J Crew beats in quarter, shares rise 17 percent

By Alexandria Sage

SAN FRANCISCO (Reuters) - Upscale apparel retailer J Crew Group Inc (JCG.N) posted first-quarter profit that handily beat Wall Street estimates and forecast an unexpected second-quarter profit.

The retailers shares were up 17 percent after hours.

For the first time since last spring, J Crew also posted a rise in same-store sales, a key measure of retail performance closely watched by Wall Street.

"While we don't have a crystal ball, it certainly feels better than it did in the fourth quarter," said Chief Executive Millard Drexler, noting improved sales trends in the business.

Still, profit did fall by a third as increased markdowns to clear unsold fashions in the downturn hurt the company's profit in the first quarter.

Eric Beder, a retail analyst with Brean Murray Carret, called the results "a really solid start in a really tough economy."

"Hat's off to them," Beder said. "They cleared out the inventory, they drove better results than the Street had expected, they gave better-than-expected guidance -- it's an impressive feat."

Thursday's share rally was a dramatic reversal for the former retail darling that has weathered slashed profit projections, website glitches and declining sales that showed the company was ultimately unable to rise above the dramatic decline in U.S. consumer spending.