As J.Crew Group Inc.’s financial performance continues to unravel in the first quarter of the year, its private equity backers won’t be seeking an exit any time soon. What’s more, the New York-based apparel retailer may need to restructure its debt through a debt for equity swap, industry sources said. J.Crew, owned by PE firms Leonard Green & Partners LP and TPG, said Thursday that comparable store sales declined 8% in the first quarter of its current fiscal year, which ended May 2. Comparable sales for the fourth quarter of the previous year were down 3%. PIK toggle notes, issued by J.Crew’s parent holding company, Chinos Intermediate Holdings A Inc., traded 4.5 points lower on the company’s earning news at 80.75 Thursday. The $500 million of 7.75% senior PIK toggle notes due 2019 were issued to back a dividend payment to J.Crew’s PE owners. J.Crew is paying dividends to Chinos in order for it to make interest payments on the debt. In addition to the drop in comparable store sales, the seller of preppy threads also said total revenue decreased 2% to about $580 million. Operating loss was approximately $520 million compared to operating income of $34 million for the same period a year prior, and adjusted Ebitda was close to $45 million compared to almost $65 million for the same period a year prior. Because of the poor numbers, largely due to the disappointing performance of its women’s apparel and accessories business, J.Crew’s reporting unit recorded another asset impairment charge of about $340 million, as well as an additional impairment of $190 million on the value of the J.Crew brand name.
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