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Ahead of the Bell: J. Crew shares rise

J. Crew Group Inc. looks to fare well during the holidays, with a favorable product assortment and third-quarter results that topped Wall Street's expectations, sending the company's stock higher in premarket trading on Wednesday.
/ Source: The Associated Press

J. Crew Group Inc. looks to fare well during the holidays, with a favorable product assortment and third-quarter results that topped Wall Street's expectations, sending the company's stock higher in premarket trading on Wednesday.

Late Tuesday the retailer of clothes, shoes and accessories reported earnings of 67 cents per share on revenue of $414.1 million. Analysts surveyed by Thomson Reuters, whose estimates generally exclude one-time items, predicted a profit of 58 cents per share on sales of $408 million.

J. Crew's stock gained $2.76, or 6.8 percent, to $43.61 in premarket trading.

The company, a favorite of first lady Michelle Obama, has held up well during the recession, an impressive feat considering that many retailers have struggled as consumers pull back on their discretionary spending and continue to hunt for bargains.

John Morris of BMO Capital Markets said in a client note that J. Crew's quarterly performance shows that it has the ability to grab market share. He expects the retailer, based in New York, to do well during the holidays on easier comparisons, decreased inventory and products that are "ahead of the curve in terms of trend and style."

Morris maintained an "Outperform" rating and $50 price target.

But Randal Konik of Jefferies & Co. cautioned that J. Crew's ability to post strong quarterly results will now likely be anticipated by Wall Street.

"With a first-quarter earnings beat from better sales, a second-quarter beat from better margins and now a third-quarter beat from better sales and margins, we expect Street models to recalibrate expectations substantially higher," he wrote.

Konik reaffirmed a "Hold" rating and boosted his price target for J. Crew to $45 from $42.