J. Crew Profit Strong, But Sales Disappoint

Shares slide in late trading even after the retailer raises guidance.
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Updated from 4:45 p.m. EDT

SAN FRANCISCO --

J. Crew

(JCG)

delivered another quarter of strong earnings, topping analysts' estimates, as the retailer continued to win over customers with its merchandise.

The preppy-clothing seller's stock sold off in late trading, however, after the company's sales came in shy of forecasts and it gave a conservative guidance for the current quarter. But J. Crew still lifted its earnings forecast for the full year, predicting that it will ride through a "bumpy" retail environment.

For the second quarter, J. Crew reported a profit of $20.6 million, or 32 cents a share, reversing a loss of $2.8 million, or 8 cents, from a year earlier, when results were weighed down by charges tied to its IPO. Adjusted for charges, year-ago earnings were $13.3 million, or 21 cents a share.

Analysts expected earnings of 29 cents a share for the latest quarter, according to Thomson Financial.

Revenue rose 13% to $304.7 million from $269.2 million a year ago, missing Wall Street's expectation of $308.5 million, according to Thomson Financial.

Still, sales showed solid gains over the year-ago period. Same-store sales, or sales at stores open at least a year, rose 6% at retail stores. Internet and catalog sales jumped 19%.

"Our team continues to be focused on the level of design, quality, style and detail that our customers have come to expect from us," said Mickey Drexler, the company's CEO, in a statement.

On its conference call, J. Crew raised its earnings guidance for the year to a range of 1.42 to $1.46 from an earlier forecast of $1.37 to $1.41.

For the current quarter, the company forecast earnings of 35 cents and 37 cents a share. That allows for some downside to analysts' estimate for per-share earnings of 37 cents.

Shares of J. Crew were down $4.18, or 8.4%, to $45.52 in after-hours trading.

Although Drexler said on Wednesday's conference call that the retail environment is bumpy, he said J. Crew has been able to navigate the choppy waters by providing the right assortments.

"When the goods are right, the customer responds," he said.

Nonetheless, he said the company will plan conservatively through the back half of the year. It will stick to a slow square footage expansion of 7% to 9% for the year, opening a total of 37 stores.

J. Crew expects same-store sales to grow in the mid single-digit percentage range, while online and catalog sales grow in the high single digits for the year.

In the second quarter, J. Crew opened seven new stores, among them two Madewells, a concept launched a year ago. Madewell offers lower-priced casual clothing, and Drexler said the chain is still in the research and development phase.

"We're just working it and we're moving forward," Drexler said.

Drexler is credited with turning J. Crew into a huge success story since the company went public last summer. He had previously headed up

Gap

(GPS) - Get Report

, which is now struggling to reconnect with its customers.

J. Crew has managed to sell much of its apparel at full price by hitting the mark on fashion, unlike Gap, which has had to slash its prices in order to drive customers into its stores. That has helped J. Crew's gross margins, which improved to 43.7% in the second quarter from 42.1% a year earlier.