Earnings Call Excerpt
J. Crew, Inc. (JCG)
Q3 2007 Earnings Call
November 29, 2007 4:30 pm ET
Executives
Millard S. Drexler – Chairman of the Board & Chief Executive Officer
James Scully – Chief Financial Officer & Executive Vice President
Analysts
Paul Lejuez – Credit Suisse
Dana Cohen – Banc of America Securities, LLC
Margaret Mager - Goldman Sachs & Company
Roxanne Meyer – CIBC World Markets
John Morris - Wachovia Securities
Kimberly Greenberger, CFA – Citigroup
Jeff Black – Lehman Brothers, Inc.
Evren Dogan Kopelman – JP Morgan
Randy Konik - Bear, Stearns & Co., Inc.
Dana Telsey - Telsey Advisory Group
Presentation
Operator
Good afternoon. My name is Mary and I will be your conference operator today. At this time I would like to welcome everyone to the J. Crew Third Quarter and First Nine Months Earnings Conference Call. (Operator Instructions) It is now my pleasure to turn the floor over to your host Ms. Allison Malkin of ICR. Ma’am you may begin
Allison Malkin - ICR
Thank you and good afternoon. Before we get started I would like to remind you of the company’s safe harbor language which I’m sure you’re all familiar with. The statements contained in this conference call which are not historical facts may be deemed to constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially from those projected in such statements due to a number of risks and uncertainties, all of which are described in the company’s filings with the SEC. With respect to each reference we make on this call to adjusted net income a reconciliation of net income on a GAAP basis to adjust the net income has been provided in Exhibit 3 in today’s Earnings Release and in Exhibit 3 of our Earnings Release issued on November 21, 2006 which are available on our website. And now, I’d like to turn the call over to J. Crew’s Chairman and CEO Millard Drexler.
Millard S. Drexler
Thank you. Hi everyone and thanks for joining us to talk about our third quarter and nine months results. Jim Scully our CFO is with me along with other senior partners at our company and following my remarks, I’ll turn the call over to Jim to review financial highlights and update our outlook and then, of course, we’ll do questions.
We continue to experience strong performance in the third quarter driven by our commitment to quality, style and design of our goods and to satisfying our customers. We remain focused and always will be focused on driving long term quality earnings growth through efficiency in the way we invest both our money and our time in the right product and in the right people. In the third quarter revenues increased 21% to $333 Million with a 5% increase in comp store sales on a real line basis and a 36% direct sales increase. This strong revenue increase coupled with SG&A leverage drove a 44% increase in operating income to $48 Million with our operating margin increasing over 2 points to 14.3%. As we said on our call a year ago we wanted to be the best, not the biggest. We started out, we strategically decided by raising the bar by investing in quality style and design and we’re seeing nice returns from these investments. We have said and continue to believe strongly that the only way to rise above the crowd and build a powerful franchise for the future is to continue to stand for the quality business we are in.
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