UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended January 31, 2009

or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



|                       |  |                                                                 |  |                                   
|---------------------- |  | --------------------------------------------------------------- |  | ----------------------------------
|Commission File Number |  | Registrant, State of Incorporation Address and Telephone Number |  | I.R.S. Employer Identification No.
|333-42427              |  | J.CREW GROUP, INC.                                              |  | 22-2894486                        

(Incorporated in Delaware)

770 Broadway

New York, New York 10003

Telephone: (212) 209 2500

Securities Registered Pursuant to Section 12(b) of the Act:



|                                       |  |                                          
|-------------------------------------- |  | -----------------------------------------
|Title of Class                         |  | Name of each exchange on which registered
|Common Stock, par value $.01 per share |  | New York Stock Exchange                  

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

x  Yes     ̈  No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

 ̈  Yes    x  No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x  Yes     ̈  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                                                                       |  |                             
|---------------------------------------------------------------------- |  | ----------------------------
|Large accelerated filer  x                                             |  | Accelerated filer   ̈        
|Non-accelerated filer   ̈ (Do not check if a smaller reporting company) |  | Smaller reporting company   ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Act).

 ̈  Yes    x  No

Based upon the closing sale price on the New York Stock Exchange on August 1, 2008, the last business day of the registrants
most recently completed second fiscal quarter, which ended August 3, 2008, the aggregate market value of the registrants common stock held by non-affiliates of the registrant on such date was approximately $1,495,641,201. For purposes of
determining this amount, the registrant has excluded shares of common stock held by directors and officers. Exclusion of shares held by any person should not be construed to indicate that such person possesses the power, direct or indirect, to
direct or cause the direction of the management or policies of the registrant, or that such person is controlled by or under common control with the registrant.

There were 62,548,892 shares of the registrants $.01 par value common stock outstanding on March 6, 2009.

DOCUMENTS INCORPORATED BY REFERENCE:



|                                                                        |  |                      
|----------------------------------------------------------------------- |  | ---------------------
|Documents                                                               |  | Form 10-K Reference  
|Portions of Proxy Statement for the 2009 Annual Meeting of Stockholders |  | Part III, Items 10-14









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DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

This report contains forward-looking statements, which include information concerning our plans, objectives, goals, strategies, future
events, future revenues or performance, capital expenditures, financing needs and other information that is not historical information. Many of these statements appear, in particular, under the headings Business, Selected Financial
Data and Managements Discussion and Analysis of Financial Condition and Results of Operations. When used in this report, the words estimate, expect, anticipate, project,
plan, intend, believe and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, our examination of
historical operating trends, are based upon our current expectations and various assumptions. We believe there is a reasonable basis for our expectations and beliefs, but there can be no assurance that we will realize our expectations or that our
beliefs will prove correct.

There are a number of risks and uncertainties that could cause our actual results to differ materially from
the forward-looking statements contained in this report. Important factors that could cause our actual results to differ materially from those expressed as forward-looking statements are set forth in this report, including but not limited to those
under the heading Risk Factors. There may be other factors of which we are currently unaware or deem immaterial that may cause our actual results to differ materially from the forward-looking statements.

All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date they are made and are expressly qualified in
their entirety by the cautionary statements included in this report. Except as may be required by law, we undertake no obligation to publicly update or revise any forward-looking statement to reflect events or circumstances occurring after the date
they were made or to reflect the occurrence of unanticipated events.



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PART I



|ITEM 1. | BUSINESS.
|------- | ---------

In this section, we,
us and our refer to J.Crew Group, Inc. (Group) and our wholly owned subsidiaries, including J.Crew Operating Corp. (Operating).

General

J.Crew® is a nationally recognized apparel and accessories retailer that we believe embraces a high standard of style, craftsmanship, quality and customer service. We are a fully integrated multi-channel, multi-brand,
specialty retailer. We seek to consistently communicate our vision of J.Crew through every aspect of our business, including through the imagery in our catalogs and on our Internet website and the inviting atmosphere of our stores.

We focus on creating product lines featuring the high quality design, fabrics and craftsmanship as well as consistent fits and detailing that our
customers expect of J.Crew. We offer complete assortments of womens, mens and childrens apparel and accessories, including wedding and special occasion attire, weekend clothes, swimwear, loungewear, outerwear, shoes, bags, belts,
hair accessories and jewelry. The J.Crew brand is widely recognized and features high quality designs, fabrics and craftsmanship. We seek to project our brand image through consistent creative messages in our catalog and through our Internet
website, our store environments and our superior customer service.

J.Crew products
are distributed through our retail and factory stores, our J.Crew catalog and our Internet website located at www.jcrew.com. We introduced Madewell, a casual Womens clothing, footwear and accessories retail concept in fiscal 2006. As of
January 31, 2009, we operated 226 retail stores, including five crewcuts®, one Mens store, one Womens Collection store, and 10 Madewell stores; and 74 factory stores,
including one crewcuts factory store, throughout the United States. We also operated 42 crewcuts shop in shops in our J.Crew retail stores and 10 crewcuts shop in shops in our factory stores. In fiscal 2008, we distributed 20 catalog editions with a
circulation of approximately 44 million copies. Our website logged over 78 million visits in fiscal 2008, as compared to over 70 million in fiscal 2007, representing an 11% increase.

We conduct our business through two primary sales channels: Stores (consisting of our retail, crewcuts, Madewell and factory stores) and Direct
(consisting of our catalog and Internet website). The following is a summary of our revenues:



|                      |  |            |         |            |   |            |  |   |        
|--------------------- |  | ---------- | ------- | ---------- | - | ---------- |  | - | -------
|(Dollars in millions) |  | Fiscal2006 |         | Fiscal2007 |   | Fiscal2008
|Stores                |  | $          | 808.5   |            | $ | 914.8      |  | $ | 974.3  
|Direct                |  |            | 308.6   |            |   | 377.4      |  |   | 408.9  
|Other                 |  |            | 35.0    |            |   | 42.5       |  |   | 44.8   
|                      |  |            |         |            |   |            |  |   |        
|Total                 |  | $          | 1,152.1 |            | $ | 1,334.7    |  | $ | 1,428.0
|                      |  |            |         |            |   |            |  |   |        

Other revenues consist principally of shipping and handling fees derived from our Direct business.

We were incorporated in the State of New York in 1988 and reincorporated in the State of Delaware in October 2005. Our principal executive
offices are located at 770 Broadway, New York, NY 10003, and our telephone number is (212) 209-2500.

Products

We offer complete assortments of womens, mens and childrens apparel and accessories, including wedding and special occasion attire,
weekend clothes, swimwear, loungewear, outerwear, shoes, bags, belts, hair



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accessories and jewelry. We focus on creating product lines featuring the high quality design, fabrics and craftsmanship as well as consistent fits and
detailing, and are designed internally by our design team to embody our classic with a twist branding and styling strategies. We offer a product assortment ranging from casual t-shirts and broken-in chinos, to cashmere items and limited
edition collection items, such as dresses, hand-beaded skirts and double-faced cashmere jackets.

In recent years we have
introduced several new product lines and product line expansions, including our Italian cashmere collection, our wedding and party dresses, our Italian leather accessories and our womens jewelry. Our J.Crew factory line offers the J.Crew brand
with similar styles made at lower costs and sold at lower price points. Crewcuts, an apparel and accessories line for children ages two through 12, which offers a product assortment that reflects the high quality, styled-classic apparel and
accessories we offer under the J.Crew brand, such as argyles, embroidered critters and cable knits for the childrens market.

We
introduced Madewell, a casual womens clothing, footwear and accessories retail concept in fiscal 2006. Additionally, we maintain a Madewell website at www.madewell1937.com that provides customers with a toll free number to place orders for
Madewell merchandise and intend to add the necessary functionality to enable customers to place orders online.

Design and Merchandising

We believe one of our key strengths is our internal design team, which designs products that reinforce our brand image. Our products are designed to
reflect a clean and fashionable aesthetic that incorporates high quality fabrics and construction as well as comfortable, consistent fits and detailing.

Our products are developed in four seasonal collections and are subdivided for monthly product introductions in our monthly catalog mailings and in our retail stores. The design process begins with our designers
developing seasonal collections eight to twelve months in advance. Our designers regularly travel domestically and internationally to develop color and design ideas. Once the design team has developed a seasons color palette and design
concepts, they order a sample assortment in order to evaluate the details of the assortment, such as how color takes to a particular fabric.

From the sample assortment, our merchandising team selects which items to market in each of our sales channels and edits the assortment as necessary to increase its commerciality. Our teams communicate regularly and work closely with each
other in order to leverage market data, ensure the quality of our products and remain true to a unified brand image. Our technical design teams develop construction and fit specifications for every product, ensuring quality workmanship and
consistency across product lines. Because our product offerings originate from a single concept assortment, we believe that we are able to efficiently offer an assortment of styles within each seasons line while still maintaining a unified
brand image. As a final step that is intended to ensure image consistency, our senior management reviews all of our products from all of our sales channels before they are manufactured. We believe we further maintain our brand image by exercising
substantial control over the presentation and pricing of our merchandise by selling all our products ourselves in North America.

Pricing

We offer our customers a mix of select designer-quality products and more casual items at various price points, consistent with our
signature styling strategy of pairing luxury items with more casual items. We have introduced limited edition collection items such as hand-beaded skirts, which we believe elevates the overall perception of our brand. We believe offering
a broad range of price points maintains a more accessible, less intimidating atmosphere.

Sales Channels

We conduct our business through two primary sales channels: Stores, which consists of our retail, crewcuts, Madewell and factory stores; and Direct, which
consists of the J.Crew catalog and our Internet website.



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Stores

The following is a summary of our net sales from Stores and the percentage relationship to total revenues:



|                             |  |            |       |   |            |   |       |            |  |   |       |  
|---------------------------- |  | ---------- | ----- | - | ---------- | - | ----- | ---------- |  | - | ----- | -
|(Dollars in millions)        |  | Fiscal2006 |       |   | Fiscal2007 |   |       | Fiscal2008 | 
|Stores                       |  | $          | 808.5 |   |            | $ | 914.8 |            |  | $ | 974.3 |  
|Percentage of total revenues |  |            | 70.2  | % |            |   | 68.5  | %          |  |   | 68.2  | %

Retail Stores

As of January 31, 2009, we operated 226 retail stores, including five crewcuts, one Mens store, one Womens Collection store, and 10
Madewell stores, throughout the United States. Our retail stores are located in upscale regional malls, lifestyle centers, shopping centers and street locations. We believe situating our stores in desirable locations is critical to the success of
our business, and we determine store locations, as well as individual store sizes, based on several factors, including geographic location, demographic information, presence of anchor tenants in mall locations and proximity to other higher-end
specialty retail stores. Our retail stores are designed by our in-house design staff and fixtured with the goal of creating a distinctive, sophisticated and inviting atmosphere, with clear displays and information about product quality and
fabrication.

Our retail stores averaged approximately 6,500 total square feet at the end of fiscal 2008, but are sized to the
market, which means that we adjust the size of a particular retail store based on the projected revenues from that particular store. For example, at the end of fiscal 2008, our largest retail store, located in New York, was approximately
15,000 square feet, and our smallest retail store, our Mens store, also located in New York, was approximately 900 square feet. The table below highlights certain information regarding our retail stores open during the five years ended
January 31, 2009:



|            |  |                                         |  |                                  |  |                                  |  |                                   |  |                                         |  |                                            
|----------- |  | --------------------------------------- |  | -------------------------------- |  | -------------------------------- |  | --------------------------------- |  | --------------------------------------- |  | -------------------------------------------
|Fiscal Year |  | Retail Stores OpenAt Beginning ofPeriod |  | Retail StoresOpened DuringPeriod |  | Retail StoresClosed DuringPeriod |  | Retail StoresOpen atEnd of Period |  | Total GrossSquare Footage(in thousands) |  | Average GrossSquare Footage PerRetail Store
|2004        |  | 154                                     |  | 5                                |  | 3                                |  | 156                               |  | 1,198                                   |  | 7,682                                      
|2005        |  | 156                                     |  | 5                                |  | 2                                |  | 159                               |  | 1,209                                   |  | 7,604                                      
|2006        |  | 159                                     |  | 21                               |  | 4                                |  | 176                               |  | 1,247                                   |  | 7,084                                      
|2007        |  | 176                                     |  | 27                               |  | 4                                |  | 199                               |  | 1,338                                   |  | 6,723                                      
|2008        |  | 199                                     |  | 28                               |  | 1                                |  | 226                               |  | 1,460                                   |  | 6,459                                      

In light of the current economic conditions we have slowed the pace of our retail store expansion.
We plan to expand our retail store base by 15 to 20 retail stores in fiscal 2009, including approximately four crewcuts and approximately eight Madewell stores.

Factory Stores

As of January 31, 2009, we operated 74 factory stores, including one
factory crewcuts store, throughout the United States. We added crewcuts shop-in-shops into 10 of our factory stores in fiscal 2008. Our factory stores are located primarily in large factory-outlet malls. Factory stores are designed with simple,
volume-driving visuals to maximize sales of key items and drive faster inventory turns. Our factory stores also use strategic and focused short-term promotional offerings designed to achieve higher margins and faster inventory turns. Sales
associates in our factory stores adhere to the same customer-service focus as our retail stores, and are trained to help customers locate styles similar to those they have seen in our retail stores or catalog.

Our factory stores averaged 5,500 total square feet at the end of fiscal 2008, but are sized to the market, which means that we adjust the
size of a particular factory store based on the projected revenues from that particular store. For example, at the end of fiscal 2008, our largest factory store, located in Connecticut, was



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approximately 9,000 square feet, and our smallest factory store, our factory crewcuts store, located in Florida, was approximately 1,500 square feet. The
table below highlights certain information regarding our factory stores open during the five years ended January 31, 2009:



|            |  |                                          |  |                                   |  |                                   |  |                                    |  |                                         |  |                                             
|----------- |  | ---------------------------------------- |  | --------------------------------- |  | --------------------------------- |  | ---------------------------------- |  | --------------------------------------- |  | --------------------------------------------
|Fiscal Year |  | Factory Stores OpenAt Beginning ofPeriod |  | Factory StoresOpened DuringPeriod |  | Factory StoresClosed DuringPeriod |  | Factory StoresOpen atEnd of Period |  | Total GrossSquare Footage(in thousands) |  | Average GrossSquare Footage PerFactory Store
|2004        |  | 42                                       |  | 0                                 |  | 1                                 |  | 41                                 |  | 258                                     |  | 6,296                                       
|2005        |  | 41                                       |  | 6                                 |  | 3                                 |  | 44                                 |  | 269                                     |  | 6,120                                       
|2006        |  | 44                                       |  | 8                                 |  | 1                                 |  | 51                                 |  | 297                                     |  | 5,827                                       
|2007        |  | 51                                       |  | 10                                |  | 0                                 |  | 61                                 |  | 350                                     |  | 5,737                                       
|2008        |  | 61                                       |  | 14                                |  | 1                                 |  | 74                                 |  | 404                                     |  | 5,464                                       

In light of the current economic conditions we have slowed the pace of our factory store
expansion. We plan to expand our factory store base by approximately five factory stores in fiscal 2009.

Direct

The following is a summary of our Direct business net sales and the percentage relationship to total revenues:



|                                                   |  |            |       |   |            |   |       |            |  |   |       |  
|-------------------------------------------------- |  | ---------- | ----- | - | ---------- | - | ----- | ---------- |  | - | ----- | -
|(Dollars in millions)                              |  | Fiscal2006 |       |   | Fiscal2007 |   |       | Fiscal2008 | 
|Internet                                           |  | $          | 218.6 |   |            | $ | 293.3 |            |  | $ | 338.2 |  
|Phone                                              |  |            | 90.0  |   |            |   | 84.1  |            |  |   | 70.7  |  
|                                                   |  |            |       |   |            |   |       |            |  |   |       |  
|Total Direct                                       |  | $          | 308.6 |   |            | $ | 377.4 |            |  | $ | 408.9 |  
|                                                   |  |            |       |   |            |   |       |            |  |   |       |  
|Direct net sales as a percentage of total revenues |  |            | 26.8  | % |            |   | 28.3  | %          |  |   | 28.6  | %

In addition to driving revenues, we use our Direct channel to introduce and test new product
offerings, to sell specialty product lines such as crewcuts and Wedding and special occasion, to offer extended sizes and colors on various products and to expand customer files to drive targeted marketing campaigns by collecting customer data to
further segment customer groups.

We currently obtain customer information for 100% of our catalog and Internet customers. As of
January 31, 2009, our customer database contained approximately 26.0 million individual customer names, of which 3.5 million customers had placed a catalog or Internet order with us or made a store purchase from us within the previous
twelve months, and 4.3 million email addresses of customers who had agreed to receive promotional emails from us.

We maintain a
database of customer records, which include sales patterns, detailed purchasing information, certain demographic information, geographic locations and email addresses of our customers. This database enables us to see how our customers
use our various sales channels to shop and facilitates targeted marketing strategies. We segment our customer files based on several variables, and we tailor our catalog offerings and email notifications to address the different product needs of our
customer groups. We focus on continually improving the segmentation of customer files and the acquisition of additional customer names from several sources, including our retail stores, our Internet website, list rentals and list exchanges with
other catalog companies.

Catalog

The J.Crew catalog is the primary branding and advertising vehicle for the J.Crew brand. We believe our catalog reinforces the J.Crew brand image and drives sales across all of our sales channels. For example,



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approximately 25% of our Internet customers referenced using a catalog prior to their Internet purchase, which we believe shows that our catalog drives sales
on our Internet channel. We believe we have distinguished ourselves from other catalog retailers by utilizing high quality photography and art direction. We further this image by not promoting clearance merchandise in our catalogs, and instead
redirect primary liquidation activity to our www.jcrew.com website. In fiscal 2008, we distributed 20 catalog editions with a circulation of approximately 44.4 million copies and approximately 5.2 billion pages circulated.

While we do not have long-term contracts with our suppliers of paper for our catalog, we believe our long-standing relationships with a number of the
largest coated paper mills in the United States allow us to purchase paper at favorable prices. Projected paper requirements are communicated on an annual basis to paper mills to ensure the availability of an adequate supply.

Internet Website

Since 1996,
our website located at www.jcrew.com has allowed our customers to purchase our merchandise over the Internet. We continue to see an ongoing shift of orders to the Internet from our catalog. Using a consistent standard measure, our website logged
over 78 million visits in fiscal 2008, as compared to over 70 million in fiscal 2007, representing an 11% increase. Internet revenues represented 83% of the Direct business in fiscal 2008, compared to 78% of the Direct business in fiscal
2007. We design and operate our websites using an in-house technical staff. Our www.jcrew.com website emphasizes simplicity and ease of customer use while integrating the J.Crew brands aspirational lifestyle imagery used in the catalog. We
update our website periodically throughout the day to accurately reflect product availability and to determine where on the website a particular product generates the best sales. In addition to selling our regular merchandise on our www.jcrew.com
website, we also use that website as a means to sell marked-down merchandise.

We have enhanced our online presence by adding
category-based shops to our www.jcrew.com website, such as J.Crew swimfinder, wedding & party shop and our new accessories shop.

We implemented certain direct channel systems upgrades including a new platform for our website during fiscal 2008. These systems upgrades impaired our ability to capture, process and ship customer orders and resulted
in the incurrence of additional costs in fiscal 2008. See Management Information System for additional information.

Marketing and
Advertising

The J.Crew catalog is the primary branding and advertising vehicle for the J.Crew brand. We believe our catalog reinforces
the J.Crew mission and image as well as drives sales in all of our channels. Our direct sales channels enable us to maintain a database of customer sales patterns and we are thus able to target segments of our customer base with specific marketing.
Depending on their spending habits, we send certain customers special catalog editions and/or emails.

We also offer a private-label credit
card through an agreement with World Financial Network National Bank (WFNNB), under which WFNNB owns the credit card accounts and Alliance Data Systems Corporation provides services to our private-label credit card customers. In fiscal
2008, sales on J.Crew credit cards made up 16.3% of our total net sales. We believe that our credit card program encourages frequent store and website visits and catalog sales and promotes multiple-item purchases, thereby cultivating customer
loyalty to the J.Crew brand and increasing sales. We also maintain a J.Crew credit card loyalty program by offering rewards for customer spending on J.Crew credit cards.

Sourcing and Distribution

Sourcing

We have no long-term merchandise supply contracts, and we typically transact business on an order-by-order basis. We source our merchandise in two ways:
through the use of buying agents, and by



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purchasing merchandise directly from trading companies and manufacturers. In fiscal 2008, we worked with eight buying agents, who together supported our
relationships with vendors that supplied approximately 55% of our merchandise, with one buying agent supporting our relationships with vendors that supplied approximately 44% of our merchandise. In exchange for a commission, our buying agents
identify suitable vendors and coordinate our purchasing requirements with the vendors by placing orders for merchandise on our behalf, ensuring the timely delivery of goods to us, obtaining samples of merchandise produced in the factories,
inspecting finished merchandise and carrying out other administrative communications on our behalf. In fiscal 2008, we worked with two trading companies, purchasing approximately 26% of our merchandise from these companies. Trading companies control
factories which manufacture merchandise and also handle certain other shipping and customs matters related to importing the merchandise into the United States. We sourced the remaining 19% of our merchandise directly with manufacturers both within
the United States and overseas with the majority of whom we have long-term, and what we believe to be, stable relationships.

Our sourcing
base currently consists of approximately 138 vendors who operate 209 factories in approximately 21 countries. Our top 10 vendors supply 51% of our merchandise.

Each of our top 10 vendors uses multiple factories to produce its merchandise, which we believe gives us a high degree of flexibility in placing production of our merchandise. We believe we have developed strong
relationships with our vendors, some of which rely upon us for a significant portion of their business.

In fiscal 2008, approximately 86%
of our merchandise was sourced in Asia (with 73% of our products sourced from China, Hong Kong and Macau), 4% was sourced in the United States and 10% was sourced in Europe and other regions. Substantially all of our foreign purchases are negotiated
and paid for in U.S. dollars.

Distribution

We operate two distribution facilities and one customer call center. We own a 282,000 square foot facility in Asheville, North Carolina that houses our distribution operations for our retail and factory stores. This
facility currently employs approximately 200 full and part-time employees during our non-peak season and approximately 50 additional employees during our peak season. In fiscal 2007, we completed a 120,000 square foot expansion of this facility to
support our expected future growth. Merchandise is transported from this distribution center to our retail and factory stores by independent trucking companies, Federal Express or UPS, with a transit time of approximately two to five days.

We also own a 262,000 square foot facility, and lease a 63,700 square foot facility, both located in Lynchburg, Virginia. These facilities
contain our customer call center and order fulfillment operations for Direct. During fiscal 2008 we implemented certain Direct channel systems upgrades including a new order management system in our call center and a new warehouse management system.
These systems upgrades impaired our ability to capture, process and ship customer orders and resulted in the incurrence of additional costs in fiscal 2008. See Management Information Systems for additional information.

These facilities currently employ approximately 1,000 full and part-time employees during our non-peak season and an additional 1,000 employees during
our peak season. We outsource a portion of our customer calls to two service providers. Merchandise sold via our Direct channel is sent directly to customers from this distribution center via the United States Postal Service, UPS or Federal Express.

