Although revenue rose 12% year-on-year, net income at multi-brand retailer of women's, men's and children's apparel J.Crew Group, Inc. plunged 38.28% in the second fiscal quarter of 2014.
Net income dived 38.28% to $17.5 million in the second quarter of 2014 from $10.8 million in the second quarter of 2013.
Revenues at the garment retailer increased 12% from a year earlier quarter to $627.2 million, with comparable company sales increasing 4% year-on-year.
J.Crew said retail store sales increased 11% from the prior year quarter to $443.5 million, while direct sales surged 14% from same quarter of 2013 to $173.6 million.
However, gross margin declined to 37.7% in second quarter of 2014 compared to 41.1% in the second quarter last year.
Selling, general and administrative expenses (SG&A) rose higher to $200.7 million, or 32.0% of revenues, compared to $174.2 million, or 31.2% of revenues in the second quarter last year.
In the second quarter of 2014, operating income also fell to $36.0 million, or 5.7% of revenues, compared to $55.8 million, or 10.0% of revenues, in the second quarter of 2013.
Adjusted EBITDA too decreased sharply to $67.6 million in second quarter of 2014 versus $83.0 million in the prior year second quarter.
Cash and cash equivalents were down to $74 million at the end of second quarter of 2014 against $99 million at the end of the second quarter last year.
J.Crew said this firstly reflects $29 million paid for refinancing a senior secured term loan and redemption of its senior unsecured notes and secondly from a dividend to service debt of $19 million in the first quarter of fiscal 2014.
Total debt at end of second quarter of 2014 stood at $1,556 million, which J.Crew explained reflects the new senior secured term loan which matures in 2021.
Inventories at the end of 2014 second quarter reached $395 million up from $321 million at the end of 2013 second quarter. The retailer said inventories and inventories per square foot increased 23% and 12% year-on-year, respectively.