J.Crew's Outlook Takes Another Hit

The following is an article from Bloomberg (click here to read in its entirety) about J.Crew's most recent performance:

J.Crew Falls After Needham Cuts Estimates on Rising Costs, Discounting
By Matt Townsend
October 20, 2010

J.Crew Group Inc. fell the most since August in New York trading after Needham & Co. cut profit estimates for the clothing retailer, saying increased promotions will lower earnings.

“The fall season has been difficult, due to warmer weather trends, increased promotional environment at the competition and a lack of dramatic fashion newness,” Christine Chen, a Needham analyst in San Francisco, wrote in a note to clients today. Second-half profit margins will be under pressure as the New York-based company increases promotions, she said.

Needham trimmed its profit estimates for the year that ends Jan. 31 to $2.25 a share, from $2.36, and for the following year to $2.48, from $2.54. Earnings estimates for the current and next quarters were reduced as well. Improved fashion and discounting at competitors also put pressure on J.Crew’s prices, said Chen, who recommends holding the company’s shares.

J.Crew dropped $1.76, or 5 percent, to $33.12 at 4:15 p.m. in New York Stock Exchange composite trading. The percentage decline was the largest since Aug. 27. The shares have fallen 26 percent this year.The retailer now has a sale on its website with some items, such as a pink dress, discounted more than 70 percent.

J.Crew has been offering a lot of promotions lately. (I am not complaining.) However, this article makes me wonder if J.Crew is going to start spacing them out more now.

I also hope J.Crew can take the appropriate steps to get back on {fashion} track. Let's hope the Holiday roll-out will be amazing. :)

What is your take on the article? Would you consider purchasing J.Crew stock? Do you think J.Crew will perform better?