Management Information Systems

Our
management information systems are designed to provide, among other things, comprehensive order processing, production, accounting and management information for the marketing, manufacturing, importing and distribution functions of our business. We
utilize an SAP Enterprise Resource Planning system along with an IBM mainframe system for our information technology requirements. We have point-of-sale systems in our retail and factory stores that enable us to track inventory from store receipt to
final sale on a real-time basis. We have



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an agreement with Electronic Data Systems Corporation, a third party, to provide hosting services and administrative support for the infrastructure of our
enterprise merchandising and financial systems, and our distribution and call center infrastructure. Our websites are hosted by a third party at its data center.

We believe our merchandising and financial systems, coupled with our point-of-sale systems and software programs, allow for item-level stock replenishment, merchandise planning and real-time inventory accounting
practices. Our telephone and telemarketing systems, warehouse package sorting systems, automated warehouse locator and inventory bar coding systems use current technology, and are designed with our highest-volume periods, such as the holiday season,
in mind, which results in our having substantial flexibility and ample capacity in our lower-volume periods.

We continue to expand and
upgrade our information systems, networks and infrastructure to support recent and expected future growth. During fiscal 2008 we implemented certain Direct channel systems upgrades including a new platform for our website, a new order management
system in our call center and a new warehouse management system. These systems upgrades impaired our ability to capture, process and ship customer orders, and transfer products between channels during the second, third and fourth quarters. We
incurred additional costs associated with these upgrades which adversely impacted our operating results in fiscal 2008. We made progress in stabilizing our Direct channel systems during the second half of fiscal 2008 and are continuing our
stabilization efforts in 2009.

Employees and Labor Relations

As of January 31, 2009, we had approximately 10,900 employees, of whom approximately 3,800 were full-time employees and 7,100 were part-time employees. Approximately 1,000 of these employees are employed in our
customer call center and Direct order fulfillment operations facility in Lynchburg, Virginia, and approximately 200 of these employees work in our store distribution center in Asheville, North Carolina. In addition, approximately 3,200 employees are
hired on a seasonal basis to meet demand during the peak season.

None of our employees are represented by a union. We have had no
labor-related work stoppages and we believe our relationship with our employees is good.

Competition

The specialty retail industry is highly competitive. We compete primarily with specialty retailers, higher-end department stores, catalog retailers and
Internet businesses that engage in the retail sale of womens, mens and childrens apparel, accessories, shoes and similar merchandise. We believe the principal bases upon which we compete are quality, design, customer service and
price. We believe that our primary competitive advantages are consumer recognition of our brands and our presence in many major shopping malls in the United States as well as our multiple sale channels which enable our customers to shop in the
setting they prefer. We believe that we also differentiate ourselves from competitors on the basis of our signature product design, our ability to offer both designer-quality products at higher price points and more casual items at lower price
points, our focus on the quality of our product offerings and our customer-service oriented culture. We believe our success depends in substantial part on our ability to originate and define product and fashion trends as well as to timely
anticipate, gauge and react to changing consumer demands. Certain of our competitors are larger and have greater financial, marketing and other resources than us. Accordingly, there can be no assurance that we will be able to compete successfully
with them in the future.

Trademarks and Licensing

The J.Crew and Madewell trademarks and variations thereon, such as crewcuts, are registered or are subject to pending trademark applications with the United States Patent and Trademark Office and with the registries
of many foreign countries. We believe our trademarks have significant value and we intend to continue to vigorously protect them against infringement.



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In addition, we licensed our J.Crew trademark and know-how to Itochu Corporation in Japan for which we
received royalty fees based on a percentage of sales. In February 2008, we provided notice that we did not intend to renew the agreement, which expired at the end of January 2009. In fiscal 2006, 2007, and 2008, licensing revenues totaled $2.8
million, $2.6 million, and $1.7 million, respectively.

Government Regulation

We are subject to customs, truth-in-advertising and other laws, including consumer protection regulations and zoning and occupancy ordinances that
regulate retailers and/or govern the promotion and sale of merchandise and the operation of retail stores and warehouse facilities. We monitor changes in these laws and believe that we are in material compliance with applicable laws.

A substantial portion of our products are manufactured outside the United States. These products are imported and are subject to U.S. customs laws, which
impose tariffs as well as import quota restrictions for textiles and apparel. Some of our imported products are eligible for duty-advantaged programs. While importation of goods from foreign countries from which we buy our products may be subject to
embargo by U.S. Customs authorities if shipments exceed quota limits, we closely monitor import quotas and believe we have the sourcing network to efficiently shift production to factories located in countries with available quotas. The existence of
import quotas has, therefore, not had a material adverse effect on our business.

Available Information

We make available free of charge on our Internet website, www.jcrew.com, copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and all amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), as soon as reasonably practicable after
filing such material electronically with, or otherwise furnishing it to, the Securities and Exchange Commission (the SEC). The reference to our website address does not constitute incorporation by reference of the information contained
on the website, and the information contained on the website is not part of this document.



|ITEM 1A. | RISK FACTORS.
|-------- | -------------

The following risk factors should be
carefully considered when evaluating our business and the forward-looking statements in this report. See Disclosure Regarding Forward Looking Statements.

The current economic crisis could materially adversely affect our financial condition and results of operations.

The current economic crisis is having a significant negative impact on businesses and consumers around the world. Our results can be impacted by a number of macroeconomic factors, including, but not limited to,
consumer confidence and spending levels, unemployment, consumer credit availability, fuel and energy costs, global factory production, commercial real estate market conditions, credit market conditions and the level of customer traffic in malls and
shopping centers.

Demand for our merchandise is significantly impacted by negative trends in consumer confidence and other economic
factors affecting consumer spending behavior. These factors have recently driven sharp declines in mall traffic and consumer spending. The downturn in the economy may continue to affect consumer purchases of our merchandise for the foreseeable
future and adversely impact our results of operations.

We believe that our current cash position, cash flow from operations and
availability under the Credit Facility will provide us with sufficient liquidity through the current economic crisis. However, the impact of this crisis on our customers and suppliers cannot be predicted and may be severe. A decrease in liquidity of
our customers and suppliers could have a material adverse effect on our results of operations and liquidity.



10



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Failure to achieve sufficient levels of revenue and cash flow at individual store locations could result
in impairment charges related to our stores. In fiscal 2008, we recorded non-cash asset impairment charges related to underperforming stores. Various uncertainties, including changes in consumer preferences or continued deterioration in the
economic environment could impact the expected cash flows to be generated by our store locations, and may result in an impairment of those assets. Although such an impairment charge would be a non-cash expense, any impairment could materially
increase our expenses and reduce our profitability.

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.

We face
intense competition in the specialty retail industry. We compete primarily with specialty retailers, high-end department stores, catalog retailers and Internet businesses that engage in the retail sale of womens, mens and childrens
apparel, accessories, shoes and similar merchandise. We believe that the principal bases upon which we compete are the quality, style and design of merchandise and the quality of customer service. We also believe that price is an important factor in
our customers decision-making process. Many of our competitors are, and many of our potential competitors may be, larger and have greater financial, marketing and other resources and therefore may be able to adapt to changes in customer
requirements more quickly, devote greater resources to the marketing and sale of their products, generate greater national brand recognition or adopt more aggressive pricing policies than we can. In addition, increased levels of promotional activity
by our competitors, both online and in stores, may negatively impact our revenues and gross profit.

If we are unable to gauge fashion trends and
react to changing consumer preferences in a timely manner, our sales will decrease.

We believe our success depends in substantial
part on our ability to:



| |  |  | originate and define product and fashion trends,
| | - |  | ------------------------------------------------



| |  |  | anticipate, gauge and react to changing consumer demands in a timely manner, and
| | - |  | --------------------------------------------------------------------------------



| |  |  | translate market trends into appropriate, saleable product offerings far in advance of their sale in our stores, our catalog or our Internet website.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

Because we enter into agreements for the manufacture and purchase of merchandise well in advance of the season in which
merchandise will be sold, we are vulnerable to changes in consumer demand, pricing shifts and suboptimal merchandise selection and timing of merchandise purchases. We attempt to reduce the risks of changing fashion trends and product acceptance in
part by devoting a portion of our product line to classic styles that are not significantly modified from year to year. Nevertheless, if we misjudge the market for our products or overall level of consumer demand, we may be faced with significant
excess inventories for some products and missed opportunities for others. Our brand image may also suffer if customers believe we are no longer able to offer the latest fashions. The occurrence of these events could hurt our financial results by
decreasing sales. We may respond by increasing markdowns or initiating marketing promotions to reduce excess inventory, which would further decrease our gross profits and net income.

The specialty retail industry is cyclical, and a decline in consumer spending on apparel and accessories could reduce our sales and slow our growth.

The industry in which we operate is cyclical. Purchases of apparel and accessories are sensitive to a number of factors that influence the levels of
consumer spending, including general economic conditions and the level of disposable consumer income, the availability of consumer credit, interest rates, taxation and consumer confidence in future economic conditions. Because apparel and
accessories generally are discretionary purchases, declines in consumer spending patterns may impact us more negatively as a specialty retailer. Therefore, we may not be able to grow revenues if there is a decline in consumer spending patterns, and
we may decide to slow or alter our growth plans.



11



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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.

We believe we have benefited substantially from the leadership and strategic guidance of our chief
executive officer, and other key executives and members of our creative team, who are primarily responsible for developing our strategy. The loss, for any reason, of the services of any of these individuals and any negative market or industry
perception arising from such loss could damage our brand image. Our executive and creative team has substantial experience and expertise in the specialty retail industry and has made significant contributions to our growth and success. The
unexpected loss of one or more of these individuals could delay the development and introduction of, and harm our ability to sell, our merchandise. In addition, products we develop without the guidance and direction of these key personnel may not
receive the same level of acceptance.

Our success depends in part on our ability to attract and retain key personnel. Competition for
these personnel is intense, and we may not be able to attract and retain a sufficient number of qualified personnel in the future.

Our real estate
strategy may not be successful, and new store locations may fail to produce desired results, which could impact our competitive position and profitability.

We expanded our store base by 40 net new stores in fiscal 2008. In light of the current economic conditions, we have slowed the pace of our store base expansion considerably and expect to open approximately half that
number in fiscal year 2009. We are also reviewing our existing store base and identifying opportunities, where available, to renegotiate the terms of those leases. The success of our business depends, in part, on our ability to open new stores and
renew our existing store leases on terms that meet our financial targets. Our ability to open new stores on schedule or at all, to renew our existing store leases on favorable terms or to operate them on a profitable basis will depend on various
factors, including our ability to:



| |  |  | identify suitable markets for new stores and available store locations,
| | - |  | -----------------------------------------------------------------------



| |  |  | negotiate acceptable lease terms for new locations or renewal terms for existing locations,
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | hire and train qualified sales associates,
| | - |  | ------------------------------------------



| |  |  | develop new merchandise and manage inventory effectively to meet the needs of new and existing stores on a timely basis,
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | foster current relationships and develop new relationships with vendors that are capable of supplying a greater volume of merchandise, and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | avoid construction delays and cost overruns in connection with the build-out of new stores.
| | - |  | -------------------------------------------------------------------------------------------

New stores and stores with renewed lease terms may not produce anticipated levels of revenue even though they increase our costs. As a result, our
expenses as a percentage of sales would increase and our profitability would be adversely affected.

Our expanded product offerings, new sales
channels and new brand concepts may not be successful, and implementation of these strategies may divert our operational, managerial and administrative resources, which could impact our competitive position.

We have grown our business in recent years by expanding our product offerings and sales channels, including by marketing our crewcuts line of
childrens apparel and accessories and our Madewell line of womens apparel, footwear and accessories. We have recently opened a small number of free-standing stores dedicated to mens wear, crewcuts and collections items.
These strategies involve various risks discussed elsewhere in these risk factors, including:



| |  |  | implementation may be delayed or may not be successful,
| | - |  | -------------------------------------------------------



12



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| |  |  | if our expanded product offerings and sales channels fail to maintain and enhance our distinctive brand identity, our brand image may be diminished and our sales
may decrease,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if customers do not respond to these product offerings and sales channels as anticipated, these strategies may not be profitable on a larger scale, and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | implementation of these plans may divert managements attention from other aspects of our business and place a strain on our management, operational and
financial resources, as well as our information systems.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, our new product offerings and sales channels may
be affected by, among other things, economic and competitive conditions, changes in consumer spending patterns and changes in consumer preferences and style trends. Further rollout of these strategies could be delayed or abandoned, could cost more
than anticipated and could divert resources from other areas of our business, any of which could impact our competitive position and reduce our revenue and profitability.

If we fail to maintain the value of our brand, our sales are likely to decline.

Our success
depends on the value of the J.Crew brand. The J.Crew name is integral to our business as well as to the implementation of our strategies for expanding our business. Maintaining, promoting and positioning our brand will depend largely on the success
of our marketing and merchandising efforts and our ability to provide a consistent, high quality customer experience. Our brand could be adversely affected if we fail to achieve these objectives or if our public image or reputation were to be
tarnished by negative publicity. Any of these events could result in decreases in sales.

Our declining levels of comparable store sales could cause
our earnings to continue to decline.

If our future comparable store sales continue to decline, our earnings could continue to
decline. See Managements Discussion and Analysis of Financial Condition and Results of OperationsHow We Assess the Performance of Our BusinessComparable Store Sales. In addition, our results have fluctuated in the past
and can be expected to continue to fluctuate in the future. For example, over the past twelve fiscal quarters, our quarterly comparable store sales have declined to a decrease of 13.1% in the fourth quarter of fiscal 2008 from an increase of 18.7%
in the third quarter of fiscal 2006. A variety of factors affect comparable store sales, including fashion trends, competition, current economic conditions, pricing, inflation, the timing of the release of new merchandise and promotional events,
changes in our merchandise mix, the success of marketing programs, timing and level of markdowns and weather conditions. These factors may cause our comparable store sales results to be materially lower than previous periods, which could cause
declines in our quarterly earnings and stock price.

An inability or failure to protect our trademarks could diminish the value of our brand and
reduce demand for our merchandise.

The J.Crew and Madewell trademarks and variations thereon, such as crewcuts, are valuable assets
that are critical to our success. We intend to continue to vigorously protect our trademarks against infringement, but we may not be successful in doing so. The unauthorized reproduction or other misappropriation of our trademarks would diminish the
value of our brand, which could reduce demand for our products or the prices at which we can sell our products.

Ongoing reductions in the volume of
mall traffic or closing of shopping malls as a result of the current economic crisis could significantly reduce our sales and leave us with unsold inventory.

Most of our stores are located in shopping malls. Sales at these stores are derived, in part, from the volume of traffic in those malls. Our stores benefit from the ability of the malls anchor
tenants, generally large



13



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department stores and other area attractions, to generate consumer traffic in the vicinity of our stores and the continuing popularity of the malls as
shopping destinations. The current economic crisis, particularly in certain regions, has adversely affected mall traffic and resulted in the closing of certain anchor department stores and has threatened the viability of certain commercial real
estate firms which operate major shopping malls. A continuation of this trend, including failure of a large commercial landlord or continued declines in the popularity of mall shopping generally among our customers, would reduce our sales and leave
us with excess inventory. We may respond by increasing markdowns or initiating marketing promotions to reduce excess inventory, which would further decrease our gross profits and net income.

Fluctuations in our results of operations for the fourth fiscal quarter would have a disproportionate effect on our overall financial condition and results of
operations.

We experience seasonal fluctuations in revenues and operating income, with a disproportionate amount of our revenues
being generated in the fourth fiscal quarter holiday season. Our revenues and income are generally weakest during the first and second fiscal quarters. In addition, any factors that harm our fourth fiscal quarter operating results, including adverse
weather or unfavorable economic conditions, could have a disproportionate effect on our results of operations for the entire fiscal year.

In order to prepare for our peak shopping season, we must order and keep in stock significantly more merchandise than we would carry at other times of the year. Any unanticipated decrease in demand for our products during our peak shopping
season could require us to sell excess inventory at a substantial markdown, which could reduce our net sales and gross profit. We saw this occur in the fourth quarter of fiscal 2008, following a substantial decline in the overall economy and
consumer spending beginning in October 2008. As a result, we were forced to take aggressive markdowns to clear our fall and holiday inventory. Additional unplanned decreases in demand for our products could produce further reductions to our net
sales and gross profit.

Our quarterly results of operations may also fluctuate significantly as a result of a variety of other factors,
including the timing of new store openings and of catalog mailings, the revenues contributed by new stores, merchandise mix and the timing and level of inventory markdowns. As a result, historical period-to-period comparisons of our revenues and
operating results are not necessarily indicative of future period-to-period results. You should not rely on the results of a single fiscal quarter, particularly the fourth fiscal quarter holiday season, as an indication of our annual results or our
future performance.

If our manufacturers are unable to produce our goods on time or to our specifications, we could suffer lost sales.

We do not own or operate any manufacturing facilities and therefore depend upon independent third party vendors for the manufacture
of all of our products. Our products are manufactured to our specifications primarily by foreign manufacturers. We cannot control all of the various factors, which include inclement weather, natural disasters and acts of terrorism, that might affect
a manufacturers ability to ship orders of our products in a timely manner or to meet our quality standards. Late delivery of products or delivery of products that do not meet our quality standards could cause us to miss the delivery date
requirements of our customers or delay timely delivery of merchandise to our stores for those items. These events could cause us to fail to meet customer expectations, cause our customers to cancel orders or cause us to be unable to deliver
merchandise in sufficient quantities or of sufficient quality to our stores, which could result in lost sales.

Third party failure to deliver
merchandise from our distribution centers to our stores and to customers or a disruption or adverse condition affecting our distribution centers could result in lost sales or reduce demand for our merchandise.

The success of our stores depends on their timely receipt of merchandise from our distribution facilities, and the success of Direct depends on the timely
delivery of merchandise to our customers. Independent third party



14



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transportation companies deliver our merchandise to our stores and to our customers. Some of these third parties employ personnel represented by a labor
union. Disruptions in the delivery of merchandise or work stoppages by employees of these third parties could delay the timely receipt of merchandise, which could result in cancelled sales, a loss of loyalty to our brand and excess inventory. Timely
receipt of merchandise by our stores and our customers may also be affected by factors such as inclement weather, natural disasters, accidents, system failures and acts of terrorism. We may respond by increasing markdowns or initiating marketing
promotions, which would decrease our gross profits and net income.

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.

In fiscal 2008,
approximately 96% of our merchandise was sourced from foreign factories. In particular, approximately 73% of our merchandise was sourced from China, Hong Kong and Macau. Any event causing a sudden disruption of manufacturing or imports from Asia or
elsewhere, including the imposition of additional import restrictions, could materially harm our operations. We have no long-term merchandise supply contracts, and many of our imports are subject to existing or potential duties, tariffs or quotas
that may limit the quantity of certain types of goods that may be imported into the United States from countries in Asia or elsewhere. We compete with other companies for production facilities and import quota capacity. Our business is also subject
to a variety of other risks generally associated with doing business abroad, such as political instability, currency and exchange risks, disruption of imports by labor disputes and local business practices.

Our sourcing operations may also be hurt by political and financial instability, strikes, health concerns regarding infectious diseases in countries in
which our merchandise is produced, adverse weather conditions or natural disasters that may occur in Asia or elsewhere or acts of war or terrorism in the United States or worldwide, to the extent these acts affect the production, shipment or receipt
of merchandise. Our future operations and performance will be subject to these factors, which are beyond our control, and these factors could materially hurt our business, financial condition and results of operations or may require us to modify our
current business practices and incur increased costs.

In addition, the raw materials used to manufacture our products are subject to
availability constraints and price volatility caused by high demand for fabrics, weather, supply conditions, government regulations, economic climate and other unpredictable factors. Increases in the demand for, or the price of, raw materials could
hurt our profitability.

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.

Trade restrictions, including increased tariffs, safeguards or quotas, on apparel and
accessories could increase the cost or reduce the supply of merchandise available to us. We source our merchandise through buying agents and by purchasing directly from trading companies and manufacturers, predominately in various foreign countries.
There are quotas and trade restrictions on certain categories of goods and apparel from China and countries which are not subject to the World Trade Organization (WTO) Agreement which could have a significant impact on our sourcing
patterns in the future. New initiatives may be proposed that may have an impact on our sourcing from certain countries and may include retaliatory duties or other trade sanctions that, if enacted, would increase the cost of products we purchase. We
cannot predict whether any of the countries in which our merchandise is currently manufactured or may be manufactured in the future will be subject to additional trade restrictions imposed by the U.S. and foreign governments, nor can we predict the
likelihood, type or effect of any such restrictions. Trade restrictions, including increased tariffs or quotas, embargoes, safeguards and customs restrictions against apparel items, as well as U.S. or foreign labor strikes, work stoppages or
boycotts or enhanced security measures at U.S. ports could increase the cost, delay shipping or reduce the supply of apparel available to us or may require us to modify our current business practices, any of which could hurt our profitability.



15



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Increases in costs of mailing, paper and printing will affect the cost of our catalog and promotional mailings,
which will reduce our profitability.

Postal rate increases and paper and printing costs affect the cost of our catalog and
promotional mailings. In fiscal 2008, approximately 10% of our selling, general and administrative expenses were attributable to such costs. In May 2008, the U.S. Postal Service implemented a postal rate increase of approximately 3%. We anticipate a
similar rate increase in 2009. We receive discounts from the basic postal rate structure, such as discounts for bulk mailings and sorting by zip code and carrier routes. We are not a party to any long-term contracts for the supply of paper. Our cost
of paper has fluctuated significantly, and our future paper costs are subject to supply and demand forces that we cannot control. Future additional increases in postal rates or in paper or printing costs would reduce our profitability to the extent
that we are unable to pass those increases directly to customers or offset those increases by raising selling prices or by reducing the number and size of certain catalog editions.

If our independent manufacturers 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.

While our internal and vendor operating guidelines, as outlined in our Vendor Code of Conduct, promote ethical business practices and we, along with third
parties that we retain for this purpose, monitor compliance with those guidelines, we do not control our independent manufacturers. Accordingly, we cannot guarantee their compliance with our guidelines. Our Vendor Code of Conduct is designed to
ensure that each of our suppliers operations are conducted in a legal, ethical, and responsible manner. Our Vendor Code of Conduct requires that each of our suppliers operates in compliance with applicable wage benefit, working hours and other
local laws, and forbids the use of practices such as child labor or forced labor.

Violation of labor or other laws by our independent
manufacturers, or the divergence of an independent manufacturers or our licensing partners labor practices from those generally accepted as ethical in the United States could diminish the value of the J.Crew brand and reduce demand for
our merchandise if, as a result of such violation, we were to attract 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.

Our customer call center and Directs order fulfillment operations are housed together in a single facility, while distribution operations for J.Crew
retail and factory stores are housed in another single facility. Although we maintain back-up systems for these facilities, they may not be able to prevent a significant interruption in the operation of these facilities due to natural disasters,
accidents, failures of the inventory locator or automated packing and shipping systems we use or other events. In addition, we have recently upgraded certain Direct channel systems, including our web platform, order management system and warehouse
management system in order to support recent and expected future growth. We experienced some interruptions during fiscal 2008 in connection with our implementation and while we made progress in stabilizing these systems during fiscal 2008, there can
be no assurance that future interruptions will not occur. Any significant interruption in the operation of these facilities, including an interruption caused by our failure to successfully expand or upgrade our systems or manage our transition to
utilizing the expansions or upgrades, could reduce our ability to receive and process orders and provide products and services to our stores and customers, which could result in lost sales, cancelled sales and a loss of loyalty to our brand.

