comparable sales increased 10% following an increase of 22% in the third quarter last year.
•Gross margin increased to 40.7% from 38.3% in the third quarter last year. The increase in gross margin was driven by: (i) a 210 basis point margin expansion and (ii) a 30 basis point decrease in buying and occupancy costs as a percentage of revenues. The margin expansion was driven by an increase in the J.Crew brand, partially offset by a decrease in the Madewell brand.
•Operating income was $11.5 million compared to $32.7 million in the third quarter last year. Operating income this year was impacted by transaction costs and non-cash impairment charges. The third quarter last year reflects the impact of the benefit related to the lease termination payment.
•Net loss was $19.9 million compared to $5.7 million in the third quarter last year. Net loss this year was impacted by transaction costs and non-cash impairment charges. The third quarter last year reflects the impact of the benefit related to the lease termination payment.

Michael J. Nicholson, President, Chief Operating Officer and Interim Chief Executive Officer, commented, “Our third quarter results reflect adjusted EBITDA growth of nearly 50%, marking our strongest third quarter performance in the last five years. These results reflect encouraging momentum at the J.Crew brand fueled by strong gross margin performance, continued growth at Madewell and the early benefits of our multi-year cost optimization program announced in September. Our teams are enthusiastic about our progress and remain relentlessly focused on continuing to capitalize on this momentum as we head into the holiday season.

Additionally, today we are pleased to announce an agreement on the terms of a transaction that will enable the Company to separate J.Crew and Madewell into two independent companies, pursue a proposed IPO of Madewell and recapitalize the Company’s balance sheet. As a result of the transaction, we expect both J.Crew and Madewell to have sustainable capital structures and to deliver enhanced value for our stakeholders.”

First Nine Months highlights:
•Total revenues increased 2% to $1,793.0 million. Comparable company sales increased 1% following an increase of 5% in the first nine months last year.
•J.Crew sales decreased 5% to $1,191.0 million. J.Crew comparable sales decreased 2% following being essentially flat in the first nine months last year.
•Madewell sales increased 14% to $424.3 million. Madewell comparable sales increased 10% following an increase of 27% in the first nine months last year.
•Gross margin decreased to 37.8% from 38.4% in the first nine months last year. The decrease in gross margin was driven by: (i) a 150 basis point deterioration in margin primarily due to the dilutive effect of the planned inventory liquidation and increased penetration of our wholesale business, offset by (ii) a 90 basis point decrease in buying and occupancy costs as a percentage of revenues.
•Selling, general and administrative expenses were $632.8 million, or 35.3% of revenues, compared to $596.3 million, or 34.1% of revenues, in the first nine months last year. This year includes transaction, severance and transformation costs of $62.8 million and a benefit of $9.2 million related to the lease termination payment in connection with our corporate headquarters relocation. Last year includes transformation and severance costs of $8.2 million and a benefit of $14.1 million related to the aforementioned lease termination payment. Excluding these items, selling, general and administrative expenses were $579.2 million, or 32.3% of revenues, compared to $602.6 million, or 34.4% of revenues in the first nine months last year.
•Operating income was $32.1 million compared to $65.1 million in the first nine months last year. Operating income this year and last year were impacted by transaction, severance and transformation costs, non-cash impairment charges and a benefit related to the lease termination payment.
•Net loss was $80.3 million compared to $45.7 million in the first nine months last year. Net loss this year and last year were impacted by transaction, severance and transformation costs, non-cash impairment charges and a benefit related to the lease termination payment.
more detail at: https://www.prnewswire.com/news-releases/jcrew-group-inc-releases-third-quarter-fiscal-2019-results-and-announces-transaction-support-agreement-with-ad-hoc-group-of-creditors-300967657.html

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