J. Crew Pushes Out Proposed Madewell IPO Date Amid Rising Sales

(Bloomberg) -- J. Crew Group Inc.'s Madewell unit drove renewed growth at the struggling retailer, giving its push for a spinoff of the brand a fresh impetus.

Madewell sales increased 13% to $178 million in the fourth quarter, the company reported in a filing after market close on Monday. Sales at the parent company declined for a fifth straight quarter.

The retailer still plans to split its operations and take Madewell to the market in a public offering, but at a later date, J. Crew said. The company entered in an amended agreement with its lenders to eliminate a requirement that it launch the proposed IPO on or before March 2, extending the date to complete the transaction from March 18 to April 30.

The amendment will give J. Crew “additional time to thoroughly assess all alternatives, including the separation of J.Crew and Madewell into two independent companies and a potential IPO of Madewell,” President and Chief Operating Officer Michael Nicholson said in prepared remarks.

J. Crew is relying on the Madewell deal to raise capital amid a heavy debt load. The company listed its outstanding long-term debt at almost $1.7 billion at the end of the fiscal year that ended Feb. 1. The transaction could shore up J. Crew's junk-rated balance sheet, which includes some debts quoted at about 87 cents on the dollar.

Credit Rating

The company carries a CCC- rating from S&P Global Ratings. The credit-ratings company in September cast doubt on the prospect for a J. Crew turnaround, citing competition from fast-fashion chains, e-commerce, big-box discounters and falling mall traffic.

J. Crew's full-year sales decreased 4% to $1.7 billion, while Madewell's sales increased 14% to $602 million. Overall, revenue increased 2% to $2.5 billion, while comparable sales also increased 2% following an increase of 6% last year.

In its push to reinvigorate the business, J. Crew recently brought in its fourth chief executive officer since 2017, ending a year-long search for a permanent boss. The company picked Jan Singer, the former head of the lingerie business at Victoria's Secret and ex-CEO at Spanx Inc.

To contact the reporter on this story: Katherine Doherty in New York at kdoherty23@bloomberg.net

To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net, Jonathan Roeder, Anne Cronin

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