We are subject to customs, advertising, consumer protection, privacy, zoning and occupancy and labor and employment laws that could require us to
modify our current business practices and incur increased costs.

We are subject to numerous regulations, including customs,
truth-in-advertising, consumer protection, privacy and zoning and occupancy laws and ordinances that regulate retailers generally and/or govern the importation, promotion and sale of merchandise and the operation of retail stores and warehouse
facilities. If



16



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these regulations were to change or were violated by our management, employees, suppliers, buying agents or trading companies, the costs of certain goods
could increase, or we could experience delays in shipments of our goods, be subject to fines or penalties, or suffer reputational harm, which could reduce demand for our merchandise and hurt our business and results of operations. In addition,
changes in federal and state minimum wage laws and other laws relating to employee benefits could cause us to incur additional wage and benefits costs, which could hurt our profitability.

Legal requirements are frequently changed and subject to interpretation, and we are unable to predict the ultimate cost of compliance with these
requirements or their effect on our operations. We may be required to make significant expenditures or modify our business practices to comply with existing or future laws and regulations, which may increase our costs and materially limit our
ability to operate our business.

Any material disruption of our information systems could disrupt our business and reduce our sales.

We are increasingly dependent on information systems to operate our website, process transactions, respond to customer inquiries,
manage inventory, purchase, sell and ship goods on a timely basis and maintain cost-efficient operations. In fiscal 2008, we upgraded certain of our information systems to support recent and expected future growth. These system upgrades impaired our
ability to capture, process and ship customer orders, and transfer product between channels. We incurred additional costs associated with these upgrades which impacted our operating results in fiscal 2008. We made progress in stabilizing these
systems during fiscal 2008, but there can be no assurances that future disruptions will not occur. We may experience operational problems with our information systems as a result of system failures, viruses, computer hackers or other
causes. Any material disruption or slowdown of our systems, including a disruption or slowdown caused by our failure to successfully upgrade our systems, could cause information, including data related to customer orders, to be lost or delayed which
couldespecially if the disruption or slowdown occurred during the holiday seasonresult in delays in the delivery of merchandise to our stores and customers or lost sales, which could reduce demand for our merchandise and cause our sales
to decline. Moreover, we may not be successful in developing or acquiring technology that is competitive and responsive to the needs of our customers and might lack sufficient resources to make the necessary investments in technology to compete with
our competitors. Accordingly, if changes in technology cause our information systems to become obsolete, or if our information systems are inadequate to handle our growth, we could lose customers.

Our Internet operations are an increasingly substantial part of our business, representing approximately 24% of our revenues in fiscal 2008. In addition
to changing consumer preferences and buying trends relating to Internet usage, we are vulnerable to certain additional risks and uncertainties associated with the Internet, including changes in required technology interfaces, website downtime and
other technical failures, security breaches, and consumer privacy concerns. Our failure to successfully respond to these risks and uncertainties could reduce Internet sales and damage our brands reputation.

We have taken over certain portions of our information systems needs that were previously outsourced to a third party and are making upgrades to our
information systems. We may take over other outsourced portions of our information systems in the near future. If we are unable to manage these aspects of our information systems or the planned upgrades, our receipt and delivery of merchandise could
be disrupted, which could result in a decline in our sales.

Our debt may limit the cash flow available for our operations, place us at a competitive
disadvantage, and limit our ability to pursue our expansion plans.

As of January 31, 2009, we had total debt of approximately
$100.0 million. The terms of our indebtedness may:



| |  |  | require us to use a substantial portion of our cash flow from operations to pay interest and principal on our debt, which would reduce the funds available to use
for working capital, capital expenditures and other general corporate purposes,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | limit our ability to pay future dividends,
| | - |  | ------------------------------------------



| |  |  | limit our ability to obtain additional financing for working capital, capital expenditures, expansion plans and other investments, which may limit our ability to
implement our business strategy,
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | result in higher interest expense if interest rates increase on our floating rate borrowings,
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | heighten our vulnerability to further downturns in our business, the industry or in the general economy and limit our flexibility in planning for or reacting to
changes in our business and the retail industry,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | prevent us from taking advantage of business opportunities as they arise or successfully carrying out our plans to expand our store base, product offerings and
sales channels, or
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | include restrictive covenants that limit managements discretion in operating our business. In particular, these agreements include, or may include, covenants
or restrictions relating to limitations on capital expenditures; liens and sale-leaseback transactions; loans and investments; debt and hedging arrangements; mergers, acquisitions and asset sales; transactions with affiliates; and changes in
business activities conducted by us and our subsidiaries.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We cannot assure you that our business will generate
sufficient cash flow from operations or that future borrowings will be available to us in amounts sufficient to enable us to make payments on our indebtedness or to fund our operations.

In addition, our indebtedness may require us, under certain circumstances, to maintain certain financial ratios. See Managements Discussion
and Analysis of Financial Condition and Results of OperationsCredit Facility and MD&A-Term Loan.

Compliance
with these covenants and these ratios may prevent us from pursuing opportunities that we believe would benefit our business, including opportunities that we might pursue as part of our plans to expand our store base, our product offerings and sales
channels.



|ITEM 1B. | UNRESOLVED STAFF COMMENTS.
|-------- | --------------------------

None.



|ITEM 2. | PROPERTIES.
|------- | -----------

We are headquartered in New York City.
Our headquarters offices are leased under a lease agreement expiring in 2012, with an option to renew thereafter. We also have entered into a lease for additional corporate office space in New York City which expires in 2012 with an option to
terminate early. We own two facilities: a 262,000 square foot customer contact call center, order fulfillment and distribution center in Lynchburg, Virginia and a 282,000 square foot distribution center in Asheville, North Carolina. We also lease a
63,700 square foot facility in Lynchburg, Virginia under a lease agreement expiring in April 2011, with an option to renew thereafter.

As
of January 31, 2009, we operated 226 retail stores, including five crewcuts stores, one Mens store, one Womens Collection store, and 10 Madewell stores; and 74 factory stores, including one crewcuts factory store, in 42 states and
the District of Columbia. All of the retail and factory stores are leased from third parties and the leases historically have in most cases had terms of 5 to 10 years. A portion of our leases have options to renew for periods typically ranging from
5 to 10 years. Generally, the leases contain standard provisions concerning the payment of rent, events of default and the rights and obligations of each party. Rent due under the leases is generally comprised of annual base rent plus a contingent
rent payment based on the stores sales in excess of a specified threshold. Some of the leases also contain early termination options, which can be exercised by us or the landlord under certain conditions. The leases also generally require us
to pay real estate taxes, insurance and certain common area costs. Excluding our stores and headquarters offices, all of our properties, whether owned or leased, are subject to liens or security interests under our credit facility.



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The table below sets forth the number of retail and factory stores, including crewcuts stores, one
Mens store, one Womens Collection store, and Madewell stores, operated by us in the United States as of January 31, 2009.



|                     |  |              |  |               |  |                      
|-------------------- |  | ------------ |  | ------------- |  | ---------------------
|                     |  | RetailStores |  | FactoryStores |  | Total Numberof Stores
|Alabama              |  | 3            |  | 1             |  | 4                    
|Arizona              |  | 4            |  | 1             |  | 5                    
|California           |  | 29           |  | 6             |  | 35                   
|Colorado             |  | 4            |  | 3             |  | 7                    
|Connecticut          |  | 9            |  | 2             |  | 11                   
|Delaware             |  |             |  | 1             |  | 1                    
|Florida              |  | 12           |  | 9             |  | 21                   
|Georgia              |  | 7            |  | 3             |  | 10                   
|Hawaii               |  | 1            |  |              |  | 1                    
|Illinois             |  | 9            |  | 1             |  | 10                   
|Indiana              |  | 1            |  | 2             |  | 3                    
|Iowa                 |  | 1            |  |              |  | 1                    
|Kentucky             |  | 2            |  |              |  | 2                    
|Louisiana            |  | 2            |  |              |  | 2                    
|Maine                |  |             |  | 2             |  | 2                    
|Maryland             |  | 6            |  | 3             |  | 9                    
|Massachusetts        |  | 11           |  | 2             |  | 13                   
|Michigan             |  | 7            |  | 2             |  | 9                    
|Minnesota            |  | 5            |  |              |  | 5                    
|Mississippi          |  | 1            |  |              |  | 1                    
|Missouri             |  | 3            |  | 1             |  | 4                    
|Nebraska             |  | 1            |  |              |  | 1                    
|Nevada               |  | 4            |  | 2             |  | 6                    
|New Hampshire        |  | 1            |  | 2             |  | 3                    
|New Jersey           |  | 14           |  | 4             |  | 18                   
|New Mexico           |  | 1            |  |              |  | 1                    
|New York             |  | 21           |  | 4             |  | 25                   
|North Carolina       |  | 7            |  | 2             |  | 9                    
|Ohio                 |  | 6            |  | 1             |  | 7                    
|Oklahoma             |  | 2            |  |              |  | 2                    
|Oregon               |  | 3            |  |              |  | 3                    
|Pennsylvania         |  | 10           |  | 5             |  | 15                   
|Rhode Island         |  | 2            |  |              |  | 2                    
|South Carolina       |  | 2            |  | 3             |  | 5                    
|Tennessee            |  | 3            |  | 1             |  | 4                    
|Texas                |  | 14           |  | 5             |  | 19                   
|Utah                 |  | 2            |  | 1             |  | 3                    
|Vermont              |  | 1            |  | 1             |  | 2                    
|Virginia             |  | 7            |  | 2             |  | 9                    
|Washington           |  | 3            |  | 1             |  | 4                    
|Wisconsin            |  | 3            |  | 1             |  | 4                    
|District of Columbia |  | 2            |  |              |  | 2                    
|                     |  |              |  |               |  |                      
|Total                |  | 226          |  | 74            |  | 300                  
|                     |  |              |  |               |  |                      



19



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|ITEM 3. | LEGAL PROCEEDINGS.
|------- | ------------------

We are subject to various legal
proceedings and claims that arise in the ordinary course of our business. Although the outcome of these other claims cannot be predicted with certainty, management does not believe that the ultimate resolution of these matters will have a material
adverse effect on our financial condition or results of operations.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
|------- | ----------------------------------------------------

No matters were submitted to a vote of security holders during the quarter ended January 31, 2009.



20



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PART II



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
|------- | ----------------------------------------------------------------------

Our common stock has been traded on the New York Stock Exchange under the symbol JCG since June 28, 2006. Prior to that time there was no public market for our stock. The following table sets forth
the high and low sale prices of our common stock as reported on the New York Stock Exchange:

Market Information



|               |  |             |       |             |   |       |  |     |       |  |   |      
|-------------- |  | ----------- | ----- | ----------- | - | ----- |  | --- | ----- |  | - | -----
|               |  | Fiscal 2007 |       | Fiscal 2008
|               |  | High        |       | Low         |   | High  |  | Low
|First Quarter  |  | $           | 43.05 |             | $ | 33.50 |  | $   | 50.21 |  | $ | 39.53
|Second Quarter |  | $           | 57.17 |             | $ | 38.06 |  | $   | 50.35 |  | $ | 27.23
|Third Quarter  |  | $           | 56.43 |             | $ | 33.69 |  | $   | 38.00 |  | $ | 15.13
|Fourth Quarter |  | $           | 51.96 |             | $ | 34.03 |  | $   | 20.59 |  | $ | 8.02 

Record Holders

As of March 6, 2009, there were 52 record holders of our common stock.

Dividends

We have never paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings to fund the development
and growth of our business, and we do not anticipate paying any cash dividends in the foreseeable future. In addition, because we are a holding company, our ability to pay dividends depends on our receipt of cash dividends from our subsidiaries. The
terms of certain of our and Operatings outstanding indebtedness substantially restrict the ability of either company to pay dividends. For more information about these restrictions, see MD&ACredit Facility and
MD&ATerm Loan. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, restrictions contained in
current and future financing instruments and other factors that our board of directors deems relevant.



21



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Performance Graph

The following graph and table shows the cumulative total stockholder return on the Companys Common Stock with the S&P 500 Stock Index and the S&P Retail Index, in each case assuming an initial investment
of $100 and reinvestment of dividends, if any.

LOGO



|                    |  |         |     |        |   |        |  |         |     |  |   |   
|------------------- |  | ------- | --- | ------ | - | ------ |  | ------- | --- |  | - | --
|                    |  | 1/28/06 |     | 2/3/07 |   | 2/2/08 |  | 1/31/09
|J.Crew Group, Inc.  |  | $       | 100 |        | $ | 156    |  | $       | 195 |  | $ | 42
|S&P 500 Stock Index |  | $       | 100 |        | $ | 117    |  | $       | 113 |  | $ | 67
|S&P Retail Index    |  | $       | 100 |        | $ | 117    |  | $       | 95  |  | $ | 58

All amounts rounded to the nearest dollar. The stock performance shown in the graph is included in
response to the SECs requirements and is not intended to forecast or be indicative of future performance.



22



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|ITEM 6. | SELECTED CONSOLIDATED FINANCIAL DATA.
|------- | -------------------------------------

The selected
historical consolidated financial data for each of the years in the three-year period ended January 31, 2009 and as of January 31, 2009 have been derived from our audited consolidated financial statements included elsewhere herein. The
selected historical consolidated financial data for each of the years in the two-year period ended January 28, 2006 have been derived from our audited consolidated financial statements which are not included herein. The consolidated financial
statements for each of the years in the five-year period ended January 31, 2009 and as of the end of each such year have been audited.

The historical results presented below are not necessarily indicative of the results to be expected for any future period. The information should be read in conjunction with Managements Discussion and Analysis of Financial
Condition and Results of Operations and our financial statements and the related notes included herein.



|                                                    |  |                                       |          |   |                 |   |          |                 |  |   |                 |   |                 |   |           |  |   |          
|--------------------------------------------------- |  | ------------------------------------- | -------- | - | --------------- | - | -------- | --------------- |  | - | --------------- | - | --------------- | - | --------- |  | - | ---------
|                                                    |  | Year Ended(1)                        
|                                                    |  | January 29,2005                       |          |   | January 28,2006 |   |          | February 3,2007 |  |   | February 2,2008 |   | January 31,2009
|                                                    |  | (in thousands, except per share data)
|Income Statement Data                               |  |                                       |          |   |                 |   |          |                 |  |   |                 |   |                 |   |           |  |   |          
|Revenues                                            |  | $                                     | 804,216  |   |                 | $ | 953,188  |                 |  | $ | 1,152,100       |   |                 | $ | 1,334,723 |  | $ | 1,427,970
|Cost of goods sold(2)                               |  |                                       | 478,829  |   |                 |   | 555,192  |                 |  |   | 651,748         |   |                 |   | 746,180   |  |   | 872,547  
|                                                    |  |                                       |          |   |                 |   |          |                 |  |   |                 |   |                 |   |           |  |   |          
|Gross profit                                        |  |                                       | 325,387  |   |                 |   | 397,996  |                 |  |   | 500,352         |   |                 |   | 588,543   |  |   | 555,423  
|Selling, general and administrative expense         |  |                                       | 287,745  |   |                 |   | 318,499  |                 |  |   | 374,738         |   |                 |   | 416,064   |  |   | 458,738  
|                                                    |  |                                       |          |   |                 |   |          |                 |  |   |                 |   |                 |   |           |  |   |          
|Income from operations                              |  |                                       | 37,642   |   |                 |   | 79,497   |                 |  |   | 125,614         |   |                 |   | 172,479   |  |   | 96,685   
|Interest expense, net                               |  |                                       | 87,571   |   |                 |   | 72,903   |                 |  |   | 43,993          |   |                 |   | 11,224    |  |   | 5,940    
|Loss on debt refinancing                            |  |                                       | 49,780   |   |                 |   |         |                 |  |   | 10,039          |   |                 |   |          |  |   |         
|Provision (benefit) for income taxes                |  |                                       | 600      |   |                 |   | 2,800    |                 |  |   | (6,200          | ) |                 |   | 64,180    |  |   | 36,628   
|                                                    |  |                                       |          |   |                 |   |          |                 |  |   |                 |   |                 |   |           |  |   |          
|Net income (loss)                                   |  |                                       | (100,309 | ) |                 |   | 3,794    |                 |  |   | 77,782          |   |                 |   | 97,075    |  |   | 54,117   
|Preferred stock dividends                           |  |                                       | (13,456  | ) |                 |   | (13,456  | )               |  |   | (6,141          | ) |                 |   |          |  |   |         
|                                                    |  |                                       |          |   |                 |   |          |                 |  |   |                 |   |                 |   |           |  |   |          
|Net income (loss) applicable to common shareholders |  | $                                     | (113,765 | ) |                 | $ | (9,662   | )               |  | $ | 71,641          |   |                 | $ | 90,075    |  | $ | 54,117   
|                                                    |  |                                       |          |   |                 |   |          |                 |  |   |                 |   |                 |   |           |  |   |          
|Net income (loss) per share                         |  |                                       |          |   |                 |   |          |                 |  |   |                 |   |                 |   |           |  |   |          
|Basic                                               |  | $                                     | (4.82    | ) |                 | $ | (0.39    | )               |  | $ | 1.61            |   |                 | $ | 1.61      |  | $ | 0.88     
|Diluted                                             |  | $                                     | (4.82    | ) |                 | $ | (0.39    | )               |  | $ | 1.49            |   |                 | $ | 1.52      |  | $ | 0.85     
|Weighted average shares outstanding                 |  |                                       |          |   |                 |   |          |                 |  |   |                 |   |                 |   |           |  |   |          
|Basic                                               |  |                                       | 23,626   |   |                 |   | 24,472   |                 |  |   | 44,558          |   |                 |   | 60,346    |  |   | 61,687   
|Diluted                                             |  |                                       | 23,626   |   |                 |   | 24,472   |                 |  |   | 48,039          |   |                 |   | 63,748    |  |   | 64,027   
|                                                    | 
|                                                    |  | As of                                
|                                                    |  | January 29,2005                       |          |   | January 28,2006 |   |          | February 3,2007 |  |   | February 2,2008 |   | January 31,2009
|                                                    |  | (in thousands)                       
|Balance Sheet Data                                  |  |                                       |          |   |                 |   |          |                 |  |   |                 |   |                 |   |           |  |   |          
|Cash and cash equivalents                           |  | $                                     | 23,647   |   |                 | $ | 61,275   |                 |  | $ | 88,900          |   |                 | $ | 131,510   |  | $ | 146,430  
|Working capital                                     |  |                                       | 12,168   |   |                 |   | 72,657   |                 |  |   | 117,100         |   |                 |   | 138,049   |  |   | 183,059  
|Total assets                                        |  |                                       | 278,194  |   |                 |   | 337,321  |                 |  |   | 428,066         |   |                 |   | 535,596   |  |   | 613,809  
|Total long-term debt and preferred stock            |  |                                       | 669,733  |   |                 |   | 724,667  |                 |  |   | 200,000         |   |                 |   | 125,000   |  |   | 99,200   
|Stockholders equity (deficit)                      |  |                                       | (581,712 | ) |                 |   | (587,843 | )               |  |   | 5,620           |   |                 |   | 140,322   |  |   | 224,949  



|(1) | J.Crews fiscal year ends on the Saturday closest to January 31. Fiscal years ended January 29, 2005 (Fiscal 2004), January 28, 2006 (Fiscal 2005),
February 2, 2008 (Fiscal 2007) and January 31, 2009 (Fiscal 2008) consisted of 52 weeks, while the fiscal year ended February 3, 2007 (Fiscal 2006) consisted of 53 weeks.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes buying and occupancy costs.
|--- | ------------------------------------



23



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|                                            |  |                                                                                               |         |   |                 |   |         |                 |  |   |                 |   |  |                 |           |   |  |   |           |   
|------------------------------------------- |  | --------------------------------------------------------------------------------------------- | ------- | - | --------------- | - | ------- | --------------- |  | - | --------------- | - |  | --------------- | --------- | - |  | - | --------- | --
|                                            |  | Year Ended(1)                                                                                 |        
|                                            |  | January 29,2005                                                                               |         |   | January 28,2006 |   |         | February 3,2007 |  |   | February 2,2008 |   |  | January 31,2009 |          
|                                            |  | (in thousands except percentages; numbers of stores; catalog pages; and per square foot data) |        
|Operating Data                              |  |                                                                                               |         |   |                 |   |         |                 |  |   |                 |   |  |                 |           |   |  |   |           |   
|Revenues                                    |  |                                                                                               |         |   |                 |   |         |                 |  |   |                 |   |  |                 |           |   |  |   |           |   
|Stores                                      |  | $                                                                                             | 579,793 |   |                 | $ | 670,447 |                 |  | $ | 808,542         |   |  | $               | 914,810   |   |  | $ | 974,284   |   
|Direct                                      |  |                                                                                               |         |   |                 |   |         |                 |  |   |                 |   |  |                 |           |   |  |   |           |   
|Internet                                    |  |                                                                                               | 121,954 |   |                 |   | 159,812 |                 |  |   | 218,659         |   |  |                 | 293,330   |   |  |   | 338,253   |   
|Catalog                                     |  |                                                                                               | 76,548  |   |                 |   | 93,870  |                 |  |   | 89,952          |   |  |                 | 84,114    |   |  |   | 70,663    |   
|Other(2)                                    |  |                                                                                               | 25,921  |   |                 |   | 29,059  |                 |  |   | 34,947          |   |  |                 | 42,469    |   |  |   | 44,770    |   
|                                            |  |                                                                                               |         |   |                 |   |         |                 |  |   |                 |   |  |                 |           |   |  |   |           |   
|Total revenues                              |  | $                                                                                             | 804,216 |   |                 | $ | 953,188 |                 |  | $ | 1,152,100       |   |  | $               | 1,334,723 |   |  | $ | 1,427,970 |   
|                                            |  |                                                                                               |         |   |                 |   |         |                 |  |   |                 |   |  |                 |           |   |  |   |           |   
|Stores:                                     |  |                                                                                               |         |   |                 |   |         |                 |  |   |                 |   |  |                 |           |   |  |   |           |   
|Sales per gross square foot (52 week basis) |  | $                                                                                             | 400     |   |                 | $ | 457     |                 |  | $ | 526             |   |  | $               | 573       |   |  | $ | 551       |   
|Number of stores open at end of period      |  |                                                                                               | 197     |   |                 |   | 203     |                 |  |   | 227             |   |  |                 | 260       |   |  |   | 300       |   
|Comparable stores sales change(3)           |  |                                                                                               | 16.4    | % |                 |   | 13.4    | %               |  |   | 13.0            | % |  |                 | 5.6       | % |  |   | (4.0      | )%
|Direct:                                     |  |                                                                                               |         |   |                 |   |         |                 |  |   |                 |   |  |                 |           |   |  |   |           |   
|Number of catalogs circulated               |  |                                                                                               | 50,000  |   |                 |   | 55,000  |                 |  |   | 50,000          |   |  |                 | 49,000    |   |  |   | 44,400    |   
|Number of pages circulated (in millions)    |  |                                                                                               | 5,400   |   |                 |   | 6,100   |                 |  |   | 5,400           |   |  |                 | 5,300     |   |  |   | 5,200     |   
|Depreciation and amortization               |  | $                                                                                             | 37,061  |   |                 | $ | 33,461  |                 |  | $ | 33,525          |   |  | $               | 34,140    |   |  | $ | 44,143    |   
|Capital expenditures:                       |  |                                                                                               |         |   |                 |   |         |                 |  |   |                 |   |  |                 |           |   |  |   |           |   
|New store openings                          |  | $                                                                                             | 5,910   |   |                 | $ | 8,243   |                 |  | $ | 21,277          |   |  | $               | 38,313    |   |  | $ | 41,700    |   
|Other(4)                                    |  |                                                                                               | 7,521   |   |                 |   | 13,695  |                 |  |   | 24,654          |   |  |                 | 42,305    |   |  |   | 35,826    |   
|                                            |  |                                                                                               |         |   |                 |   |         |                 |  |   |                 |   |  |                 |           |   |  |   |           |   
|Total capital expenditures                  |  | $                                                                                             | 13,431  |   |                 | $ | 21,938  |                 |  | $ | 45,931          |   |  | $               | 80,618    |   |  | $ | 77,526    |   
|                                            |  |                                                                                               |         |   |                 |   |         |                 |  |   |                 |   |  |                 |           |   |  |   |           |   



|(1) | The fiscal year ended February 3, 2007 consisted of 53 weeks. All other fiscal years presented consisted of 52 weeks.
|--- | ---------------------------------------------------------------------------------------------------------------------

|(2) | Consists primarily of shipping and handling fees.
|--- | -------------------------------------------------

|(3) | Comparable store sales includes net sales at stores open at least twelve months (52 week basis).
|--- | ------------------------------------------------------------------------------------------------

|(4) | Consists primarily of expenditures on store remodels, information technology and warehouse expansion.
|--- | -----------------------------------------------------------------------------------------------------



24



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|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|------- | --------------------------------------------------------------------------------------

This discussion summarizes our consolidated operating results, financial condition and liquidity during the three-year period ended January 31, 2009.
Our fiscal year ends on the Saturday closest to January 31. Fiscal years 2008, 2007 and 2006 ended on January 31, 2009, February 2, 2008 and February 3, 2007, respectively. Fiscal year 2008 and 2007 consisted of 52 weeks
each, while fiscal 2006 consisted of 53 weeks. The extra week in fiscal 2006 was reflected in the fourth quarter. The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes
included elsewhere in this annual report on Form 10-K.

