J. Crew Says Sliding Operating Results May Trigger Impairment

NEW YORK, United States — J. Crew Group Inc., the retail chain that may be considering a U.S. initial public offering, said it may record a non-cash impairment charge if its operating results continue to decline.

The operating results for the first quarter and its outlook for future results “have given rise to substantial deterioration in the excess of fair value over the carrying value of our stores reporting unit,” the New York-based company said in a statement today.

Operating income fell 54 percent to $34 million in the first quarter, from a year earlier, the company said. J. Crew’s comparable sales, based on stores open for more than a year, fell 2 percent.

J. Crew, owned by TPG Capital and Leonard Green & Partners LP, is considering an IPO for later this year, people familiar with the matter have said. In March, it reported a 42 percent drop in net income in the fourth quarter, as an industry slump hurt holiday sales and triggered a wave of discounting among rival retailers.

The goodwill allocated to its stores reporting unit is $942 million while the intangible asset for the J. Crew brand is $885 million, according to the statement.

“A future impairment charge, if any, would not have an effect on the company’s operations, liquidity or financial covenants, and would not change management’s long-term business outlook or strategy,” J. Crew said.

Today, the company reported a first-quarter net loss of $30.1 million compared with net income of $29.3 million, a year earlier. Revenue rose 4.9 percent to $592 million.

By Ben Livesey; Editors: Cecile Daurat, Ben Livesey