Michael J. Nicholson, President, Chief Operating Officer and Interim Chief Executive Officer, commented: "Our third quarter results reflect adjusted EBITDA growth of nearly 50%, marking our strongest third quarter performance in the last five years. These results reflect encouraging momentum at the J.Crew brand fuelled by strong gross margin performance, continued growth at Madewell and the early benefits of our multi-year cost optimization program announced in September".

Third Quarter Highlights

J. Crew total revenue increased by 1% totalling 625.6 million US dollars. Comparable company sales increased by 3% following an increase of 8% in the third quarter last year. By business segment, J.Crew sales decreased by 4% to 415.8 million US dollars. J.Crew comparable sales were flat following an increase of 4% in the third quarter last year, and Madewell sales increased by 13% to 151.6 million US dollars. Madewell comparable sales increased 10% following an increase of 22% in the third quarter last year.

Gross margin increased to 40.7% from 38.3% in the third quarter last year. The increase in gross margin was driven by: a 210 basis point margin expansion and a 30 basis point decrease in buying and occupancy costs as a percentage of revenues. The margin expansion was driven by an increase in the J.Crew brand, partially offset by a decrease in the Madewell brand.
  
Operating income was 11.5 million US dollars compared to 32.7 million US dollars in the third quarter last year. Net loss reached 19.9 million US dollars compared to 5.7 million US dollars in the third quarter last year.

J. Crew and Madewell to be independent companies

Additionally, the company announced an agreement on the terms of a transaction that will enable the company to separate J.Crew and Madewell into two independent companies, pursue a proposed IPO of Madewell and recapitalize the company's balance sheet. As a result of the transaction, the company "expects both J.Crew and Madewell to have sustainable capital structures and to deliver enhanced value for our stakeholders".

First Nine Months Highlights

Total revenue increased by 2% to 1,793.0 million US dollars. Comparable company sales increased by 1% following an increase of 5% in the first nine months last year.

J.Crew sales decreased by 5% to 1 191.0 million US dollars. J.Crew comparable sales decreased by 2% following being essentially flat in the first nine months last year. Madewell sales increased by 14% to 424.3 million US dollars. Madewell comparable sales increased by 10% following an increase of 27% in the first nine months last year.

Gross margin decreased to 37.8% from 38.4% in the first nine months last year. The decrease in gross margin was driven by: (i) a 150 basis point deterioration in margin primarily due to the dilutive effect of the planned inventory liquidation and increased penetration of our wholesale business, offset by (ii) a 90 basis point decrease in buying and occupancy costs as a percentage of revenues.
   
Operating income was 32.1 million US dollars compared to 65.1 million US dollars in the first nine months last year. Net loss was 80.3 million US dollars compared to 45.7 million US dollars in the first nine months last year.