J. Crew sales fall as decline steepens at namesake stores

Add J. Crew to the list of US apparel stores that are feeling the retail pinch, even as it swung back — barely — to a profit after posting a loss during the same period last year.

The private-equity backed company known for its preppy young-professional garb said on Tuesday that its revenue fell 2 per cent to $695m during the three months to January 28, which encompassed the all-important holiday shopping season and the first month of the new calendar year.

Comparable sales — a key industry metric — are down 5 per cent, compared to a 4 per cent decline during the same three-month period a year ago.

J. Crew stores bore the brunt of the fall-off, with sales from those stores down 5 per cent to $572.6m, and comparable sales at those stores declining 7 per cent, steeper than the 5 per cent drop seen during the year-ago period. Nevertheless, its Madewell stores were a brighter spot, posting an 11 per cent increase in sales to $102.9m, and comp sales increasing 6 per cent, just half of the 12 per cent rise seen during the same time last year.

Net income clocked in at $1.1m, versus a net loss of $7m during the same time last year, the company said. For the full fiscal 2016, its loss narrowed to $23.5m, from $1.2bn in FY 2015.

J. Crew chief executive and chairman Millard Drexler said in a statement that the overall retail environment remained “challenging” and that the company was focused on a disciplined approach to expenses and inventory, as well as “delivering the very best, iconic J. Crew and Madewell products our customers love across all channels.”

Despite the optimism, J. Crew’s guidance for the coming fiscal year 2017 showed that it does not expect to quickly shake off the slump. It is projecting total revenue for the year to come in either down or up in a low-single digit percentage range, and comp sales overall and at J Crew locations to decline within a range of mid- to low-single digits.

For Madewell, however, it expects to see comp sales increase by a low- to mid-single digit percentage. It said it also expects to close at least 20 stores in FY 2017.

The company, which is backed by TPG Capital and Leonard Green, has been feeling the same pressures as other brick-and-mortar-based retailers like Gap over the past year, as mall traffic declines and online retailers like Amazon threaten to move in on their territory.

J.Crew’s roughly $1.5bn term loan traded at its lowest level since it was issued before the quarterly results were released on Tuesday, reflecting investor calculations and concerns over a likely restructuring and repayment.

The preppy American retailer has struggled under its debt load and earlier this year sued the agent bank on its term loan, Wilmington Savings Fund Society, to defend against what it said was a disruption of “the company’s evaluation of opportunities to enhance its capital structure.”