Smooth Sailing for J. Crew

Earnings top Wall Street forecasts.
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J.Crew Group (JCG) swung to a fourth-quarter profit on strong sales, topping Wall Street's expectations.

The New York-based specialty-clothing retailer reported earnings of $44 million, or 71 cents a share, compared with a loss of $9.2 million, or 37 cents a share, a year earlier.

The latest quarter included $1.4 million of stock option costs and a $10.9 million non-recurring tax benefit.

Adjusted fourth-quarter earnings, which exclude the gain, totaled 33 cents a share. Analysts polled by Thomson First Call expected a profit of 28 cents a share.

J. Crew's revenue jumped 27% to $366.7 million, topping Wall Street's forecast of $344.2 million. Same-store sales, or sales at stores open at least a year, rose 7%.

Direct sales, which includes the company's catalog and Internet business, surged 43% to $113.2 million.

"We continue to re-define the designer business in America through our continued focus on quality, style and design along with endless attention to our customers' needs," said Chairman and CEO Mickey Drexler said in a statement. "This has translated into strong top line growth and significant improvements in profitability, with our operating margin more than doubling to 10.2% in the fourth quarter."

J. Crew was taken public in June after its biggest shareholder, private equity firm Texas Pacific Group, restructured the company and installed Drexler as chairman and CEO. Drexler gained notoriety by building

Gap

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, the specialty retail empire that runs Gap Stores, Banana Republic and Old Navy, into an American icon.

For the full year, J. Crew's income totaled $71.6 million, or $1.49 a share, compared with a loss of $9.7 million, or 39 cents a share, a year earlier. Revenue increased 21% to $1.15 billion.

The company said its long-term financial targets include same-store sales growth in the mid-single-digit range, direct sales growth in the high single digits, and EPS growth in excess of 20%.