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NEW YORK CITY-After an October that changed its merchandising thinking in “an extraordinary way”, J. Crew Group is cutting its store growth in half for 2009, with the exception of its Madewell chain, executives said at the company’s third-quarter conference call.

The retailer expects to grow its square footage by about 4% to 5% next year, instead of the more typical 7% to 8% expansion and focusing even more strongly on inventory control. This year, the company plans to open a total of 42 new units. Now, it is revisiting 2009 leases, with only Madewell to continue its current expansion plan.

“If everything is falling in value, why not real estate? Frankly, we want to sleep at night when this is over,” said Millard Drexler, chairman and CEO. “It’s prudent, it’s constructive [to cut expansion]. We’re not cutting back on Madewell. If [the lease] is not signed, it’s being revisited as we speak.”

Revenues were $363.1 million, up 9% from the same quarter last year. Total store sales (retail and factory) increased 7% to $250.9 million, with comparable store sales decreasing 3%. Internet and phone sales rose 13%. However, the bulk of the decline took place in October, which saw a “noticeable decline in store traffic and conversion on the web site,” said James Scully, executive vice president and chief financial officer. Net income was $19 million, compared to earnings of $26.8 million in the third quarter of fiscal 2007.

Still, Drexler noted, J Crew is in a better position than many other more upscale apparel chains.

“Frankly, if I had to pick a position, it would be that of a J. Crew. We’ll get through this,” Drexler said. “We just wish we knew when.”

J. Crew Group operates 226 retail stores (including 5 crewcuts and 10 Madewell stores) and 74 factory outlet stores.

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