J. Crew Beats Third Quarter Estimates

Nov.25.09 | About: J CREW (JCG)

J. Crew Group Inc. (JCG), a multi-channel retailer of women's, men's and children's apparel, shoes and accessories across the U.S., has reported better-than-expected fiscal 2009 third quarter results with a net income of $43.9 million or 67 cents per share, compared to a net income of $19.0 million or 30 cents per share in the year-earlier quarter. The earnings also exceeded the Zacks Consensus Estimate by 9 cents.

The strong third quarter performance was primarily driven by a healthy sales growth across its segments. J. Crew Group is one of the few U.S. apparel retailers that witnessed robust sales growth during the quarter despite an overall weak economy. Total revenues increased 14.0% to $414.1 million from $363.1 million in the year-ago quarter, while same-store sales increased 8% year-over-year.

J. Crew Group attributes its strong sales to unique and differentiated merchandise, coupled with its tailor-made customer service. The merchandise margins of the company hit a historical high during the quarter, buoyed by stringent inventory management policies and a relatively positive outlook ahead of the upcoming holiday season. At quarter-end, inventories were $223.9 million compared to $250.1 million in the previous year. Inventory per square foot decreased 17% year-over-year.

Gross margin increased to 48.4% of revenues during the quarter from 41.6% in the year-ago period. Operating income increased to $75.2 million (18.2% of revenues) from $32.5 million (9.0% of revenues) in the third quarter of fiscal 2008. At quarter-end, J. Crew Group had cash and cash equivalents of $246.8 million versus $114.5 million in the year-earlier quarter.

With an improved performance during the quarter, the shares of the company rose 7% in after-hours trading. J. Crew Group currently expects its fourth quarter earnings in the range of 37 cents to 42 cents per share.