US: J Crew swings to Q4 profit, projects robust 07 growth
J Crew Group moved to a profit from a loss in the fourth quarter and projected earnings growth of at least 20% for the current year.
In the 14 weeks ended 3 February, net income applicable to common shareholders was US$44m, or 71 cents a diluted share, versus a year-ago loss of $9.2m, or 37 cents. Excluding a one-time tax benefit, EPS for the more recent quarter would have been 33 cents a share, 5 cents above the consensus estimate.
Revenues in the quarter were up 26.5% to $366.7m from $289.9m in the 13-week 2005 quarter, led by a 42.9% increase in catalogue and Internet sales, to $113.2m. Same-store sales registered a 7% rise.
Gross margin was up 400 basis points to 40.8% of sales.
"We're very pleased with our fourth-quarter results," said Millard Drexler, chairman and chief executive of the New York-based apparel specialty chain.
"We continue to redefine the design business in America through our focus on quality, style and design along with endless attention to our customers' needs. This has translated into strong topline growth and significant improvements in profitability, with our operating margin more than doubling to 10.2% [of sales] in the fourth quarter."
The company said its long-term financial goals included growth in diluted EPS of more than 20% a year. Same-store sales are expected to grow in the mid-single digit range, with direct sales in the high single digits.
For the full year, net income applicable to common stockholders was $71.6m, or $1.49 a diluted share, versus a net loss of $9.7m, or 39 cents, in 2005. Excluding special items, earnings were $65.2m, or $1.05 a share.
Revenues rose 20.9% to $1.15bn from $953.2m as same-store sales leapt 13%, the same as in 2005. The extra week in the more recent year added $8.2m in sales to the full year and $4m to the fourth quarter.
Full-year gross margin was 43.4% of sales, up from 41.8% in the prior year.
As of 13 March, J Crew operates 178 specialty stores and 51 outlets in addition to its catalogue and e-commerce businesses.
By Arnold J Karr.
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