1051251--4/25/2006--J_CREW_GROUP

related topics

{customer, product, revenue}

{system, service, information}

{acquisition, growth, future}

{condition, economic, financial}

{debt, indebtedness, cash}

{cost, regulation, environmental}

{cost, operation, labor}

{product, market, service}

{property, intellectual, protect}

{product, liability, claim}

{competitive, industry, competition}

{operation, international, foreign}

We operate in the highly competitive specialty retail industry and the size and resources of some of our competitors may allow them to compete more effectively than we can, which could result in loss of our market share. If we are unable to gauge fashion trends and react to changing consumer preferences in a timely manner, our sales will decrease. The specialty retail industry is cyclical, and a decline in consumer spending on apparel and accessories could reduce our sales and slow our growth. We rely on the experience and skills of key personnel, the loss of whom could damage our brand image and our ability to sell our merchandise. Our plan to expand our store base may not be successful, and implementation of this plan may divert our operational, managerial and administrative resources, which could impact our competitive position. Our plans to expand our product offerings and sales channels may not be successful, and implementation of these plans may divert our operational, managerial and administrative resources, which could impact our competitive position. If we fail to maintain the value of our brand, our sales are likely to decline. The capacity of our order fulfillment and distribution facilities may not be adequate to support our growth plans, which could prevent the successful implementation of these plans or cause us to incur costs to expand these facilities. We may not be able to maintain recent levels of comparable store sales. An inability or failure to protect our trademarks could diminish the value of our brand and reduce demand for our merchandise. A reduction in the volume of mall traffic could significantly reduce our sales and leave us with unsold inventory. Fluctuations in our results of operations for the fourth fiscal quarter would have a disproportionate effect on our overall financial condition and result of operations. If our manufacturers are unable to produce our goods on time or to our specifications, we could suffer lost sales. Third party failure to deliver merchandise from our distribution center to our stores and to customers could result in lost sales or reduce demand for our merchandise. Interruption in our foreign sourcing operations could disrupt production, shipment or receipt of our merchandise, which would result in lost sales and could increase our costs. Our ability to source our merchandise profitably or at all could be hurt if new trade restrictions are imposed or existing trade restrictions become more burdensome. Increases in costs of mailing, paper and printing will affect the cost of our catalog and promotional mailings, which will reduce our profitability. If our independent manufacturers and Japan licensing partner do not use ethical business practices or comply with applicable laws and regulations, the J.Crew brand name could be harmed due to negative publicity. Any significant interruption in the operations of our customer call, order fulfillment and distribution facilities could disrupt our ability to process customer orders and to deliver our merchandise in a timely manner. We are subject to customs, advertising, consumer protection, zoning and occupancy and labor and employment laws that could require us to modify our current business practices and incur increased costs. Any material disruption of our information systems could disrupt our business and reduce our sales. A failure in our Internet operations, which are subject to factors beyond our control, could significantly disrupt our business and lead to reduced sales and reputational damage. Our substantial amount of debt may limit the cash flow available for our operations and place us at a competitive disadvantage and may limit our ability to pursue our expansion plans. The terms of our indebtedness contain various covenants that may limit our business activities.

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1051251--4/25/2006--J_CREW_GROUP_INC