J. Crew's 3Q Falls Short

Goldman Sachs has published a research report on J. Crew Group JCG after the company reported 3Q results that caused Goldman Sachs to lower 2010 year end estimates. In the report, Goldman Sachs writes "JCG delivered on bottom-line expectations for 3Q via SG&A reductions, but lowered its 4Q and FY outlook. 3Q EPS of $0.58 beat GS/FC of $0.55/0.54 thanks to a 2% decline in SG&A that offset a 460bps decline in gross margin (steeper vs. original guidance of 250-350bps decline). The primary driver was promotions as a result of weak response to women's product and heavy inventories (+12% vs. 3Q sales +4%). Looking ahead, this weakness is expected to persist into 4Q, and the company expects sequential weakening for 4Q (gross margins down 600-700bps vs. -490bps in 3Q; comps down low single digit vs. -1% in 3Q). The 4Q outlook brought FY2010 guidance down to $2.08-2.13 from $2.22-2.25 (FC currently $2.24)." Goldman Sachs has no rating or price target for J. Crew Group, which closed yesterday at $43.99.