J. Crew's net loss in its first quarter jumped to $23 million from $20 million in the prior year, the company said last week.
The increase was attributed to a newly required inclusion of preferred dividends ($8 million) as interest expense in 2004. Last year, these dividends were recorded as a direct charge to the stockholders' deficit. However, the company reduced its operating loss for the 13 weeks ended May 1 to $2 million from $10 million a year ago.
Despite the lower operating loss, consolidated revenue for the quarter decreased 10 percent to $145 million from $161 million in the comparable period last year. The decline resulted from a 34 percent drop ($19 million) in net sales in the direct business, which encompasses Internet and catalog operations. The anticipated falloff resulted from reductions in catalog pages, circulation and clearance sales.
The direct sector accounted for $36 million in the 13 weeks ended May 1, including $21 million in the Internet segment and $15 million in catalog. The total for the corresponding period ended May 3, 2003, was $55 million, including $37 million from Internet and $18 million for catalog.
Retail sales, including factory, increased to $104 million from $98 million last year with a comparable-store sales increase of 4 percent.
“Our conservative inventory strategy affected sales in the first quarter — and we have since made appropriate adjustments in the current quarter to reflect recent trends in our business,” chairman/CEO Millard Drexler said in a statement that also noted the company's new merchandise strategy and the revitalization of the brand.