This discussion contains forward-looking statements involving risks, uncertainties
and assumptions that could cause our results to differ materially from expectations. Factors that might cause such differences include those described under Risk Factors, Disclosure Regarding Forward-Looking Statements and
elsewhere in this annual report on Form 10-K.

Executive Overview

J.Crew is a nationally recognized apparel and accessories brand that we believe embraces a high standard of style, craftsmanship, quality and customer service.

On the basis of data collected on our Internet channel customers, we believe our customer base consists primarily of affluent, college-educated and
professional and fashion-conscious women and men. As of January 31, 2009, we operated 226 retail stores, including five crewcuts stores, one Mens store, one Womens Collection store, and 10 Madewell stores; and 74 factory stores,
including one crewcuts factory store, throughout the United States.

The following is a summary of fiscal 2008 highlights:



| |  |  | Revenues totaled $1,428.0 million, reflecting a 7% increase over prior year revenues of $1,334.7 million.
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | Comparable store sales decreased 4%.
| | - |  | ------------------------------------



| |  |  | Direct net sales increased 8.3% to $408.9 million.
| | - |  | --------------------------------------------------



| |  |  | Income from operations decreased 44% to $96.7 million, or 6.8% of revenues.
| | - |  | ---------------------------------------------------------------------------



| |  |  | We collected $9.3 million of refundable income taxes including interest.
| | - |  | ------------------------------------------------------------------------



| |  |  | Voluntary prepayment of $25.0 million was made under the Term Loan.
| | - |  | -------------------------------------------------------------------



| |  |  | We opened 23 and closed one J.Crew retail stores; opened 14 and closed one J.Crew factory stores, including one crewcuts standalone factory store and opened four
Madewell stores.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We implemented certain Direct channel systems upgrades including a new platform for our website, a new order management system in our call center and a new
warehouse management system. These systems upgrades impaired our ability to capture, process and ship customer orders, and transfer products between channels during the second, third, and fourth quarters. We incurred additional costs associated with
these upgrades which adversely impacted our operating results in fiscal 2008. We made progress in stabilizing our Direct channel systems during the second half of fiscal 2008 and are continuing our stabilization efforts in 2009.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following is a summary of our cost reduction program announced in February 2009:



| |  |  | On February 27, 2009, the Company announced that is has initiated a workforce reduction as part of a cost reduction program that is expected to generate
approximately $40 million in annualized pre-tax
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



25



---

| | savings. This program is being implemented in response to the challenging economic environment, which is anticipated to continue through fiscal 2009. The
workforce reduction impacted approximately 95 positions, including positions that are currently unfilled, primarily in the Companys New York offices and support functions in the field and distribution centers. We expect to incur a pre-tax
charge of approximately $1.5 million during the first quarter of fiscal 2009 mainly to reflect anticipated severance and related costs for affected individuals. In addition to the workforce reduction, the Company also suspended its 401(k) Plan
Company matching contributions through the balance of 2009, eliminated 2009 merit based wage increases for the entire workforce and initiated other cost reduction initiatives.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We have two primary sales channels: Stores, which consists of our retail, crewcuts, Madewell and factory stores, and Direct, which consists of our
catalog and Internet website. The following is a summary of our net sales:



|                      |  |            |         |            |   |            |  |   |        
|--------------------- |  | ---------- | ------- | ---------- | - | ---------- |  | - | -------
|(Dollars in millions) |  | Fiscal2006 |         | Fiscal2007 |   | Fiscal2008
|Stores                |  | $          | 808.5   |            | $ | 914.8      |  | $ | 974.3  
|Direct                |  |            | 308.6   |            |   | 377.4      |  |   | 408.9  
|                      |  |            |         |            |   |            |  |   |        
|Net sales             |  | $          | 1,117.1 |            | $ | 1,292.2    |  | $ | 1,383.2
|                      |  |            |         |            |   |            |  |   |        

Our recent growth has led to increased buying and occupancy costs and increased selling, general
and administrative expenses. The most significant components of these increases were occupancy and wage costs, particularly at retail and factory stores due primarily to the opening of new stores, as well as lease renewals. We expect these other
costsparticularly our store occupancy coststo increase as we pursue our strategy of expanding our retail and factory store base.

While we believe our growth strategy offers significant opportunities, it also presents significant risks and challenges, including, among others, the risks that we may not be able to hire and train qualified sales associates, that our new
product offerings and expanded sales channels may not maintain or enhance our brand identity and that our order fulfillment and distribution facilities and information systems may not be adequate to support our growth plans. In addition, we must
also seek to ensure that implementation of these plans does not divert managements attention from continuing to build on the strengths that we believe have driven our recent success, including, among others, our focus on improving the quality
of our products, pursuing a disciplined merchandising strategy and improving our store environments and our customer service. For a more complete discussion of the risks facing our business, see Risk Factors.

How We Assess the Performance of Our Business

In
assessing the performance of our business, we consider a variety of performance and financial measures. A key measure for determining how our business is performing is comparable store sales for Stores and net sales for Direct. We also consider
gross profit and selling, general and administrative expenses in assessing the performance of our business.

Net Sales

Net sales reflect our revenues from the sale of our merchandise less returns and discounts.

We aggregate our merchandise into four sales categories: womens, mens, and childrens apparel, which consist of items of clothing such
as shirts, sweaters, pants, dresses, jackets, outerwear and suits; and accessories, which consists of items such as shoes, socks, jewelry, bags, belts and hair accessories.



26



---

The approximate percentage of our sales derived from these four categories, based on our internal
merchandising systems, is as follows:



|            |  |                 |   |  |                 |   |  |                 |  
|----------- |  | --------------- | - |  | --------------- | - |  | --------------- | -
|            |  | Year Ended      |  
|            |  | February 3,2007 |   |  | February 2,2008 |   |  | January 31,2009 |  
|Apparel     |  |                 |   |  |                 |   |  |                 |  
|Womens     |  | 65              | % |  | 66              | % |  | 66              | %
|Mens       |  | 21              | % |  | 20              | % |  | 19              | %
|Childrens  |  | 1               | % |  | 1               | % |  | 3               | %
|Accessories |  | 13              | % |  | 13              | % |  | 12              | %
|            |  |                 |   |  |                 |   |  |                 |  
|            |  | 100             | % |  | 100             | % |  | 100             | %
|            |  |                 |   |  |                 |   |  |                 |  

Our crewcuts childrens concept was introduced in the first quarter of fiscal 2006 with the
opening of 10 shops within our J.Crew retail stores followed by the opening of two stand-alone stores in the third quarter of fiscal 2006. During fiscal 2008 we opened a standalone crewcuts factory store and 10 shop-in-shops within our Factory
stores. As of January 31, 2009, we operated 42 crewcuts shop-in-shops in our J.Crew retail stores, five standalone crewcuts retail stores, one standalone crewcuts factory store, and 10 crewcuts shop-in-shops within our factory stores.

Comparable Store Sales

Comparable store sales reflects net sales at stores that have been open for at least twelve months.
Therefore, a store is included in comparable store sales on the first day it has comparable prior year sales. In the first quarter of fiscal 2008, we refined our comparable store sales calculation to include the impact of more significant
remodelings of our stores. Stores that have changed their square footage by 15% or more and stores that have been closed for 30 consecutive days are considered non-comparable. Non-comparable store sales include net sales from new stores that have
not been open for twelve months, stores impacted by remodels as discussed above, and net sales from closed stores and temporary stores. In fiscal 2006, comparable store sales excluded the impact of the 53rdweek.

By measuring the change in year-over-year net sales in stores
that have been open for twelve months or more, comparable store sales allows us to evaluate how our core store base is performing. Various factors affect comparable store sales, including:



| |  |  | consumer preferences, buying trends and overall economic trends,
| | - |  | ----------------------------------------------------------------



| |  |  | our ability to anticipate and respond effectively to fashion trends and customer preferences,
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | competition,
| | - |  | ------------



| |  |  | changes in our merchandise mix,
| | - |  | -------------------------------



| |  |  | pricing,
| | - |  | --------



| |  |  | the timing of our releases of new merchandise and promotional events,
| | - |  | ---------------------------------------------------------------------



| |  |  | the level of customer service that we provide in our stores,
| | - |  | ------------------------------------------------------------



| |  |  | changes in sales mix among sales channels,
| | - |  | ------------------------------------------



| |  |  | our ability to source and distribute products efficiently, and
| | - |  | --------------------------------------------------------------



| |  |  | the number of stores we open, close (including for temporary renovations) and expand in any period.
| | - |  | ---------------------------------------------------------------------------------------------------

As we continue to open new stores, we expect that a greater percentage of our revenues will come from non-comparable store sales.



27



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Cyclicality and Seasonality

The industry in which we operate is cyclical, and consequently our revenues are affected by general economic conditions. Purchases of apparel and
accessories are sensitive to a number of factors that influence the levels of consumer spending, including economic conditions and the level of disposable consumer income, consumer debt, interest rates and consumer confidence.

Our business is seasonal. As a result, our revenues fluctuate from quarter to quarter. We have four distinct selling seasons that align with our four
fiscal quarters. Revenues are usually substantially higher in our fourth fiscal quarter, particularly December, as customers make holiday purchases. In fiscal 2008, we realized approximately 27% of our revenues in the fourth fiscal quarter compared
to 30% in fiscal 2007. This percentage was lower in 2008 due to the macroeconomic environment which resulted in increased markdowns in the fourth quarter of fiscal 2008.

Gross Profit

Gross profit is equal to our revenues minus our cost of goods sold. Cost of goods sold
includes the direct cost of purchased merchandise, freight, design, buying and production costs, occupancy costs related to store operations (such as rent and utilities) and all shipping costs associated with our Direct business. Our cost of goods
sold is substantially higher in the holiday season because cost of goods sold generally increases as revenues increase and cost of goods sold includes the cost of purchasing merchandise that we sell to generate revenues. Cost of goods sold also
generally changes as we expand or contract our store base and incur higher or lower store occupancy and related costs. The primary drivers of the costs of individual goods are the costs of raw materials and labor in the countries where we source our
merchandise. Gross margin measures gross profit as a percentage of our revenues.

Our gross profit may not be comparable to other specialty
retailers, as some companies include all of the costs related to their distribution network in cost of goods sold while others, like us, exclude all or a portion of them from cost of goods sold and include them in selling, general and administrative
expenses.

Selling, General and Administrative Expenses

Selling, general and administrative expenses include all operating expenses not included in cost of goods sold, primarily catalog production and mailing
costs, certain warehousing expenses, administrative payroll, store expenses other than occupancy costs, depreciation and amortization and credit card fees. These expenses do not necessarily vary proportionally with net sales.



28



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Results of Operations

The following table presents, for the periods indicated, our operating results as a percentage of revenues as well as selected store data:



|                                                            |  |                   |   |  |                 |   |  |                 |  
|----------------------------------------------------------- |  | ----------------- | - |  | --------------- | - |  | --------------- | -
|                                                            |  | Fiscal Year Ended |  
|                                                            |  | February 3,2007   |   |  | February 2,2008 |   |  | January 31,2009 |  
|Revenues                                                    |  | 100.0             | % |  | 100.0           | % |  | 100.0           | %
|Cost of goods sold, including buying and occupancy costs(1) |  | 56.6              |   |  | 55.9            |   |  | 61.1            |  
|                                                            |  |                   |   |  |                 |   |  |                 |  
|Gross profit(1)                                             |  | 43.4              |   |  | 44.1            |   |  | 38.9            |  
|Selling, general and administrative expenses(1)             |  | 32.5              |   |  | 31.2            |   |  | 32.1            |  
|                                                            |  |                   |   |  |                 |   |  |                 |  
|Income from operations                                      |  | 10.9              |   |  | 12.9            |   |  | 6.8             |  
|Interest expense, net                                       |  | 3.8               |   |  | 0.8             |   |  | 0.4             |  
|Loss on refinancing of debt                                 |  | 0.9               |   |  |                |   |  |                |  
|                                                            |  |                   |   |  |                 |   |  |                 |  
|Income before income taxes                                  |  | 6.3               |   |  | 12.1            |   |  | 6.4             |  
|Provision (benefit) for income taxes                        |  | (0.5              | ) |  | 4.8             |   |  | 2.6             |  
|                                                            |  |                   |   |  |                 |   |  |                 |  
|Net income                                                  |  | 6.8               | % |  | 7.3             | % |  | 3.8             | %
|                                                            |  |                   |   |  |                 |   |  |                 |  



|                                              |  |                   |      |   |                 |   |     |                 |  |   |      |   
|--------------------------------------------- |  | ----------------- | ---- | - | --------------- | - | --- | --------------- |  | - | ---- | --
|                                              |  | Fiscal Year Ended |     
|                                              |  | February 3,2007   |      |   | February 2,2008 |   |     | January 31,2009 | 
|Selected store data:                          |  |                   |      |   |                 |   |     |                 |  |   |      |   
|Number of stores open at end of period        |  |                   | 227  |   |                 |   | 260 |                 |  |   | 300  |   
|Sales per gross square foot (52 week basis)   |  | $                 | 526  |   |                 | $ | 573 |                 |  | $ | 551  |   
|Comparable store sales change (52 week basis) |  |                   | 13.0 | % |                 |   | 5.6 | %               |  |   | (4.0 | )%



|(1) | We exclude a portion of our distribution network costs from the cost of goods sold and include them in selling, general and administrative expenses. Our gross profit therefore may
not be directly comparable to that of some of our competitors.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Fiscal 2008 Compared to Fiscal 2007



|                                           |  |                               |         |                    |                               |   |        |          |                    |  |       |         |  |   |             |   |  |       |   
|------------------------------------------ |  | ----------------------------- | ------- | ------------------ | ----------------------------- | - | ------ | -------- | ------------------ |  | ----- | ------- |  | - | ----------- | - |  | ----- | --
|                                           |  | Fiscal Year Ended             |         |                    |                               |   |        |          |                   
|                                           |  | January 31, 2009(Fiscal 2008) |         |                    | February 2, 2008(Fiscal 2007) |   |        | Variance |                   
|(Dollars in millions)                      |  | Amount                        |         | Percent ofRevenues |                               |   | Amount |          | Percent ofRevenues |  |       | Dollars |  |   | Percentages |  
|Revenues                                   |  | $                             | 1,427.9 |                    | 100.0                         | % |        | $        | 1,334.7            |  | 100.0 | %       |  | $ | 93.2        |   |  | 7.0   | % 
|Gross profit                               |  |                               | 555.4   |                    | 38.9                          | % |        |          | 588.5              |  | 44.1  | %       |  |   | (33.1       | ) |  | (5.6  | )%
|Selling, general & administrative expenses |  |                               | 458.7   |                    | 32.1                          | % |        |          | 416.1              |  | 31.2  | %       |  |   | 42.6        |   |  | 10.3  | % 
|Income from operations                     |  |                               | 96.7    |                    | 6.8                           | % |        |          | 172.5              |  | 12.9  | %       |  |   | (75.8       | ) |  | (43.9 | )%
|Interest expense, net                      |  |                               | 5.9     |                    | 0.4                           | % |        |          | 11.2               |  | 0.8   | %       |  |   | (5.3        | ) |  | (47.1 | )%
|Provision for income taxes                 |  |                               | 36.6    |                    | 2.6                           | % |        |          | 64.2               |  | 4.8   | %       |  |   | (27.6       | ) |  | (42.9 | )%
|Net income                                 |  | $                             | 54.1    |                    | 3.8                           | % |        | $        | 97.1               |  | 7.3   | %       |  | $ | (43.0       | ) |  | (44.3 | )%

Revenues

Revenues in fiscal 2008 increased by $93.2 million, or 7.0%, to $1,427.9 million from $1,334.7 million in fiscal 2007. The increase in revenues for fiscal 2008 resulted from the additional number of store locations
compared to the prior year and the increase in Direct sales, partially offset by decreased comparable store sales. We believe the increase in revenues is due to the continuing appeal of our expanded product line in both Stores



29



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and Direct and our continuing commitment to customer service. Given the overall macroeconomic environment during the second half of fiscal 2008, we saw a
notable softening of the sales trend, especially during the fourth quarter, in both stores and Direct, which contributed to the decreased comparable store sales, and which we expect to continue in fiscal 2009.

Stores sales increased by $59.5 million, or 6.5%, to $974.3 million in fiscal 2008 from $914.8 million in fiscal 2007. Comparable store sales decreased
by 4.0% to $850.1 million in fiscal 2008 from $885.5 million in the prior year. Non-comparable store sales were $124.2 million in fiscal 2008.

Direct sales increased by $31.5 million, or 8.3%, to $408.9 million in fiscal 2008 from $377.4 million in fiscal 2007. The Direct sales increase reflects an increase in our Internet revenues of $45.0 million, partially offset by a decrease
in our catalog revenues of $13.5 million as compared to fiscal 2007.

The increase in Stores and Direct sales during fiscal 2008 was
primarily driven by an increase in sales of womens apparel. This increase was largely driven by sales of sweaters, knits, and pants. Sales of mens apparel and accessories also increased during the year.

Other revenues increased by $2.3 million due primarily to an increase in shipping and handling fees of $1.5 million from $37.9 million in fiscal 2007 to
$39.4 million in fiscal 2008 primarily as a result of an increase in orders in the Direct business.

Gross Profit

In fiscal 2008, gross profit decreased by $33.1 million, or 5.6%, to $555.4 million from $588.5 million in fiscal 2007. The change in the components of
gross profit were as follows:



|                                       |  |   |       |  
|-------------------------------------- |  | - | ----- | -
|(Dollars in millions)                  |  |   |      
|Increase in revenues                   |  | $ | 51.5  |  
|Decrease in gross margin               |  |   | (60.1 | )
|Increase in buying and occupancy costs |  |   | (24.5 | )
|                                       |  |   |       |  
|                                       |  | $ | (33.1 | )
|                                       |  |   |       |  

Gross margin decreased from 44.1% in fiscal 2007 to 38.9% in fiscal 2008. The decrease in gross
margin was due primarily to a decrease of 420 basis points in merchandise margin, primarily due to increased markdowns during the fourth quarter, and a 100 basis point increase in buying and occupancy costs. We expect the trend of increased
markdowns to continue in the first half of fiscal 2009 and increased buying and occupancy costs to continue in fiscal 2009.

Selling,
General and Administrative Expenses

Selling, general and administrative expenses increased by $42.6 million, or 10.3%, to $458.7
million in fiscal 2008 from $416.1 million in fiscal 2007. The increase resulted primarily from:



| |  |  | an increase in stores operating expensesprimarily payroll and payroll-related expenses associated with our growth in store locationsof $25.4 million;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase in Direct operating expensesprimarily payroll, payroll-related, and consulting expensesof $15.6 million, which includes $9.6 million related
to our Direct channel stabilization efforts;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase in catalog costs of $5.2 million;
| | - |  | ---------------------------------------------



| |  |  | an increase in non-cash asset impairment charges related to underperforming stores of $2.7 million; offset by
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | a decrease in share-based and incentive compensation of $12.1 million.
| | - |  | ----------------------------------------------------------------------



30



---

As a percentage of revenues, selling, general and administrative expenses increased to 32.1% in fiscal
2008 from 31.2% in fiscal 2007, resulting primarily from the fact that these expenses increased at a faster rate than revenues during fiscal 2008, which we expect to continue in fiscal 2009. See Executive Overview for discussion of our
cost reduction program announced in February 2009.

Interest Expense, Net

Interest expense, net decreased $5.3 million to $5.9 million in fiscal 2008 from $11.2 million in fiscal 2007. This decrease primarily reflects our lower
average outstanding debt in fiscal 2008 resulting from voluntary prepayments under the Term Loan and declining interest rates.

A summary
of the components of interest expense, net is as follows:



|                                         |  |                       |      |   |                 |   |      |  
|---------------------------------------- |  | --------------------- | ---- | - | --------------- | - | ---- | -
|                                         |  | Year Ended            |     
|                                         |  | February 2,2008       |      |   | January 31,2009 |  
|                                         |  | (amounts in millions) |     
|Interest expense related to:             |  |                       |      |   |                 |   |      |  
|Term Loan                                |  |                       | 11.8 |   |                 |   | 5.0  |  
|Other                                    |  |                       | 1.1  |   |                 |   | 0.7  |  
|Amortization of deferred financing costs |  |                       | 2.3  |   |                 |   | 2.2  |  
|                                         |  |                       |      |   |                 |   |      |  
|Total interest expense                   |  |                       | 15.2 |   |                 |   | 7.9  |  
|Interest income                          |  |                       | (4.0 | ) |                 |   | (2.0 | )
|                                         |  |                       |      |   |                 |   |      |  
|Interest expense, net                    |  | $                     | 11.2 |   |                 | $ | 5.9  |  
|                                         |  |                       |      |   |                 |   |      |  

Provision for Income Taxes

The effective tax rate was 40.4% in fiscal 2008 compared to 39.8% in fiscal 2007. The increase in the rate is due to certain losses not deductible for
state income tax purposes.

