J. Crew Takes Loss to Clear Excess Inventory Within Season

J. Crew Group Inc. has increased its reported net loss by $9 million to $20.7 million for the fourth quarter and to $40.6 million for the fiscal year ended Feb. 1, the apparel direct marketer said Friday.

Earnings before interest, taxes, depreciation and amortization also decreased by the same amount — $9 million — to $7.2 million for the fourth quarter and $30 million for the fiscal year.

The changes result from the New York company's decision to modify its strategy on the disposal of inventory and have such excess, unsold products cleared at the end of each selling season.

J. Crew previously allowed excess prior-season inventory to sell in subsequent seasons. The new strategy rids the carry-over season to season, entailing the quick sale of this excess inventory through J. Crew factory stores, online promotions and warehouse sales.

Consequently, the changes in the method and timing of inventory disposal will lead to a shortfall in the amounts received for this inventory. So, the company has taken additional inventory reserves of $9 million as of Feb. 1.

“This change in strategy will enable us to clear excess inventories in season and to maximize our offering of current season merchandise in all channels,” J. Crew chief financial officer Scott Rosen said in a statement.

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