J. Crew Group on Wednesday reported that total first quarter revenue rose 7% to $578.5 million. The company's Madewell sales rose 15% to $132.9 million, while flagship J. Crew sales fell 4% to $376.1 million, according to a company press release.
The disparity in the banners' performance continued with store comps, which overall rose 1%: J. Crew comps fell 1% (following a 6% decline a year ago), while Madewell comps rose 10%, after a 31% increase in the first quarter last year.
Gross margin decreased to 37% from 38.3% in the year-ago quarter, while operating income reached $22.1 million from the operating loss of $0.9 million last year. Net loss in the quarter narrowed to $16.2 million from $33.9 million a year ago.
While Madewell's growth has slowed, as seen in its same-store sales metric, which last year surged 31%, the brand remains the company's beacon of hope.
The company continues to mull taking Madewell public, which interim CEO Michael Nicholson on a conference call Wednesday said would bring it "overall financial flexibility" and help meet its debt maturities. The group remains mired in debt, with the total at $1.7 billion compared to $1.71 billion at the end of the first quarter last year, according to the release. As of May 29, there were outstanding borrowings of approximately $198 million under its asset-based lending facility, with excess availability of approximately $113 million.
The company managed to goose profits, thanks to cost-cutting measures: Selling, general and administrative expenses were $189.8 million, or 32.8% of revenues, compared to $200.8 million, or 37.2% of revenues in the first quarter last year.
Nicholson expressed confidence in the future, which has the company bereft of a permanent chief executive and much of the creative leadership that fueled the J. Crew brand's popularity a decade ago. Nicholson has helmed the group solo since last month, replacing a four-person team (including him) that ran things after the abrupt departure six months ago of ex-CEO Jim Brett, who left after a little over a year. But that confidence appears centered on the potential of Madewell — which since April does have a CEO, for the first time ever — rather than of J. Crew.
"As we look ahead, we are optimistic about our plans to reignite the J.Crew Brand with new designs, assortments and brand expressions, and remain steadfast in our commitment towards achieving Madewell's long-term growth potential as a leading global brand," he said.
The key, then, is to, as quickly as possible, feed growth at Madewell, which still contributes the minority of the company's sales. The company in the quarter opened one J. Crew store and 10 Madewell stores, and executives said they will continue to rationalize its footprint, with plans to close about 20 J. Crew and factory stores.