Retail Earnings Cheat Sheet: J.Crew (JCG) Spikes Downward On Weak Guidance

Earnings: Q2 profits of $0.53 vs. estimates of $0.46 and $0.29 in Q2 last year.

Revenue: Up 14% to $407.5 million vs. estimates of $403 million.

According to investment firm Brean Murray, “investors [are] likely worried about the difficult comparisons J. Crew faces in the second half of the fiscal year, but [sic] the company [will] benefit from a highly differentiated viewpoint and a fashion-driven core consumer who will pay full price for the right offerings.”

Comment: J.Crew Group (NYSE: JCG) blew away the numbers for Q2, upping profits 88% YoY, but weak guidance is pressuring shares after-hours.  Management forecasted Q3 earnings of $0.55-$0.65 vs. expectations of $0.71 and lowered their FY2010 target by $0.10 to $2.25-$2.35.  Inventory per square foot also increased by about 10%.

Add that all up and you’ve got a stock that’s trading down 6.76% after-hours on top of a 0.65% decline during regular trading.  Shares last changed hands at $31.17, a price they haven’t hit since around this time last year.

This news coincides with another story reported earlier today at the Wall St. Cheat Sheet regarding Coach (COH), indicating impending weakness at higher-priced retailers, a sector that held up through much of the downturn.  This may be a result of an American consumer who many say have now completely acclimated to a recessionary environment and find themselves comfortable spending less money.

JCG has always been known to be among the best retailers at executing high-margin strategies, but the company seems to be losing steam.  Until we see a well-founded reason to get back behind shares, J. Crew looks like a stock worth avoiding.

Disclosure: No holdings in JCG.