Non-cash impairment charges of $684.0 million pushed apparel retailer, J Crew Group to post a massive loss in the third fiscal quarter of 2014 as against net income in the prior year quarter.
Net loss at the apparel retailer totalled to $607.8 million in the third quarter ending November 1, 2014 compared with net income of $35.4 million in the third quarter last year.
According to J Crew, it concluded that the carrying value of the Stores reporting unit exceeded its fair value and recorded an estimated non-cash goodwill impairment charge of $536 million.
“There has been no deterioration of the excess of fair value over the carrying value of its Direct reporting unit,” J Crew said.
It added, “Additionally, the company recorded non-cash impairment charge of $145 million to write down the intangible asset related to the J Crew trade name.”
In the reporting quarter, revenues increased 6 per cent year on year to $655.2 million, with comparable company sales decreasing 2 per cent.
Same store sales rose 4 per cent to $437.8 million on top of an increase of 7 per cent in the third quarter last year.
While direct sales went up in double digits to 10 per cent year on year at $207.8 million, following an increase of 21 per cent, in the same quarter of last year.
In the quarter under preview, gross margin at the apparel retailer slipped to 40.2 per cent as against 43.9 per cent in the third quarter last year.
Selling, general and administrative expenses were $215.7 million or 32.9 per cent of revenues, compared to $188.6 million, or 30.5 per cent of revenues in the corresponding quarter last year.
On account of non-cash impairment charges of $684.0 million, operating loss too zoomed to $636.3 million from $82.9 million in the third quarter of 2013.
Cash and cash equivalents stood at $80 million as on November 1, 2014 compared to $78 million at the end of the November 2, 2013.
Total debt, net of discount, was $1,552 million reflecting the new senior secured term loan which matures in 2021.
Inventories at the end of the reporting quarter were $450 million as against $418 million at the end of the third quarter last year.
J Crew Group is a multi-brand retailer of women's, men's and children's apparel, shoes and accessories.
As of December 4, 2014, it operated 281 J Crew retail stores, 83 Madewell stores, jcrew.com, jcrewfactory.com, the J.Crew catalog, madewell.com, the Madewell catalog, and 138 factory stores. (AR)