Net Income

Net income decreased $43.0 million to $54.1 million in fiscal 2008 from $97.1 million in fiscal 2007. This decrease was due to a $33.1 million decrease in gross profit primarily driven by a lower gross margin rate,
partially offset by the 7.0% increase in revenue, and a $42.6 million increase in selling, general and administrative expenses, offset by a $5.3 million decrease in interest expense and a $27.6 million decrease in the provision for income taxes.

Fiscal 2007 Compared to Fiscal 2006



|                                           |  |                                         |         |                    |                                         |   |        |          |         |                    |  |       |         |  |   |             |   |  |        |   
|------------------------------------------ |  | --------------------------------------- | ------- | ------------------ | --------------------------------------- | - | ------ | -------- | ------- | ------------------ |  | ----- | ------- |  | - | ----------- | - |  | ------ | --
|                                           |  | Fiscal Year Ended                       |         |                    |                                         |  
|                                           |  | February 2, 2008(Fiscal 2007)(52 weeks) |         |                    | February 3, 2007(Fiscal 2006)(53 weeks) |   |        | Variance |        
|(Dollars in millions)                      |  | Amount                                  |         | Percent ofRevenues |                                         |   | Amount |          |         | Percent ofRevenues |  |       | Dollars |  |   | Percentages |  
|Revenues                                   |  | $                                       | 1,334.7 |                    | 100.0                                   | % |        | $        | 1,152.1 |                    |  | 100.0 | %       |  | $ | 182.6       |   |  | 15.8   | % 
|Gross profit                               |  |                                         | 588.5   |                    | 44.1                                    | % |        |          | 500.4   |                    |  | 43.4  | %       |  |   | 88.1        |   |  | 17.6   | % 
|Selling, general & administrative expenses |  |                                         | 416.1   |                    | 31.2                                    | % |        |          | 374.7   |                    |  | 32.5  | %       |  |   | 41.4        |   |  | 11.0   | % 
|Income from operations                     |  |                                         | 172.5   |                    | 12.9                                    | % |        |          | 125.6   |                    |  | 10.9  | %       |  |   | 46.9        |   |  | 37.3   | % 
|Interest expense, net                      |  |                                         | 11.2    |                    | 0.8                                     | % |        |          | 44.0    |                    |  | 3.8   | %       |  |   | (32.8       | ) |  | (74.5  | )%
|Loss on refinancing of debt                |  |                                         |        |                    |                                        |   |        |          | 10.0    |                    |  | 0.9   | %       |  |   | (10.0       | ) |  | (100.0 | )%
|Provision (benefit) for income taxes       |  |                                         | 64.2    |                    | 4.8                                     | % |        |          | (6.2    | )                  |  | (0.5  | )%      |  |   | 70.4        |   |  | NM     |   
|Net income                                 |  | $                                       | 97.1    |                    | 7.3                                     | % |        | $        | 77.8    |                    |  | 6.8   | %       |  | $ | 19.3        |   |  | 24.8   | % 



31



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Revenues

Revenues in fiscal 2007 increased by $182.6 million, or 15.8%, to $1,334.7 million from $1,152.1
million in fiscal 2006. We believe this increase reflects the continuing appeal of our expanded product line in both Stores and Direct, the additional number of store locations compared to the prior year and continuing improvements in our customer
service. Fiscal 2007 consisted of 52 weeks, as compared to fiscal 2006. which consisted of 53 weeks. The impact of the 53rdweek on fiscal 2006
revenues was $12.6 million.

Stores sales increased by $106.3 million, or 13.1%, to
$914.8 million in fiscal 2007 from $808.5 million in fiscal 2006. Comparable store sales increased by 5.6% to $838.5 million in fiscal 2007 from $794.3 million in the prior year. Realigning fiscal 2006s calendar weeks to be consistent with the
fiscal 2007 retail calendar weeks would increase comparable store sales in 2006 to $794.4 million, resulting in a comparable store sales increase of 5.5%. Non-comparable store sales were $76.3 million in fiscal 2007. The impact of the 53rdweek on fiscal 2006 stores sales was $8.2 million.

Direct sales increased by $68.8 million, or 22.3%, to $377.4 million in fiscal 2007 from $308.6
million in fiscal 2006. A lower return rate accounted for 3.5 percentage points of the increase. We believe the return rate decreased in part because of improvements in fit and quality as well as an increase in the penetration of categories with
lower returns. The Direct sales increase reflects an increase in our Internet revenues of $74.6 million, or 34.1%, partially offset by a decrease in our catalog revenues of $5.8 million, or 6.5% as compared to fiscal 2006. The impact of the
53rdweek on fiscal 2006 direct sales was $3.9 million.

The increase in Stores and Direct sales during fiscal 2007 was primarily driven by an increase in sales of womens apparel. The increase was largely driven by sales of sweaters, knits and jackets. Sales of
mens apparel and accessories also increased during the year.

Other revenues
increased by $7.5 million due primarily to an increase in shipping and handling fees of $6.6 million from $31.3 million in fiscal 2006 to $37.9 million in fiscal 2007 primarily as a result of an increase in orders in the Direct business. The impact
of the 53rdweek on fiscal 2006 other revenues was $0.5 million.

Gross Profit

In fiscal 2007, gross profit increased by $88.1 million, or 17.6%, to $588.5 million
from $500.4 million in fiscal 2006. The change in the components of gross profit were as follows:



|                                       |  |   |       |  
|-------------------------------------- |  | - | ----- | -
|(Dollars in millions)                  |  |   |      
|Increase in revenues                   |  | $ | 99.1  |  
|Increase in gross margin               |  |   | 11.9  |  
|Increase in buying and occupancy costs |  |   | (22.9 | )
|                                       |  |   |       |  
|                                       |  | $ | 88.1  |  
|                                       |  |   |       |  

Gross margin increased from 43.4% in fiscal 2006 to 44.1% in fiscal 2007. The increase in gross
margin was due primarily to an increase of 90 basis points in merchandise margins, offset by a 20 basis point increase in buying and occupancy costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased
by $41.4 million, or 11.0%, to $416.1 million in fiscal 2007 from $374.7 million in fiscal 2006. The increase resulted primarily from:



| |  |  | an increase in Direct and Stores operating expenses, primarily payroll and payroll related expenses associated with new stores, of $27.5 million,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



32



---

| |  |  | an increase in expenses related to the Madewell and crewcuts businesses of $4.0 million,
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | an increase in corporate occupancy expenses of $3.4 million attributable to additional office space,
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | an increase in share-based compensation expense of $3.2 million, and
| | - |  | --------------------------------------------------------------------



| |  |  | severance costs of $2.3 million recorded in connection with the departure of a senior executive.
| | - |  | ------------------------------------------------------------------------------------------------

As a percentage of revenue, selling, general and administrative expenses decreased to 31.2% in fiscal 2007 from 32.5% in fiscal 2006, resulting primarily
from the fact that these expenses increased at a slower rate than revenues during fiscal 2007.

Interest Expense, Net

Interest expense, net decreased by $32.8 million to $11.2 million in fiscal 2007 from $44.0 million in fiscal 2006. This decrease primarily reflects our
lower average outstanding debt in fiscal 2007 resulting from voluntary prepayments under the Term Loan. All debt and preferred stock outstanding at the beginning of fiscal 2006 was redeemed during the second quarter of 2006 with the proceeds of the
$285.0 million Term Loan entered into in May 2006 and the issuance of 21.6 million shares of common stock at $20.00 per share in our initial public offering (the IPO) in July 2006.

A summary of the components of interest expense, net is as follows:



|                                                             |  |                 |      |   |                 |   |      |  
|------------------------------------------------------------ |  | --------------- | ---- | - | --------------- | - | ---- | -
|                                                             |  | Year Ended      |     
|(Dollars in millions)                                        |  | February 3,2007 |      |   | February 2,2008 |  
|Accreted dividends on mandatorily redeemable preferred stock |  | $               | 20.8 |   |                 | $ |     |  
|Interest expense related to:                                 |  |                 |      |   |                 |   |      |  
|93/4% Senior
Subordinated Notes due 2014                     |  |                 | 7.7  |   |                 |   |     |  
|Term Loan                                                    |  |                 | 14.3 |   |                 |   | 11.8 |  
|131/8% Senior
Discount Debentures due 2008                   |  |                 | 1.1  |   |                 |   |     |  
|5.0% Convertible Notes Payable                               |  |                 | 0.5  |   |                 |   |     |  
|Amortization of deferred financing costs                     |  |                 | 1.5  |   |                 |   | 2.3  |  
|Other                                                        |  |                 | 1.1  |   |                 |   | 1.1  |  
|                                                             |  |                 |      |   |                 |   |      |  
|Total interest expense                                       |  |                 | 47.0 |   |                 |   | 15.2 |  
|Interest income                                              |  |                 | (3.0 | ) |                 |   | (4.0 | )
|                                                             |  |                 |      |   |                 |   |      |  
|Interest expense, net                                        |  | $               | 44.0 |   |                 | $ | 11.2 |  
|                                                             |  |                 |      |   |                 |   |      |  

Loss on Refinancing of Debt

The loss on refinancing of debt of $10.0 million in fiscal 2006 reflects $4.8 million of tender
fees and other expenses and $5.2 million related to the write off of unamortized deferred financing costs incurred in connection with the redemption of the 93/4% Notes in May 2006.

Provision (Benefit) for Income Taxes

The provision for income taxes in fiscal 2007 and fiscal 2006 is not comparable. The effective tax rate in fiscal 2006 of (8.7)% was not reflective of a
normalized rate due to several factors, including (a) preferred stock dividends included in interest expense for financial statement purposes but not deductible for income tax purposes, and (b) the reversal at February 3, 2007 of a
valuation allowance which fully reserved net deferred income tax assets.

The income tax provision for fiscal 2007 reflects a more
normalized effective tax rate of 39.8%.



33



---

Net Income

Net income increased $19.3 million to $97.1 million in fiscal 2007 from $77.8 million in fiscal 2006. This increase was due to an $88.1 million increase in gross profit primarily driven by the 15.8% increase in
revenues, a $32.8 million decrease in interest expense, offset by a $41.4 million increase in selling, general and administrative expenses, and a $70.4 million increase in the provision for income taxes. In addition, fiscal 2006 included a $10.0
million loss on refinancing of debt.

Liquidity and Capital Resources

Our primary sources of liquidity are our current balances of cash and cash equivalents, cash flows from operations and borrowings available under the
Credit Facility. Our primary cash needs are capital expenditures in connection with opening new stores and remodeling our existing stores, making information technology system enhancements, meeting debt service requirements and funding working
capital requirements. The most significant components of our working capital are cash and cash equivalents, merchandise inventories, accounts payable and other current liabilities. See Outlook below.

Operating Activities



|                                                                        |  |                 |       |   |                 |   |       |                 |  |   |       |  
|----------------------------------------------------------------------- |  | --------------- | ----- | - | --------------- | - | ----- | --------------- |  | - | ----- | -
|                                                                        |  | Year Ended      |      
|                                                                        |  | February 3,2007 |       |   | February 2,2008 |   |       | January 31,2009 | 
|                                                                        |  | (in millions)   |      
|Net income                                                              |  | $               | 77.8  |   |                 | $ | 97.1  |                 |  | $ | 54.1  |  
|Adjustments to reconcile net income to net cash provided by operations: |  |                 |       |   |                 |   |       |                 |  |   |       |  
|Depreciation and amortization                                           |  |                 | 33.5  |   |                 |   | 34.1  |                 |  |   | 44.1  |  
|Accreted dividends on redeemable preferred stock                        |  |                 | 20.8  |   |                 |   |      |                 |  |   |      |  
|Amortization of deferred financing costs                                |  |                 | 2.0   |   |                 |   | 2.3   |                 |  |   | 2.2   |  
|Loss on refinancing of debt                                             |  |                 | 10.0  |   |                 |   |      |                 |  |   |      |  
|Deferred income taxes                                                   |  |                 | (10.9 | ) |                 |   | 8.1   |                 |  |   | 13.0  |  
|Excess tax benefit from share based compensation                        |  |                 | (12.9 | ) |                 |   | (22.2 | )               |  |   | (13.5 | )
|Share based compensation                                                |  |                 | 3.8   |   |                 |   | 7.0   |                 |  |   | 8.4   |  
|Changes in inventories                                                  |  |                 | (24.5 | ) |                 |   | (17.9 | )               |  |   | (28.5 | )
|Changes in accounts payable and other current liabilities               |  |                 | 14.6  |   |                 |   | 38.2  |                 |  |   | 10.9  |  
|Changes in other operating assets and liabilities                       |  |                 | 6.7   |   |                 |   | 21.5  |                 |  |   | 4.7   |  
|                                                                        |  |                 |       |   |                 |   |       |                 |  |   |       |  
|Net cash provided by operations                                         |  | $               | 120.9 |   |                 | $ | 168.2 |                 |  | $ | 95.4  |  
|                                                                        |  |                 |       |   |                 |   |       |                 |  |   |       |  

Cash provided by operating activities in fiscal 2008 was $95.4 million and consisted of
(i) net income of $54.1 million, (ii) adjustments of $54.2 million, and (iii) changes in operating assets and liabilities of $12.9 million due primarily to increases in inventories and accounts payable resulting primarily from
additional stores.

Cash provided by operating activities in fiscal 2007 was $168.2 million and consisted of (i) net income of $97.1
million, (ii) adjustments of $29.3 million and (iii) changes in operating assets and liabilities of $41.8 million due primarily to increases in inventories and accounts payable resulting from anticipated sales increases.

Cash provided by operating activities in fiscal 2006 was $120.9 million and consisted of (i) net income of $77.8 million, (ii) adjustments of
$46.3 million and (iii) changes in operating assets and liabilities of $3.2 million due primarily to increases in inventories and accounts payable resulting from anticipated sales increases.

Investing Activities

Capital
expenditures were $77.5 million in fiscal 2008, $80.6 million in fiscal 2007, and $45.9 million in fiscal 2006. Capital expenditures for the opening of new stores were $41.7 million in fiscal 2008, $38.3 million



34



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in fiscal 2007, and $21.3 million in fiscal 2006. The remaining capital expenditures in each period were for store renovation and refurbishment programs, and
investments in information systems and distribution center initiatives as well as general corporate purposes. In light of the current economic conditions, we have slowed the pace of our store base expansion and plan to reduce capital expenditures as
compared to recent years. Capital expenditures are planned at approximately $55 million for the 2009 fiscal year, including $20 to $25 million for new stores and $15 to $20 million for information technology enhancements and the remainder for store
renovations and refurbishments and general corporate purposes.

Financing Activities



|                                                                                                 |  |                 |        |   |                 |   |       |                 |  |   |       |  
|------------------------------------------------------------------------------------------------ |  | --------------- | ------ | - | --------------- | - | ----- | --------------- |  | - | ----- | -
|                                                                                                 |  | Year Ended      |       
|                                                                                                 |  | February 3,2007 |        |   | February 2,2008 |   |       | January 31,2009 | 
|                                                                                                 |  | (in millions)   |       
|Initial public offering of 21.6 million shares of common stock, net of expenses of $29.7 million |  | $               | 402.8  |   |                 | $ |      |                 |  | $ |      |  
|Redemption of preferred stock                                                                    |  |                 | (358.3 | ) |                 |   |      |                 |  |   |      |  
|Proceeds from issuance of new debt, net of costs incurred                                        |  |                 | 276.5  |   |                 |   |      |                 |  |   |      |  
|Repayment of debt                                                                                |  |                 | (386.5 | ) |                 |   | (75.0 | )               |  |   | (25.0 | )
|Proceeds from share based compensation plans                                                     |  |                 | 5.2    |   |                 |   | 9.6   |                 |  |   | 9.0   |  
|Excess tax benefit from share based compensation                                                 |  |                 | 12.9   |   |                 |   | 22.2  |                 |  |   | 13.5  |  
|Repurchase of common stock                                                                       |  |                 |       |   |                 |   | (0.5  | )               |  |   | (0.4  | )
|Costs incurred in connection with amended and restated credit agreement                          |  |                 |       |   |                 |   | (1.3  | )               |  |   |      |  
|                                                                                                 |  |                 |        |   |                 |   |       |                 |  |   |       |  
|Net cash provided by (used in) financing activities                                              |  | $               | (47.4  | ) |                 | $ | (45.0 | )               |  | $ | (2.9  | )
|                                                                                                 |  |                 |        |   |                 |   |       |                 |  |   |       |  

Cash used in financing activities was $2.9 million in fiscal 2008 resulting from the voluntary
prepayment on the Term Loan, offset primarily by proceeds and tax benefits from share based compensation plans.

Cash used in financing
activities was $45.0 million in fiscal 2007 resulting from the voluntary prepayments on the Term Loan, offset primarily by proceeds and tax benefits from share based compensation plans.

Financing activities in fiscal 2006 included the IPO and the Term Loan. The proceeds of these financings and our available cash from operations were used
to redeem all of our outstanding indebtedness, including preferred stock, and to prepay $85.0 million of the Term Loan during 2006. In connection with the IPO, the 5.0% Notes Payable were converted into shares of our common stock. Our financing
activities also included the recognition of excess tax benefits of $12.9 million from share based compensation. Our total indebtedness (including preferred stock) of $724.7 million at January 28, 2006 was reduced to $200.0 million at
February 3, 2007.

Amended and Restated Credit Agreement

On May 4, 2007, J.Crew Group, Inc. and certain of its subsidiaries, as guarantors, and Operating and certain of its subsidiaries, as borrowers,
entered into a Second Amended and Restated Credit Agreement (the Credit Facility) with Citicorp USA, Inc. (Citicorp), as administrative agent, Citicorp, as collateral agent, and Bank of America, N.A. and Wachovia Bank,
National Association, as syndication agents.

The Credit Facility provides for revolving loans and letters of credit of up to $200 million
(which amount may be increased to up to $250 million subject to certain conditions) at floating interest rates based on the base rate, as defined, plus a margin of up to 0.25% or LIBOR plus a margin ranging from 1.0% to 1.25%. The margin is based
upon quarterly excess availability levels specified in the Credit Facility. The total amount of availability



35



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is limited to the sum of: (a) 100% of qualified cash, (b) 90% of eligible receivables, (c) the lesser of 90% of eligible inventory and 92.5%
of the net recovery percentage of inventories (as determined by periodic inventory appraisals) for the period August 1 through December 31, or 90% of the net recovery percentage of inventories for the period January 1 through
July 31, (d) 65% of the fair market value of eligible real estate, and (e) less any reserves established by Citicorp. The Credit Facility expires on May 4, 2013.

Borrowings under the Credit Facility are guaranteed by the Company and certain of its subsidiaries, and are secured by a perfected first priority
security interest in substantially all of the Companys assets and those of certain of its subsidiaries. The Credit Facility includes restrictions on the Companys ability and the ability of certain of its subsidiaries to incur additional
indebtedness and liens, pay dividends or make other distributions, make investments, dispose of assets and merge. If excess availability under the Credit Facility is less than $20 million at any time, then the Companys fixed charge coverage
ratio for the most recently ended period of four consecutive fiscal quarters may not be less than 1.10 to 1.00 for that period.

If an
event of default occurs under the Credit Facility, the lenders may declare all amounts outstanding under the Credit Facility immediately due and payable. In such event, the lenders may exercise any rights and remedies they may have by law or
agreement, including the ability to cause all or any part of the collateral securing the Credit Facility to be sold.

There was $192.7
million available in borrowings under the Credit Facility at January 31, 2009 based on the factors described above. There were no borrowings outstanding in fiscal 2008, 2007 or fiscal 2006.

Demand Letter of Credit Facility

On
October 31, 2007, Operating entered into an unsecured, demand letter of credit facility with HSBC which provides for the issuance of up to $35 million of documentary letters of credit on a no fee basis. Outstanding letters of credit were $12.2
million and availability was $22.8 million at January 31, 2009 under this facility.

Term Loan

On May 15, 2006, Operating, as borrower, we and certain of Operatings direct and indirect subsidiaries, as guarantors, entered into the Term
Loan, a $285.0 million senior secured term loan facility with certain lenders named therein as lenders, Goldman Sachs Credit Partners L.P. (GSCP) and Bear, Stearns & Co. Inc. as joint lead arrangers and joint bookrunners, GSCP
as administrative agent and collateral agent, Bear Stearns Corporate Lending Inc. as syndication agent and Wachovia as documentation agent.

The Company is required to make the following annual principal payments based upon certain conditions as set forth in the Term Loan: (i) 1% per annum of the original principal balance of the Term Loan due in quarterly installments and
(ii) an amount equal to 50% of excess cash flow, as defined in the agreement, due within 90 days of the fiscal year-end. In fiscal 2007, the Company made aggregate voluntary prepayments of $75.0 million. In fiscal 2008, the Company made an
additional voluntary prepayment of $25.0 million.

As of January 31, 2009, the amount outstanding under the Term Loan was $100.0
million, including $0.8 million due within the next year. Borrowings bear interest, at our option, at the base rate plus a margin of 0.75% or at LIBOR plus a margin of 1.75% per annum. All borrowings will mature on May 15, 2013.

The IPO and Related Transactions in Fiscal 2006

On July 3, 2006, we completed the IPO of our common stock, issuing 21,620,000 shares of our common stock at a price of $20.00 per share and realizing net proceeds of $402.8 million.



36



---

Since October 1997, when the Company completed a recapitalization as a result of which Texas Pacific
Group (TPG), a private investment group, obtained a controlling interest in us, we have incurred significant amounts of interest on our debt and dividends on our preferred stock. A substantial portion of our outstanding debt and all of
our preferred stock were redeemed, refinanced or converted into shares of our common stock prior to or shortly after the IPO. Specifically:



| |  |  | on May 15, 2006, Operating repurchased, using $285.0 million in borrowings under the Term Loan and $12.7 million of
cash on hand, the total principal amount ($275.0 million) of its 93/4% Notes (plus accrued and unpaid interest of $10.6 million)
in a tender offer and consent solicitation and paid premiums, tender fees and other expenses of $13.3 million,
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | on June 14, 2006, we redeemed all $21.7 million aggregate principal amount of outstanding 131/8% Debentures (plus accrued and unpaid interest of $0.5 million),
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | on July 3, 2006, TPG-MD Investment, LLC, an entity controlled by TPG, our largest shareholder, and our chief executive officer and chairman of the board,
Millard Drexler, converted the $20.0 million principal amount of Operatings 5.0% Notes Payable due 2008 (the 5.0% Notes Payable) (plus accrued and unpaid interest of $3.7 million) into 6,729,186 shares of our common stock at a
conversion price of $3.52 per share of common stock immediately prior to the consummation of the IPO,
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | on July 12, 2006, we made a $35.0 million voluntary prepayment of the borrowings under the Term Loan,
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | on July 13, 2006, TPG purchased from us, at the IPO price of $20.00 per share, 3,673,729 shares of our common stock (the TPG Subscription),
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | on July 13, 2006, we redeemed all outstanding $92.8 million liquidation value of our 141/2% Series A Cumulative Preferred Stock (plus accrued and unpaid dividends of $227.0 million) with a portion of the net proceeds of
the IPO and the TPG Subscription, and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | on July 13, 2006, we redeemed all outstanding $32.5 million liquidation value of our 141/2% Series B Cumulative Redeemable Preferred Stock (plus accrued and unpaid dividends of $79.5 million) with a portion of the net
proceeds of the IPO.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Outlook

Our short-term and long-term liquidity needs arise primarily from principal and interest payments on our indebtedness, capital expenditures associated with our expansion plans and growth strategy and working capital
requirements. Management anticipates that capital expenditures in fiscal 2009 will be approximately $55 million, primarily for opening new stores, information technology enhancements, store renovations and refurbishments and general corporate
purposes. As of January 31, 2009, we were permitted to borrow $192.7 million under the Credit Facility. Our annual debt service obligations will change by $1 million per year for each 1.0% change in the average interest rate we pay based on the
$100.0 million balance of variable interest rate debt outstanding at January 31, 2009. Management believes that our current balances of cash and cash equivalents, cash flow from operations and availability under the Credit Facility will be
adequate to finance working capital needs, planned capital expenditures and debt service obligations for the next twelve months. Our ability to fund our operations and make planned capital expenditures, to make scheduled debt payments, to refinance
indebtedness and to remain in compliance with the financial covenants under our debt agreements depends on our future financing activities, our future operating performance and our future cash flow, which in turn, are subject to prevailing economic
conditions and to financial, business and other factors, some of which are beyond our control.



