NEW YORK, Dec. 1, 2011/PRNewswire/ -- J.Crew Group, Inc. today announced financial results for the three months (third quarter) and nine months (first nine months) ended October 29, 2011. 

The results below reflect the Company's performance for the "combined period" which consists of the period prior to its acquisition on March 7, 2011("predecessor period") by affiliates of TPG Capital, L.P. and Leonard Green& Partners, L.P. and the period after the acquisition ("successor period").  

The combination of the predecessor and successor periods to present combined totals is not consistent with GAAP and may yield results that are not comparable on a period-to-period basis.  For purposes of comparing results of operations for the first nine months of fiscal 2011 to the comparable period last year, the Company believes that the combined presentation provides a meaningful comparison.  Combined operating results (i) have not been prepared on a pro forma basis as if the acquisition occurred on the first day of the period, (ii) may not reflect the actual results we would have achieved absent the acquisition and (iii) may not be predictive of future results of operations. 

Third Quarter highlights:

  • Revenues increased 12% to $479.6 million, with comparable company sales increasing 5%.  Comparable company sales increased 2% in the third quarter last year.  Store sales increased 10% to $334.5 million, with comparable store sales increasing 2%. Comparable store sales decreased 1% in the third quarter last year.  Direct sales increased 18% to $138.5 millionon top of increasing 12% in the third quarter last year.  
  • Gross margin decreased to 42.1% from 43.5% in the third quarter last year.  The decrease includes the impact of purchase accounting of $6.8 million.    
  • Selling, general and administrative expenses increased to $143.9 millionfrom $122.6 millionin the third quarter last year.  The increase includes transaction-related costs and the impact of purchase accounting of $4.0 million.    
  • Operating income was $57.9 million, or 12.1% of revenues, compared to $64.1 million, or 14.9% of revenues, in the third quarter last year.  Operating income includes transaction-related costs and the impact of purchase accounting of $10.8 million.    
  • Net income was $21.6 millioncompared to $37.8 millionin the third quarter last year.  Net income includes (i) transaction-related costs and the impact of purchase accounting noted above and (ii) increased interest expense as a result of debt incurred in connection with the acquisition.  
  • Adjusted EBITDA was $83.8 millioncompared to $78.2 millionin the third quarter last year.  Last year included income of $5.9 millionresulting from a bonus accrual reversal.  An explanation of how we use Adjusted EBITDA and a reconciliation of net income to Adjusted EBITDA are included in Exhibit (3). 

First Nine Months highlights:

  • Revenues increased 6% to $1,324.0 million, with comparable company sales increasing 2.0%.  Comparable company sales increased 9% in the first nine months last year.  Store sales increased 4% to $926.7 million, with comparable store sales decreasing 1%.  Comparable store sales increased 8% in the first nine months last year.  Direct sales increased 12.0% to $374.8 millionon top of increasing 16% in the first nine months last year.    
  • Gross margin decreased to 40.9% from 45.6% in the first nine months last year.  The decrease includes the impact of purchase accounting of $33.4 million.      
  • Selling, general and administrative expenses increased to $495.4 millionfrom $372.3 millionin the first nine months last year.  The increase includes transaction-related costs and the impact of purchase accounting of $99.5 million.     
  • Operating income was $46.2 million, or 3.5% of revenues, compared to $198.5 million, or 15.9% of revenues, in the first nine months last year.  Operating income includes transaction-related costs and the impact of purchase accounting of $132.9 million.   
  • Net loss was $18.8 millioncompared with net income of $117.5 millionin the first nine months last year.  Net loss includes (i) transaction-related costs and the impact of purchase accounting noted above and (ii) increased interest expense as a result of debt incurred in connection with the acquisition. 
  • Adjusted EBITDA was $222.7 millioncompared to $236.6 millionin the first nine months last year. 

Balance Sheet highlights as of October 29, 2011: 

  • Cash and cash equivalents were $142.7 millionat the end of the third quarter compared to $311.7 millionat the end of the third quarter last year. 
  • Total debt was $1,597 millionat the end of the third quarter, including the seven-year senior secured term loan of $1,197 millionand the eight-year senior unsecured notes of $400 million, incurred in connection with the acquisition, compared with no debt outstanding at the end of the third quarter last year. 
  • Inventories at the end of the third quarter were $291.7 million(including $1.7 millionof inventory step-up from purchase accounting), compared to $261.0 millionat the end of the third quarter last year.  Inventory per square foot (excluding inventory step-up) increased 4% compared to the third quarter last year.

Use of Non-GAAP Financial Measures

This announcement contains non-GAAP financial measures.  An explanation of these measures and a reconciliation to the most directly comparable GAAP financial measures are included in Exhibit (3). 

Conference Call Information

A conference call to discuss third quarter results is scheduled for today, December 1, 2011, at 11:00 AM Eastern Time.  Investors and analysts interested in participating in the call are invited to dial (877) 407-3982 approximately ten minutes prior to the start of the call.  The conference call will also be webcast live at .  A replay of this call will be available until December 8, 2011and can be accessed by dialing (877) 870-5176 and entering conference ID number 382545.  

About J.Crew Group, Inc.

J.Crew Group, Inc. is a nationally recognized multi-channel retailer of women's, men's and children's apparel, shoes and accessories.  As of November 30, 2011, the Company operates 269 retail stores (including 226 J.Crew retail stores, 10 crewcuts stores and 33 Madewell stores), the J.Crew catalog business, jcrew.com, madewell.com and 96 factory outlet stores.  Additionally, certain product, press release and SEC filing information concerning the Company are available at the Company's website . 

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