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The retailer will disclose today significant gains for the fourth quarter and fiscal year ended Jan. 29. In a preview given to WWD, J. Crew said fourth-quarter operating income jumped to $20 million, from $1 million in the year-ago period, and revenues leaped 26 percent to $264 million from $210 million.
The company did have a net loss of $52 million, but $50 million of that was from debt refinancing, a key component to the turnaround. Excluding the refinancing, the net loss for the quarter was $2 million, an $18 million decrease in the loss over the year-ago fourth quarter.
Highlights for the full year included a 17 percent jump in revenues, to $804 million from $690 million, and an operating income increase to $38 million, compared to an operating loss of $31 million the year before.
Executives have been attacking the business from all angles, though at the core of the turnaround drive are efforts to improve the quality of the clothes and provide consistent fits. That’s been largely achieved through sourcing changes.
There has also been a massive infusion of vibrant colors and the addition of some higher-ticket and limited-edition items, such as shearling coats. Previously underplayed categories, particularly shoes, accessories and bridal, have been built up in recent seasons, and some new ones are being introduced. Jewelry, for example, will be part of the mix beginning in May, company executives disclosed.
The J. Crew team cited debt reduction as critical. The company has $297 million in long-term debt, but has been whittling it down to continue to improve the profit picture going forward. Debt restructuring efforts are expected to reduce annual interest expense by $16 million in 2005, the company said.
By reenergizing itself, the brand is expected to go down the path to a public offering, possibly in 2006, as previously reported. J. Crew has been majority owned by The Texas Pacific Group since 1997 and was founded by the Cinader family.
Two years ago, Mickey Drexler, Gap Inc.’s former chief executive officer, was brought in to reverse years of deterioration in J. Crew’s image and financial performance. One of the first things he did was recruit a colleague from the Old Navy division of Gap, Jeff Pfeifle, to be president. Drexler also sought to reduce overhead and cut down the staff at J. Crew’s headquarters, at Ninth Street and Broadway, to 400 people from 600.