37



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Off Balance Sheet Arrangements

We enter into documentary letters of credit to facilitate a portion of our international purchase of merchandise. We also enter into standby letters of
credit as required to secure certain of our obligations, including insurance programs and duties related to import purchases. As of January 31, 2009, we had the following obligations under letters of credit in future periods.



|                  |  |               |      |              |   |          |  |          |   |              |   |   |  |   |    
|----------------- |  | ------------- | ---- | ------------ | - | -------- |  | -------- | - | ------------ | - | - |  | - | ---
|Letters of Credit |  | Total         |      | Within1 Year |   | 2-3Years |  | 4-5Years |   | After 5Years
|                  |  | (in millions)
|Standby           |  | $             | 7.3  |              | $ |         |  | $        |  |              | $ |  |  | $ | 7.3
|Documentary       |  |               | 12.2 |              |   | 12.2     |  |          |  |              |   |  |  |   |   
|                  |  |               |      |              |   |          |  |          |   |              |   |   |  |   |    
|                  |  | $             | 19.5 |              | $ | 12.2     |  | $        |  |              | $ |  |  | $ | 7.3
|                  |  |               |      |              |   |          |  |          |   |              |   |   |  |   |    

Contractual Obligations

The following table summarizes our contractual obligations as of January 31, 2009 and the effect such obligations are expected to have on our
liquidity and cash flows in future periods:



|                               |  |                       |         |              |   |          |  |          |       |              |   |       |  |   |      
|------------------------------ |  | --------------------- | ------- | ------------ | - | -------- |  | -------- | ----- | ------------ | - | ----- |  | - | -----
|                               |  | Total                 |         | Within1 Year |   | 2-3Years |  | 4-5Years |       | After 5Years
|                               |  | (amounts in millions)
|Term Loan(1)                   |  | $                     | 100.0   |              | $ | 0.8      |  | $        | 2.0   |              | $ | 97.2  |  | $ |     
|Interest on long term debt(2)  |  |                       |         |              |   |          |  |          |       |              |   |       |  |   |      
|Operating lease obligations(3) |  |                       | 604.7   |              |   | 88.3     |  |          | 164.1 |              |   | 125.6 |  |   | 226.7
|Unrecognized tax benefits(4)   |  |                       |         |              |   |          |  |          |       |              |   |       |  |   |      
|Purchase obligations:          |  |                       |         |              |   |          |  |          |       |              |   |       |  |   |      
|Inventory commitments          |  |                       | 298.3   |              |   | 298.3    |  |          |      |              |   |      |  |   |     
|Employment agreements          |  |                       | 7.1     |              |   | 2.2      |  |          | 3.5   |              |   | 1.4   |  |   |     
|Other                          |  |                       | 9.2     |              |   | 1.5      |  |          | 3.1   |              |   | 3.2   |  |   | 1.4  
|                               |  |                       |         |              |   |          |  |          |       |              |   |       |  |   |      
|Total purchase obligations     |  |                       | 314.6   |              |   | 302.0    |  |          | 6.6   |              |   | 4.6   |  |   | 1.4  
|                               |  |                       |         |              |   |          |  |          |       |              |   |       |  |   |      
|Total                          |  | $                     | 1,019.3 |              | $ | 391.1    |  | $        | 172.7 |              | $ | 227.4 |  | $ | 228.1
|                               |  |                       |         |              |   |          |  |          |       |              |   |       |  |   |      



|(1) | Mandatory principal payment requirements are based on, among other things, 1% of original principal balance and annual excess cash flows as defined and subject to certain
conditions.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The Term Loan bears interest at a floating rate of LIBOR + 1.75% or the base rate + 0.75%. As of January 31, 2009, annual interest expense related to the Term Loan is expected
to be approximately $2.5 million.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Operating lease obligations represent obligations under various long-term operating leases entered in the normal course of business for retail and factory stores, warehouses, office
space and equipment requiring minimum annual rentals. Operating lease expense is a significant component of our operating expenses. The lease terms range for various periods of time in various rental markets and are entered into at different times,
which mitigates exposure to market changes that could have a material effect on our results of operations within any given year. Operating lease obligations do not include common area maintenance, insurance, taxes and other occupancy costs, which
constitute approximately an additional 50% of the minimum lease obligations.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | As of January 31, 2009, the Company has $7.4 million in unrecognized tax benefits, which are included in other liabilities on the consolidated balance sheet. While these tax
liabilities may result in future cash outflows, management cannot make reliable estimates of the cash flows by period due to the inherent uncertainty surrounding the effective settlement of these positions.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



38



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Impact of Inflation

Our results of operations and financial condition are presented based on historical cost. While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we
believe the effects of inflation, if any, on our results of operations and financial condition have not been significant.

Recent Accounting
Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair
Value Measurements. SFAS No. 157 establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 is effective for the Company beginning
February 1, 2009. The adoption of SFAS No. 157 will not have a significant impact on the financial condition or results of operations of the Company.

Critical Accounting Policies

Managements discussion and analysis of financial condition and results of
operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires estimates
and judgments that affect the reported amounts of our assets, liabilities, revenues and expenses. Management bases estimates on historical experience and other assumptions it believes to be reasonable under the circumstances and evaluates these
estimates on an on-going basis. Actual results may differ from these estimates under different assumptions or conditions.

The following
critical accounting policies reflect the significant estimates and judgments used in the preparation of our consolidated financial statements. With respect to critical accounting policies, even a relatively minor variance between actual and expected
experience can potentially have a materially favorable or unfavorable impact on subsequent consolidated results of operations. For more information on J.Crews accounting policies, please refer to the Notes to Consolidated Financial Statements
in this annual report on Form 10-K.

Revenue Recognition



| |  |  | We recognize Store sales at the time of sale, and Direct sales at the time merchandise is shipped to customers. Amounts billed to customers for shipping and
handling of catalog and Internet sales are classified as other revenues and recognized at the time of shipment. We must make estimates of future sales returns related to current period sales. Management analyzes historical returns, current economic
trends and changes in customer acceptance of our products when evaluating the adequacy of the reserve for sales returns.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We licensed our trademark and know-how to Itochu Corporation in Japan through January 31, 2009, for which we received percentage royalty fees. We defer
recognition of advance royalty payments and recognize royalty revenue when sales entitling us to royalty revenue occur.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Employee discounts are classified as a reduction of revenue.
| | - |  | ------------------------------------------------------------



| |  |  | We account for gift cards by recognizing a liability at the time a gift card is sold and recognizing revenue at the time the gift card is redeemed for merchandise.
We review our gift card liability on an ongoing basis and recognize our estimate of the unredeemed gift card liability on a ratable basis over the estimated period of redemption. We defer revenue and recognize a liability for gift cards issued in
connection with our customer loyalty program. Any unredeemed loyalty gift cards are recognized as income in the period in which they expire.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Inventory Valuation

Merchandise inventories are carried at the lower of average cost or market
value. We capitalize certain design, purchasing and warehousing costs in inventory. We evaluate all of our inventories to determine excess



39



---

inventories based on estimated future sales. Excess inventories may be disposed of through our factory stores, Internet clearance sales and other
liquidations. Based on historical results experienced through various methods of disposition, we write down the carrying value of inventories that are not expected to be sold at or above costs. Additionally, we reduce the cost of inventories based
on an estimate of lost or stolen items each period.

Deferred Catalog Costs

The costs associated with direct response advertising, which consist primarily of catalog production and mailing costs, are capitalized and amortized over
the expected future revenue stream of the catalog mailings, which we currently estimate to be approximately three months. The expected future revenue stream is determined based on historical revenue trends developed over an extended period of time.
If the current revenue streams were to diverge from the expected trend, our amortization of deferred catalog costs would be adjusted accordingly.

Asset Impairment

We are exposed to potential impairment if the book value of our assets exceeds their expected future cash
flows. The major components of our long-lived assets are store fixtures, equipment and leasehold improvements. The impairment of unamortized costs is measured at the store level and the unamortized cost is reduced to fair value if it is determined
that the sum of expected discounted future net cash flows is less than net book value.

Income Taxes

Income taxes are calculated in accordance with SFAS No. 109, Accounting for Income Taxes, which requires the use of the asset and
liability method. Deferred tax assets and liabilities are recognized based on the difference between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are
measured using current enacted tax rates in effect in the years in which those temporary differences are expected to reverse. Inherent in the measurement of deferred balances are certain judgments and interpretations of enacted tax law and published
guidance.

Management believes it is more likely than not that forecasted income, together with the tax effects of the deferred tax
liabilities, will be sufficient to fully recover the remaining deferred tax assets. In the event that all or part of the net deferred tax assets are determined not to be realizable in the future, a valuation allowance would be charged to earnings in
the period such determination is made. Similarly, if the Company subsequently realizes deferred tax assets that were previously determined unrealizable, any valuation allowance would be reversed into income in the period such determination is made.
In addition, the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with managements
expectation could have a material impact on the Companys results of operations and financial position.

On February 4, 2007, the
Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement No. 109, (FIN 48). FIN 48 prescribes a comprehensive model for how a company should
recognize, measure, present and disclose in its financial statements, uncertain tax positions that it has taken or expects to take on a tax return. This interpretation requires that a company recognize in its financial statements the impact of tax
positions that meet a more likely than not threshold, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a
greater than fifty percent likelihood of being realized upon ultimate settlement.

Share-Based Compensation

On January 29, 2006, we adopted SFAS No. 123(R), Share-Based Payment requiring the recognition of compensation expense in the
consolidated statements of operations related to the fair value of employee share-



40



---

based awards including stock options. Determining the fair value of options at the grant date requires judgment, including estimating the expected term that
stock options will be outstanding prior to exercise, the associated volatility and the expected dividends. Prior to adopting SFAS No. 123(R), we applied Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employeesand related interpretations, in accounting for share-based compensation plans. All employee stock options were granted at or above the grant date market price. Accordingly, no compensation cost was recognized for stock option
grants in prior periods. In accordance with SFAS No. 123(R), judgment is required in estimating the amount of share-based awards to be forfeited prior to vesting. If actual forfeitures differ significantly from the estimates, share-based
compensation expense could be materially impacted.



|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|-------- | -----------------------------------------------------------

Our principal market risk relates to interest rate sensitivity, which is the risk that future changes in interest rates will reduce our net income or net assets. Our Credit Facility and Term Loan carry floating rates of interest that
are a function of prime rate or LIBOR. A one percentage point increase in the interest rate on our variable rate debt would result in a change in income before taxes of approximately $100,000 for each $10.0 million of borrowings under the Credit
Facility and approximately $1.0 million for the $100.0 million of borrowings under the Term Loan.

We also enter into letters of credit
primarily to facilitate a portion of our international purchase of merchandise. The letters of credit are primarily denominated in U.S. dollars. Outstanding letters of credit at January 31, 2009 were $19.5 million, including $7.3 million
of standby letters of credit.



|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
|------- | --------------------------------------------

See
Index to Financial Statements, which is located on page F-1 of this report.



|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
|------- | -------------------------------------------------------------------------------------

None.



|ITEM 9A. | CONTROLS AND PROCEDURES.
|-------- | ------------------------

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Executive Vice President and Chief Financial Officer,
carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on
that evaluation, our Chief Executive Officer and our Executive Vice President and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that
information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

Managements Report on Internal Control over Financial Reporting

The Companys management is responsible for establishing and maintaining adequate internal controls over financial reporting. The Companys internal control system was designed to provide reasonable
assurance to the Companys management and board of directors regarding the preparation and fair presentation of published financial statements. Management evaluated the effectiveness of the Companys internal control over financial
reporting using the criteria set forth by the Committee of Sponsoring Organizations (COSO) of the Treadway



41



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Commission in Internal Control-Integrated Framework. Management, under the supervision and with the participation of the Companys Chief
Executive Officer and Chief Financial Officer, assessed the effectiveness of the Companys internal control over financial reporting as of January 31, 2009 and concluded that it is effective. The Companys independent auditors have
issued an audit report on the effectiveness of the Companys internal control over financial reporting. That report appears herein on page F-3.

Changes in Internal Control over Financial Reporting

There were no changes in internal control over financial reporting
that occurred during the fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



|ITEM 9B. | OTHER INFORMATION.
|-------- | ------------------

None.



42



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PART III



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE OF THE REGISTRANT.
|-------- | -------------------------------------------------------------------------

The information set forth in the Proxy Statement for the 2009 Annual Meeting of Stockholders is incorporated herein by reference. The Proxy Statement will be filed with the SEC within 120 days after the end of the
fiscal year covered by this Form 10-K pursuant to Regulation 14A under the Exchange Act.

In 2008, we submitted to the New York Stock
Exchange the Annual CEO Certification required pursuant to Section 303A.12(A) of the New York Stock Exchanges Listed Company Manual.



|ITEM 11. | EXECUTIVE COMPENSATION.
|-------- | -----------------------

The information set forth
in the Proxy Statement for the 2009 Annual Meeting of Stockholders is incorporated herein by reference. The Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10-K pursuant to Regulation
14A under the Exchange Act.



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
|-------- | -----------------------------------------------------------------------------------------------

Security ownership of management as set forth in the Proxy Statement for the 2009 Annual Meeting of Stockholders is incorporated herein by reference. The
Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10-K pursuant to Regulation 14A under the Exchange Act.



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
|-------- | -----------------------------------------------

The information set forth in the Proxy Statement for the 2009 Annual Meeting of Stockholders is incorporated herein by reference. The Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year covered by
this Form 10-K pursuant to Regulation 14A under the Exchange Act.



|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES.
|-------- | ---------------------------------------

The
information required by this item is incorporated herein by reference to the section entitled Independent Registered Public Accounting Firm Fees and Services in the Proxy Statement for the 2009 Annual Meeting of Stockholders. The Proxy
Statement will be filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10-K pursuant to Regulation 14A under the Exchange Act.



43



---

PART IV



|ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
|-------- | ----------------------------------------



| | (a) | Financial Statements and Financial Statement Schedules. See Index to Financial Statements which is located on page F-1 of this report.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------



| | (b) | Exhibits. See the exhibit index which is included herein.
| | --- | ---------------------------------------------------------



44



---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                     |  |  |  |                    |  |                        |  |                                        
|-------------------- |  |  |  | ------------------ |  | ---------------------- |  | ---------------------------------------
|                     |  |  |  | J.CREW GROUP, INC.
|                     |  |  | 
|Date: March 23, 2009 |  |  |  | By:                |  | /s/    MILLARD DREXLER
|                     |  |  |  |                    |  |                        |  | Millard Drexler Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities indicated, on March 23, 2009.



|                                       |  |                                                                                                     |  |      
|-------------------------------------- |  | --------------------------------------------------------------------------------------------------- |  | -----
|                                       |  | Signature                                                                                           |  | Title
|                                       | 
|/s/    MILLARD
DREXLER Millard Drexler |  | Chairman of the Board,Chief Executive Officer and a Director(Principal Executive Officer)          
|                                       | 
|/s/    JAMES
SCULLY James Scully       |  | Chief Administrative Officer andChief Financial Officer(Principal Financial and Accounting Officer)
|                                       | 
|* Mary Ann Casati                      |  | Director                                                                                           
|                                       | 
|* Jonathan Coslet                      |  | Director                                                                                           
|                                       | 
|* James Coulter                        |  | Director                                                                                           
|                                       | 
|* David House                          |  | Director                                                                                           
|                                       | 
|* Steven Grand-Jean                    |  | Director                                                                                           
|                                       | 
|* Heather Reisman                      |  | Director                                                                                           
|                                       | 
|* Stuart Sloan                         |  | Director                                                                                           
|                                       | 
|* Josh Weston                          |  | Director                                                                                           
|                                       |  |                                                                                                    
|*By:                                   |  | /s/    JAMES
SCULLY James Scully, Attorney-in-Fact                                                  |  |      



45



---

J.Crew Group, Inc.

INDEX TO FINANCIAL STATEMENTS



|                                                                                                                                                  |  |     
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|Audited Consolidated Financial Statements                                                                                                         |  |     
|                                                                                                                                                  | 
|Reports of Independent Registered Public Accounting Firm                                                                                          |  | F-2 
|                                                                                                                                                  | 
|Consolidated Balance Sheets as of February 2, 2008 and January 31, 2009                                                                           |  | F-4 
|                                                                                                                                                  | 
|Consolidated Statements of Operations for the years ended February 3, 2007, February 2, 2008 and January 
31, 2009                                |  | F-5 
|                                                                                                                                                  | 
|Consolidated Statements of Changes in Stockholders Equity (Deficit) for the years ended February 
3, 2007, February 2, 2008 and January 31, 2009 |  | F-6 
|                                                                                                                                                  | 
|Consolidated Statements of Cash Flows for the years ended February 3, 2007, February 2, 2008 and January 
31, 2009                                |  | F-7 
|                                                                                                                                                  | 
|Notes to Consolidated Financial Statements                                                                                                        |  | F-8 
|                                                                                                                                                  | 
|Financial Statement Schedules                                                                                                                     |  |     
|                                                                                                                                                  | 
|Schedule IIValuation and Qualifying Accounts for the years ended February 3, 2007, 
February 2, 2008 and January 31, 2009                        |  | F-24



F-1



---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

J.Crew Group, Inc.:

We have audited the accompanying consolidated balance sheets of J.Crew Group, Inc. and subsidiaries (Group) as of
February 2, 2008 and January 31, 2009, and the related consolidated statements of operations, stockholders equity (deficit), and cash flows for each of the years in the three-year period ended January 31, 2009. In connection
with our audits of the consolidated financial statements, we also have audited financial statement schedule II. These consolidated financial statements and the financial statement schedule are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated financial statements and the financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Group as of February 2, 2008 and January 31, 2009 and the results
of its operations and its cash flows for each of the years in the three-year period ended January 31, 2009, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Groups internal control over financial reporting as of January 31, 2009, based on the
criteria established inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 23, 2009 expressed an unqualified opinion on the
effectiveness of Groups internal control over financial reporting.

As discussed in Note 2 to the consolidated financial statements,
Group has changed its method of accounting for share-based payments in the year ended February 3, 2007 due to the adoption of Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment. Also,
as discussed in Note 15 to the consolidated financial statements, Group has changed its method of accounting for uncertainty in income taxes in the year ended February 2, 2008 due to the adoption of FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109.

/s/ KPMG LLP

New York, New York

March 23, 2009



F-2



---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

J.Crew Group, Inc.:

We have audited J.Crew Group, Inc. and subsidiaries (Group) internal control over financial reporting as of
January 31, 2009, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).Groups management is responsible for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Managements Report on Internal Control over Financial
Reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.

A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of Groups assets that could have a material effect
on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.

In our opinion, Group maintained, in all material respects, effective internal control over financial reporting as of
January 31, 2009, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets
of Group as of February 2, 2008 and January 31, 2009, and the related consolidated statements of operations, stockholders equity (deficit) and cash flows for each of the years in the three-year period ended January 31, 2009, and
our report dated March 23, 2009 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

New York, New York

March 23, 2009



F-3



---

J.CREW GROUP, INC.

Consolidated Balance Sheets

(in thousands, except shares)



|                                                                                                                                                  |  |                 |          |   |                 |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | -------- | - | --------------- | - | -------- | -
|                                                                                                                                                  |  | February 2,2008 |          |   | January 31,2009 |  
|Assets                                                                                                                                            |  |                 |          |   |                 |   |          |  
|Cash and cash equivalents                                                                                                                         |  | $               | 131,510  |   |                 | $ | 146,430  |  
|Merchandise inventories                                                                                                                           |  |                 | 158,525  |   |                 |   | 187,044  |  
|Prepaid expenses and other current assets                                                                                                         |  |                 | 33,293   |   |                 |   | 34,926   |  
|Income taxes receivable                                                                                                                           |  |                 | 9,794    |   |                 |   | 23,116   |  
|                                                                                                                                                  |  |                 |          |   |                 |   |          |  
|Total current assets                                                                                                                              |  |                 | 333,122  |   |                 |   | 391,516  |  
|                                                                                                                                                  |  |                 |          |   |                 |   |          |  
|Property and equipmentat cost                                                                                                                    |  |                 | 305,014  |   |                 |   | 344,952  |  
|Less accumulated depreciation and amortization                                                                                                    |  |                 | (136,722 | ) |                 |   | (143,277 | )
|                                                                                                                                                  |  |                 |          |   |                 |   |          |  
|                                                                                                                                                  |  |                 | 168,292  |   |                 |   | 201,675  |  
|                                                                                                                                                  |  |                 |          |   |                 |   |          |  
|Deferred income taxes, net                                                                                                                        |  |                 | 20,188   |   |                 |   | 8,862    |  
|Other assets                                                                                                                                      |  |                 | 13,994   |   |                 |   | 11,756   |  
|                                                                                                                                                  |  |                 |          |   |                 |   |          |  
|Total assets                                                                                                                                      |  | $               | 535,596  |   |                 | $ | 613,809  |  
|                                                                                                                                                  |  |                 |          |   |                 |   |          |  
|Liabilities and Stockholders Equity                                                                                                              |  |                 |          |   |                 |   |          |  
|Accounts payable                                                                                                                                  |  | $               | 101,277  |   |                 | $ | 119,719  |  
|Other current liabilities                                                                                                                         |  |                 | 91,414   |   |                 |   | 83,889   |  
|Current portion of long-term debt                                                                                                                 |  |                 |         |   |                 |   | 800      |  
|Deferred income taxes, net                                                                                                                        |  |                 | 2,382    |   |                 |   | 4,049    |  
|                                                                                                                                                  |  |                 |          |   |                 |   |          |  
|Total current liabilities                                                                                                                         |  |                 | 195,073  |   |                 |   | 208,457  |  
|                                                                                                                                                  |  |                 |          |   |                 |   |          |  
|Deferred credits                                                                                                                                  |  |                 | 67,600   |   |                 |   | 73,815   |  
|Long-term debt                                                                                                                                    |  |                 | 125,000  |   |                 |   | 99,200   |  
|Other liabilities                                                                                                                                 |  |                 | 7,601    |   |                 |   | 7,388    |  
|Stockholders equity:                                                                                                                             |  |                 |          |   |                 |   |          |  
|Common stock $.01 par value; authorized 200,000,000 shares; issued 62,823,940 and 63,791,590 shares; outstanding 61,574,862 and 62,529,563
shares |  |                 | 628      |   |                 |   | 637      |  
|Additional paid-in capital                                                                                                                        |  |                 | 554,127  |   |                 |   | 585,003  |  
|Accumulated deficit                                                                                                                               |  |                 | (411,208 | ) |                 |   | (357,091 | )
|Treasury stock, at cost (1,249,078 and 1,262,027 shares)                                                                                          |  |                 | (3,225   | ) |                 |   | (3,600   | )
|                                                                                                                                                  |  |                 |          |   |                 |   |          |  
|Total stockholders equity                                                                                                                        |  |                 | 140,322  |   |                 |   | 224,949  |  
|                                                                                                                                                  |  |                 |          |   |                 |   |          |  
|Total liabilities and stockholders equity                                                                                                        |  | $               | 535,596  |   |                 | $ | 613,809  |  
|                                                                                                                                                  |  |                 |          |   |                 |   |          |  

The accompanying notes are an integral part of these consolidated financial statements.



