J. Crew Group Inc. posted a narrower fourth-quarter loss after the preppy retailer streamlined operations and trimmed expenses, helping make up for sluggish sales.
Its net loss was $7 million in the period, which ended Jan. 30, the company said in a statement Thursday. That compared with a deficit of $30.6 million a year earlier. Same-store sales, a closely watched benchmark, fell 4 percent in the fourth quarter. The decrease by that measure was 11 percent in the previous three months.
The results signal that J. Crew is making progress in its comeback plan, even as sales continue to decline. The New York-based chain has revamped its products and marketing, Chief Executive Officer Mickey Drexler said in the statement. It’s also keeping a closer eye on costs and inventory. Selling, general and administrative expenses amounted to 32 percent of revenue last quarter, compared with almost 34 percent a year earlier.
“The fourth quarter represented a positive ending to a difficult year,” Drexler said. “Our team is focused on delivering further improvements in the business by executing on our strategic initiatives.”
J. Crew’s $500 million of 7.75 percent senior unsecured bonds maturing May 2019 jumped after the results were released. They climbed 10.75 cents to last trade at 42.5 cents on the dollar at 17:07 p.m. New York time, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
J. Crew also said it will make the May interest on these notes, paying the coupon with more debt instead of paying in cash. That’s an option a borrower can tap in order to save cash while still complying with the bond agreement.
J. Crew alienated customers in recent years by moving away from classic styles and boosting prices. Same-store sales at the retailer have dropped in seven of the past eight quarters. As Drexler works to reverse this trend, he’s expanding the company’s new, lower-priced Mercantile stores and opening locations overseas.
TPG, one of the private equity firms that led a 2011 leveraged buyout of J. Crew, cut the value of its stake in the clothing retailer by 84 percent at the end of 2015. The firm told investors that its $478.6 million equity holding in J. Crew was lowered to $76 million, according to documents obtained by Bloomberg.
J. Crew also has reached an agreement with its banks to increase its borrowing capacity. Lenders will allow the company to borrow $350 million under an asset-based revolving loan, up from $300 million, according to a December filing.
In January, Michael Nicholson took over as J. Crew’s its chief operating officer and chief financial officer. Nicholson, who came from Anne Inc., will be working to help correct some operational missteps that’s led to fashion misses in stores and forced J. Crew to increase discounts.