F-4



---

J.CREW GROUP, INC.

Consolidated Statements of Operations

(in thousands, except share data)



|                                                                                                          |  |                 |           |   |                 |   |                 |  |   |          
|--------------------------------------------------------------------------------------------------------- |  | --------------- | --------- | - | --------------- | - | --------------- |  | - | ---------
|                                                                                                          |  | Years Ended(1) 
|                                                                                                          |  | February 3,2007 |           |   | February 2,2008 |   | January 31,2009
|Revenues:                                                                                                 |  |                 |           |   |                 |   |                 |  |   |          
|Net sales                                                                                                 |  | $               | 1,117,153 |   |                 | $ | 1,292,254       |  | $ | 1,383,200
|Other                                                                                                     |  |                 | 34,947    |   |                 |   | 42,469          |  |   | 44,770   
|                                                                                                          |  |                 |           |   |                 |   |                 |  |   |          
|                                                                                                          |  |                 | 1,152,100 |   |                 |   | 1,334,723       |  |   | 1,427,970
|Cost of goods sold, including buying and occupancy costs                                                  |  |                 | 651,748   |   |                 |   | 746,180         |  |   | 872,547  
|                                                                                                          |  |                 |           |   |                 |   |                 |  |   |          
|Gross profit                                                                                              |  |                 | 500,352   |   |                 |   | 588,543         |  |   | 555,423  
|Selling, general and administrative expenses                                                              |  |                 | 374,738   |   |                 |   | 416,064         |  |   | 458,738  
|                                                                                                          |  |                 |           |   |                 |   |                 |  |   |          
|Income from operations                                                                                    |  |                 | 125,614   |   |                 |   | 172,479         |  |   | 96,685   
|Interest expense-net of interest income of $3,000, $4,043 and $2,037 in 2006, 2007 and 2008, respectively |  |                 | 43,993    |   |                 |   | 11,224          |  |   | 5,940    
|Loss on refinancing of debt                                                                               |  |                 | 10,039    |   |                 |   |                |  |   |         
|                                                                                                          |  |                 |           |   |                 |   |                 |  |   |          
|Income before income taxes                                                                                |  |                 | 71,582    |   |                 |   | 161,255         |  |   | 90,745   
|Provision (benefit) for income taxes                                                                      |  |                 | (6,200    | ) |                 |   | 64,180          |  |   | 36,628   
|                                                                                                          |  |                 |           |   |                 |   |                 |  |   |          
|Net income                                                                                                |  |                 | 77,782    |   |                 |   | 97,075          |  |   | 54,117   
|Preferred dividends                                                                                       |  |                 | (6,141    | ) |                 |   |                |  |   |         
|                                                                                                          |  |                 |           |   |                 |   |                 |  |   |          
|Net income applicable to common shareholders                                                              |  | $               | 71,641    |   |                 | $ | 97,075          |  | $ | 54,117   
|                                                                                                          |  |                 |           |   |                 |   |                 |  |   |          
|Net income per share:                                                                                     |  |                 |           |   |                 |   |                 |  |   |          
|Basic                                                                                                     |  | $               | 1.61      |   |                 | $ | 1.61            |  | $ | 0.88     
|                                                                                                          |  |                 |           |   |                 |   |                 |  |   |          
|Diluted                                                                                                   |  | $               | 1.49      |   |                 | $ | 1.52            |  | $ | 0.85     
|                                                                                                          |  |                 |           |   |                 |   |                 |  |   |          
|Weighted average shares outstanding:                                                                      |  |                 |           |   |                 |   |                 |  |   |          
|Basic                                                                                                     |  |                 | 44,558    |   |                 |   | 60,346          |  |   | 61,687   
|                                                                                                          |  |                 |           |   |                 |   |                 |  |   |          
|Diluted                                                                                                   |  |                 | 48,039    |   |                 |   | 63,748          |  |   | 64,027   
|                                                                                                          |  |                 |           |   |                 |   |                 |  |   |          



|(1) | Year ended February 3, 2007 consisted of 53 weeks. Years ended February 2, 2008 and January 31, 2009 consisted of 52 weeks.
|--- | ---------------------------------------------------------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated financial statements.



F-5



---

J.CREW GROUP, INC.

Consolidated Statements of Changes in Stockholders Equity (Deficit)

(in
thousands, except shares)



|                                                                     |  |              |   |  |                          |     |   |                    |   |         |               |  |   |                      |   |  |                                    |        |   |  |   |        |   |  |   |          |  
|-------------------------------------------------------------------- |  | ------------ | - |  | ------------------------ | --- | - | ------------------ | - | ------- | ------------- |  | - | -------------------- | - |  | ---------------------------------- | ------ | - |  | - | ------ | - |  | - | -------- | -
|                                                                     |  | Common Stock |   |  | Additionalpaid-incapital |     |   | Accumulateddeficit |   |         | Treasurystock |  |   | Deferredcompensation |   |  | Totalstockholdersequity (deficit) |       
|                                                                     |  | Shares       |   |  | Amount                   |     |   |                    |   |         |              
|January 28, 2006                                                     |  | 27,757,289   |   |  | $                        | 278 |   |                    | $ |        |               |  | $ | (582,780             | ) |  | $                                  | (2,686 | ) |  | $ | (2,655 | ) |  | $ | (587,843 | )
|Reclassification of deferred compensation                            |  |             |   |  |                          |    |   |                    |   |        |               |  |   | (2,655               | ) |  |                                    |       |   |  |   | 2,655  |   |  |   |         |  
|Net income                                                           |  |             |   |  |                          |    |   |                    |   |        |               |  |   | 77,782               |   |  |                                    |       |   |  |   |       |   |  |   | 77,782   |  
|Issuance of 21,620,000 shares of common stock, net of costs incurred |  | 21,620,000   |   |  |                          | 216 |   |                    |   | 402,558 |               |  |   |                     |   |  |                                    |       |   |  |   |       |   |  |   | 402,774  |  
|Conversion of 5% convertible notes payable                           |  | 6,729,186    |   |  |                          | 67  |   |                    |   | 23,619  |               |  |   |                     |   |  |                                    |       |   |  |   |       |   |  |   | 23,686   |  
|Redemption of preferred stock                                        |  | 3,673,729    |   |  |                          | 37  |   |                    |   | 73,438  |               |  |   |                     |   |  |                                    |       |   |  |   |       |   |  |   | 73,475   |  
|Issuance of restricted stock                                         |  | 15,000       |   |  |                          |    |   |                    |   |        |               |  |   |                     |   |  |                                    |       |   |  |   |       |   |  |   |         |  
|Stock based compensation                                             |  |             |   |  |                          |    |   |                    |   | 3,801   |               |  |   |                     |   |  |                                    |       |   |  |   |       |   |  |   | 3,801    |  
|Exercise of stock options                                            |  | 1,319,254    |   |  |                          | 13  |   |                    |   | 5,173   |               |  |   |                     |   |  |                                    |       |   |  |   |       |   |  |   | 5,186    |  
|Preferred stock dividends                                            |  |             |   |  |                          |    |   |                    |   | (6,141  | )             |  |   |                     |   |  |                                    |       |   |  |   |       |   |  |   | (6,141   | )
|Excess tax benefit from exercise of stock options                    |  |             |   |  |                          |    |   |                    |   | 12,900  |               |  |   |                     |   |  |                                    |       |   |  |   |       |   |  |   | 12,900   |  
|                                                                     |  |              |   |  |                          |     |   |                    |   |         |               |  |   |                      |   |  |                                    |        |   |  |   |        |   |  |   |          |  
|February 3, 2007                                                     |  | 61,114,458   |   |  |                          | 611 |   |                    |   | 515,348 |               |  |   | (507,653             | ) |  |                                    | (2,686 | ) |  |   |       |   |  |   | 5,620    |  
|                                                                     |  |              |   |  |                          |     |   |                    |   |         |               |  |   |                      |   |  |                                    |        |   |  |   |        |   |  |   |          |  
|Adoption of FIN 48                                                   |  |             |   |  |                          |    |   |                    |   |        |               |  |   | (630                 | ) |  |                                    |       |   |  |   |       |   |  |   | (630     | )
|Net income                                                           |  |             |   |  |                          |    |   |                    |   |        |               |  |   | 97,075               |   |  |                                    |       |   |  |   |       |   |  |   | 97,075   |  
|Issuance of restricted stock                                         |  | 325,000      |   |  |                          | 3   |   |                    |   | (3      | )             |  |   |                     |   |  |                                    |       |   |  |   |       |   |  |   |         |  
|Net settlement of vested restricted stock                            |  |             |   |  |                          |    |   |                    |   |        |               |  |   |                     |   |  |                                    | (539   | ) |  |   |       |   |  |   | (539     | )
|Forfeiture of restricted stock                                       |  | (90,734      | ) |  |                          | (1  | ) |                    |   | 1       |               |  |   |                     |   |  |                                    |       |   |  |   |       |   |  |   |         |  
|Stock based compensation                                             |  |             |   |  |                          |    |   |                    |   | 6,975   |               |  |   |                     |   |  |                                    |       |   |  |   |       |   |  |   | 6,975    |  
|Issuance of common stock under ASPP                                  |  | 53,893       |   |  |                          | 1   |   |                    |   | 1,819   |               |  |   |                     |   |  |                                    |       |   |  |   |       |   |  |   | 1,820    |  
|Exercise of stock options                                            |  | 1,421,323    |   |  |                          | 14  |   |                    |   | 7,810   |               |  |   |                     |   |  |                                    |       |   |  |   |       |   |  |   | 7,824    |  
|Excess tax benefit from exercise of stock options                    |  |             |   |  |                          |    |   |                    |   | 22,177  |               |  |   |                     |   |  |                                    |       |   |  |   |       |   |  |   | 22,177   |  
|                                                                     |  |              |   |  |                          |     |   |                    |   |         |               |  |   |                      |   |  |                                    |        |   |  |   |        |   |  |   |          |  
|February 2, 2008                                                     |  | 62,823,940   |   |  |                          | 628 |   |                    |   | 554,127 |               |  |   | (411,208             | ) |  |                                    | (3,225 | ) |  |   |       |   |  |   | 140,322  |  
|                                                                     |  |              |   |  |                          |     |   |                    |   |         |               |  |   |                      |   |  |                                    |        |   |  |   |        |   |  |   |          |  
|Net income                                                           |  |             |   |  |                          |    |   |                    |   |        |               |  |   | 54,117               |   |  |                                    |       |   |  |   |       |   |  |   | 54,117   |  
|Issuance of restricted stock                                         |  | 14,994       |   |  |                          |    |   |                    |   |        |               |  |   |                     |   |  |                                    |       |   |  |   |       |   |  |   |         |  
|Net settlement of vested restricted stock                            |  |             |   |  |                          |    |   |                    |   |        |               |  |   |                     |   |  |                                    | (375   | ) |  |   |       |   |  |   | (375     | )
|Forfeiture of restricted stock                                       |  | (56,131      | ) |  |                          | (1  | ) |                    |   | 1       |               |  |   |                     |   |  |                                    |       |   |  |   |       |   |  |   |         |  
|Stock based compensation                                             |  |             |   |  |                          |    |   |                    |   | 8,405   |               |  |   |                     |   |  |                                    |       |   |  |   |       |   |  |   | 8,405    |  
|Issuance of common stock under ASPP                                  |  | 111,215      |   |  |                          | 1   |   |                    |   | 1,539   |               |  |   |                     |   |  |                                    |       |   |  |   |       |   |  |   | 1,540    |  
|Exercise of stock options                                            |  | 897,572      |   |  |                          | 9   |   |                    |   | 7,430   |               |  |   |                     |   |  |                                    |       |   |  |   |       |   |  |   | 7,439    |  
|Excess tax benefit from exercise of stock options                    |  |             |   |  |                          |    |   |                    |   | 13,501  |               |  |   |                     |   |  |                                    |       |   |  |   |       |   |  |   | 13,501   |  
|                                                                     |  |              |   |  |                          |     |   |                    |   |         |               |  |   |                      |   |  |                                    |        |   |  |   |        |   |  |   |          |  
|January 31, 2009                                                     |  | 63,791,590   |   |  | $                        | 637 |   |                    | $ | 585,003 |               |  | $ | (357,091             | ) |  | $                                  | (3,600 | ) |  | $ |       |   |  | $ | 224,949  |  
|                                                                     |  |              |   |  |                          |     |   |                    |   |         |               |  |   |                      |   |  |                                    |        |   |  |   |        |   |  |   |          |  

The accompanying notes are an integral part of these consolidated financial statements.



F-6



---

J.CREW GROUP, INC.

Consolidated Statements of Cash Flows

(in thousands, except shares)



|                                                                                                                          |  |                 |          |   |                 |   |         |                 |  |   |         |  
|------------------------------------------------------------------------------------------------------------------------- |  | --------------- | -------- | - | --------------- | - | ------- | --------------- |  | - | ------- | -
|                                                                                                                          |  | Years Ended     |         
|                                                                                                                          |  | February 3,2007 |          |   | February 2,2008 |   |         | January 31,2009 | 
|Cash flows from operating activities:                                                                                     |  |                 |          |   |                 |   |         |                 |  |   |         |  
|Net income                                                                                                                |  | $               | 77,782   |   |                 | $ | 97,075  |                 |  | $ | 54,117  |  
|Adjustments to reconcile to net cash provided by operating activities:                                                    |  |                 |          |   |                 |   |         |                 |  |   |         |  
|Depreciation and amortization of property and equipment                                                                   |  |                 | 33,525   |   |                 |   | 34,140  |                 |  |   | 44,143  |  
|Amortization of deferred financing costs                                                                                  |  |                 | 1,460    |   |                 |   | 2,319   |                 |  |   | 2,150   |  
|Deferred income taxes                                                                                                     |  |                 | (10,900  | ) |                 |   | 8,066   |                 |  |   | 12,993  |  
|Non-cash interest expense (including redeemable preferred stock dividends $20,800 in 2006)                                |  |                 | 21,292   |   |                 |   |        |                 |  |   |        |  
|Share based compensation                                                                                                  |  |                 | 3,801    |   |                 |   | 6,975   |                 |  |   | 8,405   |  
|Loss on refinancing of debt                                                                                               |  |                 | 10,039   |   |                 |   |        |                 |  |   |        |  
|Excess tax benefit from share based compensation                                                                          |  |                 | (12,900  | ) |                 |   | (22,177 | )               |  |   | (13,501 | )
|Changes in operating assets and liabilities:                                                                              |  |                 |          |   |                 |   |         |                 |  |   |         |  
|Merchandise inventories                                                                                                   |  |                 | (24,479  | ) |                 |   | (17,855 | )               |  |   | (28,519 | )
|Prepaid expenses and other current assets                                                                                 |  |                 | (1,596   | ) |                 |   | (2,565  | )               |  |   | (1,633  | )
|Other assets                                                                                                              |  |                 | 1,004    |   |                 |   | (1,475  | )               |  |   | 88      |  
|Accounts payable and other liabilities                                                                                    |  |                 | 19,130   |   |                 |   | 43,341  |                 |  |   | 17,132  |  
|Federal and state income taxes                                                                                            |  |                 | 2,819    |   |                 |   | 20,386  |                 |  |   | (15     | )
|                                                                                                                          |  |                 |          |   |                 |   |         |                 |  |   |         |  
|Net cash provided by operating activities                                                                                 |  |                 | 120,977  |   |                 |   | 168,230 |                 |  |   | 95,360  |  
|                                                                                                                          |  |                 |          |   |                 |   |         |                 |  |   |         |  
|Cash flow from investing activities:                                                                                      |  |                 |          |   |                 |   |         |                 |  |   |         |  
|Capital expenditures                                                                                                      |  |                 | (45,931  | ) |                 |   | (80,618 | )               |  |   | (77,526 | )
|                                                                                                                          |  |                 |          |   |                 |   |         |                 |  |   |         |  
|Cash flow from financing activities:                                                                                      |  |                 |          |   |                 |   |         |                 |  |   |         |  
|Proceeds from share-based compensation plans                                                                              |  |                 | 5,186    |   |                 |   | 9,644   |                 |  |   | 8,960   |  
|Excess tax benefit from share-based compensation                                                                          |  |                 | 12,900   |   |                 |   | 22,177  |                 |  |   | 13,501  |  
|Costs incurred in connection with amended and restated credit agreement                                                   |  |                 |         |   |                 |   | (1,284  | )               |  |   |        |  
|Repayments and redemption of long-term debt                                                                               |  |                 | (386,526 | ) |                 |   | (75,000 | )               |  |   | (25,000 | )
|Redemption of preferred stock                                                                                             |  |                 | (358,271 | ) |                 |   |        |                 |  |   |        |  
|Proceeds from issuance of long-term debt, net of debt issuance costs                                                      |  |                 | 276,516  |   |                 |   |        |                 |  |   |        |  
|Proceeds from issuance of common stock, net of underwriting discount and offering costs                                   |  |                 | 402,774  |   |                 |   |        |                 |  |   |        |  
|Repurchase of common stock                                                                                                |  |                 |         |   |                 |   | (539    | )               |  |   | (375    | )
|                                                                                                                          |  |                 |          |   |                 |   |         |                 |  |   |         |  
|Net cash provided by (used in) financing activities                                                                       |  |                 | (47,421  | ) |                 |   | (45,002 | )               |  |   | (2,914  | )
|                                                                                                                          |  |                 |          |   |                 |   |         |                 |  |   |         |  
|Increase in cash and cash equivalents:                                                                                    |  |                 | 27,625   |   |                 |   | 42,610  |                 |  |   | 14,920  |  
|Cash and cash equivalents at beginning of year                                                                            |  |                 | 61,275   |   |                 |   | 88,900  |                 |  |   | 131,510 |  
|                                                                                                                          |  |                 |          |   |                 |   |         |                 |  |   |         |  
|Cash and cash equivalents at end of year                                                                                  |  | $               | 88,900   |   |                 | $ | 131,510 |                 |  | $ | 146,430 |  
|                                                                                                                          |  |                 |          |   |                 |   |         |                 |  |   |         |  
|Supplemental cash flow information:                                                                                       |  |                 |          |   |                 |   |         |                 |  |   |         |  
|Income taxes paid                                                                                                         |  | $               | 1,848    |   |                 | $ | 35,789  |                 |  | $ | 32,492  |  
|                                                                                                                          |  |                 |          |   |                 |   |         |                 |  |   |         |  
|Interest paid                                                                                                             |  | $               | 26,609   |   |                 | $ | 11,600  |                 |  | $ | 5,199   |  
|                                                                                                                          |  |                 |          |   |                 |   |         |                 |  |   |         |  
|Non-cash financing activities:                                                                                            |  |                 |          |   |                 |   |         |                 |  |   |         |  
|Dividends on preferred stock charged directly to stockholders equity (deficit)                                           |  | $               | 6,141    |   |                 | $ |        |                 |  | $ |        |  
|Conversion of principal amount plus accrued and unpaid interest of 5% notes payable into 6,729,186 shares of common stock |  |                 | 23,686   |   |                 |   |        |                 |  |   |        |  
|Liquidation value of Series A preferred stock converted into 3,673,729 shares of common stock                             |  |                 | 73,475   |   |                 |   |        |                 |  |   |        |  

The accompanying notes are an integral part of these consolidated financial statements.



F-7



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J.CREW GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended February 3, 2007, February 2, 2008 and January 31, 2009

(Dollars in thousands, unless otherwise
indicated)

1. Nature of Business and Summary of Significant Accounting Policies

(a) Basis of Presentation

The
consolidated financial statements presented herein are J.Crew Group, Inc. and its wholly-owned subsidiaries (collectively, the Company or Group), which consist of the accounts of J.Crew Group, Inc. and its wholly owned subsidiaries, including J.Crew
Intermediate LLC (Intermediate) and J.Crew Operating Corp. (Operating). Intermediate was formed in March 2003 as a limited liability company. Effective May 2003, Group transferred its investment in Operating to Intermediate. On October 11,
2005, Intermediate was merged into J.Crew Group, Inc., and J.Crew Group, Inc. became the direct parent of Operating.

All significant
intercompany balances and transactions are eliminated in consolidation.

(b) Business

The Company designs, contracts for the manufacture of, markets and distributes womens, mens and childrens apparel, shoes and accessories
under the J.Crew brand name. The Companys products are marketed primarily in the United States through various channels of distribution, including retail and factory stores, catalogs, and the Internet. The Company was also party to a licensing
agreement which granted the licensee exclusive rights to use the Companys trademarks in connection with the manufacture and sale of products in Japan. The license agreement provided for payments based on a specified percentage of net sales.
The license agreement expired at the end of January 2009.

The Company is subject to seasonal fluctuations in its merchandise sales and
results of operations. The Company expects its sales and operating results generally to be lower in the first and second quarters than in the third and fourth quarters (which includes the holiday season) of each fiscal year.

A significant amount of the Companys products are produced in Asia through arrangements with independent contractors. As a result, the
Companys operations could be adversely affected by political instability resulting in the disruption of trade from the countries in which these contractors are located or by the imposition of additional duties or regulations relating to
imports or by the contractors inability to meet the Companys production requirements.

(c) Fiscal Year

The Companys fiscal year ends on the Saturday closest to January 31. The fiscal years 2006, 2007 and 2008 ended on February 3,
2007, February 2, 2008 and January 31, 2009, respectively. Fiscal years 2007 and 2008 consisted of 52 weeks and fiscal year 2006 consisted of 53 weeks.

(d) Use of Estimates in the Preparation of Financial Statements

The preparation of financial
statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates in amounts that may be material to the financial
statements.



F-8



---

(e) Revenue Recognition

Revenue is recognized for catalog and Internet sales when merchandise is shipped to customers and at the time of sale for store sales. Shipping terms for
catalog and Internet sales are FOB shipping point, and title passes to the customer at the time and place of shipment. Prices for all merchandise are listed in the Companys catalogs and website and are confirmed with the customer upon order.
The customer has no cancellation privileges other than customary rights of return that are accounted for in accordance with Statement of Financial Accounting Standards (SFAS) No. 48, Revenue Recognition When Right of Return
Exists.The Company accrues a sales return allowance for estimated returns of merchandise subsequent to the balance sheet date that relate to sales prior to the balance sheet date. The Company presents taxes collected from customers and
remitted to governmental authorities on a net basis in the Consolidated Statements of Operations.

A liability is recognized at the time a
gift card is sold, and revenue is recognized at the time the gift card is redeemed for merchandise. Revenue is deferred and a liability is recognized for gift cards issued in connection with our customer loyalty program. Any unredeemed loyalty gift
cards are recognized as income in the period in which they expire.

Other revenues include the estimated amount of unredeemed gift card
liability based on Company specific historical trends, which amounted to $725, $1,922 and $2,954 in fiscal years 2006, 2007 and 2008, respectively.

Amounts billed to customers for shipping and handling fees related to catalog and Internet sales are included in other revenues at the time of shipment.

Royalty or licensing revenue is recognized as it is earned based on contractually specified percentages applied to reported sales. Advance royalty payments are deferred and recorded as revenue when the related sales
occur.

(f) Merchandise Inventories

Merchandise inventories are stated at the lower of average cost or market. The Company capitalizes certain design, purchasing and warehousing costs in inventory and these costs are included in cost of goods sold as
the inventories are sold.

(g) Advertising and Catalog Costs

Direct response advertising, which consists primarily of catalog production and mailing costs, are capitalized and amortized over the expected future
revenue stream. The Company accounts for catalog costs in accordance with the AICPA Statement of Position, Reporting on Advertising Costs (SOP 93-7). SOP 93-7 requires that the amortization of capitalized advertising
costs be the amount computed using the ratio that current period revenues for the catalog cost pool bear to the total of current and estimated future period revenues for that catalog cost pool. The capitalized costs of direct response advertising
are amortized, commencing with the date catalogs are mailed, over the duration of the expected revenue stream, which was approximately three months for the fiscal years 2006, 2007 and 2008. Deferred catalog costs, included in prepaid expenses and
other current assets, as of February 2, 2008 and January 31, 2009 were $7,607 and $7,996 respectively. Catalog costs, which are reflected in selling, general and administrative expenses, for the fiscal years 2006, 2007 and 2008, were
$43,666, $45,652 and $51,746 respectively.

All other advertising costs, which are not significant, are expensed as incurred.

(h) Deferred Rent and Lease Incentives

Rental payments under operating leases are charged to expense on a straight-line basis after consideration of rent holidays, step rent provisions and escalation clauses. Differences between rental expense and actual rental



F-9



---

payments are recorded as deferred rent and included in deferred credits. Rent is expensed from the date of possession. The Company adopted FAS 13-1,
Accounting for Rental Costs Incurred During a Construction Period, in the fourth quarter of fiscal 2005. Accordingly, rental costs incurred during the construction period will be recognized as rental expense and no longer
capitalized. The unamortized balance of capitalized rent upon adoption of FAS 13-1 is amortized over the remaining lease terms (without consideration of option renewal periods).

The Company receives construction allowances upon entering into certain store leases. These construction allowances are recorded as deferred credits and
are amortized as a reduction of rent expense over the term of the related lease. Deferred construction allowances were $45,310 and $49,168 at February 2, 2008 and January 31, 2009, respectively.

(i) Stock Based Compensation

The
Company accounts for stock-based compensation in accordance with SFAS No. 123 (revised 2004), Share Based Payment (SFAS 123R) effective January 29, 2006. Thus the Company measures the cost of employee
services received in exchange for equity instruments awards issued based on the grant-date fair value of the awards. The Company recognizes compensation expense for share-based awards such as stock options and time or performance based restricted
stock awards on a straight line basis over the requisite service period of the award. Prior to January 29, 2006, the Company accounted for stock based compensation under the recognition and measurement provisions of Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees (APB No. 25). No share based employee compensation cost related to stock options was recognized prior to January 29, 2006.

(j) Property and Equipment

Property
and equipment are stated at cost and are depreciated over the estimated useful lives by the straight-line method. Buildings and improvements are depreciated over estimated useful lives of twenty years. Furniture, fixtures and equipment are
depreciated over estimated useful lives, ranging from three to ten years. Leasehold improvements (including rent formerly capitalized during the construction period) are amortized over the shorter of their useful lives or related lease terms
(without consideration of optional renewal periods).

The Company capitalizes certain costs (included in fixtures and equipment) related to
the acquisition and development of software and amortizes these costs using the straight line method over the estimated useful life of the software, which is three to five years. Certain development costs not meeting the criteria for capitalization
are expensed as incurred.

(k) Impairment of Long-Lived Assets

The Company reviews long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Company assesses the recoverability of such assets based upon estimated cash flow forecasts. Charges for impairment for the fiscal years 2006, 2007 and 2008 were $550, $0, and $2,652
respectively.

(l) Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. This statement requires the use of the asset and liability method of accounting for
income taxes. Under the asset and liability method, deferred taxes are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences
are expected to reverse. The provision for income taxes includes taxes currently payable and deferred taxes resulting from the tax effects of temporary differences between the financial statement and tax bases of



F-10



---

assets and liabilities. The Company maintains valuation allowances where it is more likely than not that all or a portion of a deferred tax asset will not be
realized. Changes in the valuation allowances are included in our tax provision in the period of change. In determining whether a valuation allowance is warranted, the Company evaluates factors such as prior earnings history, expected future
earnings, carry-back and carry-forward periods and tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset.

On February 4, 2007, the Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement No. 109, (FIN 48). FIN 48
prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements, uncertain tax positions that it has taken or expects to take on a tax return. This interpretation requires that a company
recognize in its financial statements the impact of tax positions that meet a more likely than not threshold, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position
should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.

It is the Companys policy to recognize interest income and expense related to income taxes as a component of interest expense, and penalties as a component of selling, general and administrative expenses.

(m) Segment Information

The Company
operates in one reportable business segment. All of the Companys identifiable assets are located in the United States. Export sales are not significant.

(n) Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments, with maturities of 90 days or less when purchased, to be cash equivalents. Cash equivalents, which were $113,637 and $132,402 at February 2, 2008 and January 31, 2009, respectively, are stated
at cost, which approximates market value.

(o) Operating Expenses

Cost of goods sold (including buying and occupancy costs) includes the direct cost of purchased merchandise, freight, design, buying and production costs,
occupancy costs related to store operations and all shipping and handling and delivery costs associated with our Direct business.

Selling,
general and administrative expenses include all operating expenses not included in cost of goods sold, primarily catalog production and mailing costs, administrative payroll, store expenses other than occupancy costs, depreciation and amortization,
credit card fees, and certain warehousing expenseswhich aggregated to $19,468, $22,078, and $30,343 for fiscal years 2006, 2007, and 2008, respectively.

(p) Debt Issuance Costs

Debt issuance costs (included in other assets) are amortized over the term
of the related debt agreements and are included in interest expense-net.

(q) Store Pre-opening Costs

Costs associated with the opening of new stores are expensed as incurred.

(r) Income (Loss) per Share

Basic net income (loss) per share is calculated by dividing net income
applicable to common shareholders by the weighted average number of common shares outstanding. Common shares outstanding included common



F-11



---

stock and restricted stock shares for which no future service is required as a condition to the delivery of the underlying common stock. Diluted net income
(loss) per share includes the determinants of basic income per share and, in addition, reflects the dilutive effect of the common stock deliverable pursuant to stock options and to restricted stock shares for which future service is required as a
condition to the delivery of the underlying common stock.

(s) Reclassification

Certain prior year amounts have been reclassified to conform with current years presentation.

2. Share Based Compensation

At January 31,
2009, the Company had five share-based compensation plans, which are described below:

Amended and Restated 1997 Stock Option Plan

Under the terms of the Amended and Restated 1997 Stock Option Plan (the 1997 Plan), an aggregate of 3,697,374 shares of Group common stock
were allotted for grant to key employees and consultants in the form of non-qualified stock options. The options have terms of seven to ten years and become exercisable over a period of four to five years. Options granted under the 1997 Plan are
subject to various conditions, including under some circumstances, the achievement of certain performance objectives.

2003 Equity Incentive Plan

In January 2003, the Board of Directors of Group approved the adoption of the 2003 Equity Incentive Plan (the 2003 Plan). Under
the terms of the 2003 Plan, an aggregate of 9,288,270 shares of Group common stock were allotted for award to key employees and consultants in the form of non-qualified stock options and restricted shares, as follows:



| |  |  | 2,159,987 shares at an exercise price of $3.52 or fair market value, whichever is greater,
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | 2,159,987 shares at an exercise price of $12.91 or fair market value, whichever is greater,
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | 2,159,987 shares at an exercise price of $18.08 or fair market value, whichever is greater, and
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | 2,808,309 shares for the issuance of restricted shares.
| | - |  | -------------------------------------------------------

The options have terms of ten years and become exercisable over the period provided in each grant agreement. Under the 2003 Plan, the Compensation Committee of the Board of Directors of Group has the discretion to
modify the exercise price and the number of shares reserved for the issuance of stock options and restricted shares.

2005 Equity Incentive Plan

In June 2006, the Board of Directors of Group approved the adoption of the 2005 Equity Incentive Plan (the 2005 Plan). Under
the terms of the 2005 Plan, an aggregate of 1,900,000 shares of Group common stock were allotted for the issuance of options or other stock based awards to employees, independent contractors, and eligible non-employee directors. Awards may be
subject to performance based and/or service based conditions. Stock options are available for issuance at an exercise price representing the fair market value on the date of grant. The options have terms of up to ten years and become exercisable
over a period up to five years.

2007 Associate Stock Purchase Plan

On December 5, 2006, the Companys Board of Directors adopted the J.Crew 2007 Associate Stock Purchase Plan (the ASPP), which was subsequently approved by shareholders. As adopted, 500,000 shares
of



F-12



---

common stock are reserved for issuance under the ASPP. Under the ASPP, full time employees are permitted to purchase a limited number of J.Crew common shares
at 85% of market value as outlined in the ASPP plan document.

2008 Equity Incentive Plan

In June 2008, the Stockholders of Group approved the adoption of the 2008 Equity Incentive Plan (the 2008 Plan). Under the terms of the 2008
Plan, an aggregate of 3,000,000 shares of Group common stock were allotted for the issuance of options or other stock based awards to employees, independent contractors, and eligible non-employee directors. Awards may be subject to performance based
and/or service based conditions. Stock options are available for issuance at an exercise price representing the fair market value on the date of grant. The options have terms of up to ten years and become exercisable over a period up to five years.

The adoption of the 2008 Plan replaced the 1997 Plan, the 2003 Plan, and the 2005 Plan and as a result, the 2008 Plan is the only plan for
issuing all new equity-based incentive awards. While the 1997 Plan, the 2003 Plan, and the 2005 Plan remain in place to govern existing awards, they are frozen as to future awards.

Accounting for Share-Based Payments

Effective January 29, 2006, the Company adopted the fair
value recognition provisions of SFAS No. 123R. In fiscal 2007 and 2008, share-based compensation cost includes: (i) compensation cost for all share-based payments granted prior to, but not yet vested as of January 29, 2006, based on
the grant date fair value estimated in accordance with the original provisions of SFAS No. 123 and (ii) compensation cost for all share-based payments granted subsequent to January 29, 2006, based on the grant date fair value
estimated using the Black-Scholes option pricing model. The Company recognizes compensation expense for stock option awards, and time and performance based restricted stock awards on a straight-line basis over the requisite service period of the
award.

Total share based compensation expense was $3.8 million, $7.0 million and $8.4 million for fiscal 2006, 2007, and 2008,
respectively.

The fair value of stock options was estimated at the date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions:



|                                             |  |      |   |  |      |   |  |      |  
|-------------------------------------------- |  | ---- | - |  | ---- | - |  | ---- | -
|Black-Scholes Option Valuation Assumptions   |  | 2006 |   |  | 2007 |   |  | 2008 |  
|Risk-free interest rates(1)                  |  | 4.8  | % |  | 4.6  | % |  | 3.1  | %
|Dividend yield                               |  |     |   |  |     |   |  |     |  
|Expected volatility(2)                       |  | 40.0 | % |  | 40.0 | % |  | 44.7 | %
|Weighted-average expected term(3) (in years) |  | 5.63 |   |  | 5.42 |   |  | 5.11 |  



|(1) | Based on the U.S. Treasury yield curve in effect at the time of grant.
|--- | ----------------------------------------------------------------------

|(2) | In 2006, volatility was based on average volatility of stock prices of companies in a peer group analysis. Beginning in July 2007, the first anniversary of the Companys
initial public offering, volatility has been based on the historical volatility of the Companys stock price, implied volatility of publicly traded options on the Companys stock and the average volatility of the stock prices of a peer
group.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Represents the period of time options are expected to be outstanding. The weighted average expected option term was determined using the simplified method as allowed by
Staff Accounting Bulletin No. 110, Share-Based Payment.The simplified method calculates the expected term as the average of the vesting term and original contractual term of the options.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of January 31, 2009, there was $23.4 million of total unrecognized compensation cost related to non-vested options that is expected to be
recognized over the remaining weighted-average vesting period of 3.3 years.



F-13



---

The weighted-average grant-date fair value of options granted was $12.49, $17.94 and $12.18 for fiscal 2006, 2007 and 2008, respectively. The aggregate
intrinsic value of stock options exercised was $30.4 million, $52.5 million and $30.4 million for fiscal 2006, 2007 and 2008, respectively.

The following table summarizes stock option activity for fiscal 2008:



|                                     |  |                |   |  |                                |       |                                           |     |                         |   |     
|------------------------------------ |  | -------------- | - |  | ------------------------------ | ----- | ----------------------------------------- | --- | ----------------------- | - | ----
|                                     |  | Shares         |   |  | Weighted AverageExercise Price |       | Weighted AverageRemainingContractual Term |     | AggregateIntrinsicValue
|                                     |  | (in thousands) |   |  |                                |       | (in years)                                |     | (in millions)          
|Outstanding at February 2, 2008      |  | 7,493          |   |  | $                              | 13.32 |                                           |     |                         |   |     
|Granted                              |  | 1,219          |   |  | $                              | 28.18 |                                           |     |                         |   |     
|Exercised                            |  | (898           | ) |  | $                              | 8.28  |                                           |     |                         |   |     
|Forfeited                            |  | (274           | ) |  | $                              | 24.79 |                                           |     |                         |   |     
|                                     |  |                |   |  |                                |       |                                           |     |                         |   |     
|Outstanding at January 31, 2009      |  | 7,540          |   |  | $                              | 15.91 |                                           | 5.5 |                         | $ | 12.2
|                                     |  |                |   |  |                                |       |                                           |     |                         |   |     
|Exercisable at January 31, 2009      |  | 4,899          |   |  | $                              | 9.71  |                                           | 5.2 |                         | $ | 11.0
|                                     |  |                |   |  |                                |       |                                           |     |                         |   |     
|Expected to vest at January 31, 2009 |  | 2,402          |   |  | $                              | 27.40 |                                           | 6.0 |                         | $ | 1.1 
|                                     |  |                |   |  |                                |       |                                           |     |                         |   |     

The following table summarizes information about unvested options for fiscal 2008:



|                             |  |                |   |  |                                       |      
|---------------------------- |  | -------------- | - |  | ------------------------------------- | -----
|                             |  | Shares         |   |  | Weighted AverageGrant Date Fair Value
|                             |  | (in thousands) |   |  |                                      
|Unvested at February 2, 2008 |  | 2,576          |   |  | $                                     | 8.83 
|Granted                      |  | 1,219          |   |  | $                                     | 12.18
|Vested                       |  | (892           | ) |  | $                                     | 3.59 
|Forfeited                    |  | (263           | ) |  | $                                     | 10.82
|                             |  |                |   |  |                                       |      
|Unvested at January 31, 2009 |  | 2,640          |   |  | $                                     | 11.87
|                             |  |                |   |  |                                       |      

The following table summarizes information about stock options outstanding as of January 31,
2009:



|              |  |                  |  |                                                     |       |             |                  |  |                                |  |   |      
|------------- |  | ---------------- |  | --------------------------------------------------- | ----- | ----------- | ---------------- |  | ------------------------------ |  | - | -----
|              |  | Outstanding      |  | Weighted AverageRemainingContractual Term(in years) |       | Exercisable
|Range         |  | Number ofoptions |  | Weighted AverageExercise price                      |       |             | Number ofoptions |  | Weighted AverageExercise price
|$3.53-$4.41   |  | 914              |  | $                                                   | 3.54  |             | 4.6              |  | 900                            |  | $ | 3.54 
|$5.17-$10.76  |  | 2,486            |  | $                                                   | 7.47  |             | 5.5              |  | 2,102                          |  | $ | 7.56 
|$11.80-$18.09 |  | 1,868            |  | $                                                   | 12.90 |             | 5.3              |  | 1,717                          |  | $ | 12.92
|$20.00-$55.72 |  | 2,272            |  | $                                                   | 32.58 |             | 5.9              |  | 180                            |  | $ | 35.11
|              |  |                  |  |                                                     |       |             |                  |  |                                |  |   |      
|$3.53-$55.72  |  | 7,540            |  | $                                                   | 15.91 |             | 5.5              |  | 4,899                          |  | $ | 9.71 
|              |  |                  |  |                                                     |       |             |                  |  |                                |  |   |      

The Company issues new shares upon the exercise of stock options. Cash received from share based
compensation plans was $5.2 million, $9.6 million and $9.0 million for fiscal 2006, 2007, and 2008, respectively.

Certain employees and
directors have been awarded restricted stock under the 2003 Plan, 2005 Plan, and the 2008 Plan. The restricted stock vests primarily over a period of four to five years. Compensation expense is recognized on a straight-line basis over the vesting
period. Compensation expense associated with restricted stock was $0.8 million, $1.3 million, and $1.9 million for fiscal 2006, 2007, and 2008 respectively. As of January 31, 2009, there was $4.6 million of unrecognized compensation cost
related to non-vested restricted stock that is expected to be recognized over the remaining weighted-average vesting period of 2.2 years. The total intrinsic value of restricted shares vested during fiscal 2006, 2007, and 2008 was $21.3 million,
$6.6 million, and $7.0 million, respectively.



F-14



---

In 2007, the Company granted market based restricted stock that vests if a certain predefined shareholder
return threshold is met within a set performance period from the grant date. The fair value of market based awards was estimated at the date of grant using a Monte Carlo Simulation valuation model with the following weighted average assumptions:



|                                               |  |      |  
|---------------------------------------------- |  | ---- | -
|                                               |  | 2007 |  
|Risk-free interest rates(1)                    |  | 4.4  | %
|Dividend yield                                 |  |     |  
|Expected volatility(2)                         |  | 41.2 | %
|Weighted-average performance period (in years) |  | 3    |  

The following table summarizes restricted share activity for fiscal 2008:



|                                |  |                |   |  |                                      |      
|------------------------------- |  | -------------- | - |  | ------------------------------------ | -----
|                                |  | Shares         |   |  | Weighted AverageGrant-DateFair Value
|                                |  | (in thousands) |   |  |                                     
|Outstanding at February 2, 2008 |  | 707            |   |  | $                                    | 12.91
|Granted                         |  | 15             |   |  | $                                    | 33.96
|Vested                          |  | (237           | ) |  | $                                    | 4.16 
|Forfeited                       |  | (56            | ) |  | $                                    | 18.95
|                                |  |                |   |  |                                      |      
|Outstanding at January 31, 2009 |  | 429            |   |  | $                                    | 17.69
|                                |  |                |   |  |                                      |      

Shares available for the issuance of stock options or other stock based awards under our
share-based compensation plans were 1,853,600 at January 31, 2009.

3. Initial and Secondary Public Offering and Related Transactions

On July 3, 2006, the Company completed an initial public offering (IPO) of 21,620,000 shares of common stock at $20.00
per share. The Company received net proceeds of $402,774 from the IPO after deducting $29,650 in underwriting discounts and offering expenses. The Company used the net proceeds to redeem the liquidation value and accreted dividends of all
outstanding Series A and Series B Preferred Stock.

On July 13, 2006, $73,500 of Series A Preferred Stock held by TPG Partners II,
L.P., TPG Parallel II, L.P., and TPG Investors, II L.P., was redeemed with 3,673,729 shares of the Companys common stock.

Immediately prior to the consummation of the IPO, $20,000 principal amount (plus accrued and unpaid interest of $3,700) of 5.0% Convertible Notes Payable was converted into 6,729,186 shares of the Companys common stock at a conversion
price of $3.52 per share.

On January 25, 2007, the Company completed a secondary offering of 9,392,100 shares of common stock offered
by TPG and its affiliates as selling stockholders. The Company did not receive any proceeds from the secondary offering.



F-15



---

4. Property and Equipment

Property and equipment, net consists of:



|                                               |  |                 |          |   |                 |   |          |  
|---------------------------------------------- |  | --------------- | -------- | - | --------------- | - | -------- | -
|                                               |  | February 2,2008 |          |   | January 31,2009 |  
|Land                                           |  | $               | 1,710    |   |                 | $ | 1,710    |  
|Buildings and improvements                     |  |                 | 15,445   |   |                 |   | 15,465   |  
|Fixtures and equipment                         |  |                 | 64,137   |   |                 |   | 104,242  |  
|Leasehold improvements                         |  |                 | 190,944  |   |                 |   | 206,362  |  
|Construction in progress                       |  |                 | 32,778   |   |                 |   | 17,173   |  
|                                               |  |                 |          |   |                 |   |          |  
|                                               |  |                 | 305,014  |   |                 |   | 344,952  |  
|Less accumulated depreciation and amortization |  |                 | (136,722 | ) |                 |   | (143,277 | )
|                                               |  |                 |          |   |                 |   |          |  
|                                               |  | $               | 168,292  |   |                 | $ | 201,675  |  
|                                               |  |                 |          |   |                 |   |          |  

5. Other Current Liabilities

Other current liabilities consist of:



|                               |  |                 |        |                 |   |       
|------------------------------ |  | --------------- | ------ | --------------- | - | ------
|                               |  | February 2,2008 |        | January 31,2009
|Customer liabilities           |  | $               | 28,463 |                 | $ | 28,214
|Taxes, other than income taxes |  |                 | 4,926  |                 |   | 9,137 
|Accrued occupancy              |  |                 | 3,030  |                 |   | 2,648 
|Reserve for sales returns      |  |                 | 7,140  |                 |   | 5,942 
|Accrued compensation           |  |                 | 19,804 |                 |   | 5,877 
|Other                          |  |                 | 28,051 |                 |   | 32,071
|                               |  |                 |        |                 |   |       
|                               |  | $               | 91,414 |                 | $ | 83,889
|                               |  |                 |        |                 |   |       

6. Credit Agreements

Credit Facility

On May 4, 2007, J.Crew Group, Inc. and certain of its subsidiaries, as
guarantors, and Operating and certain of its subsidiaries, as borrowers, entered into a Second Amended and Restated Credit Agreement (the Credit Facility) with Citicorp USA, Inc. (Citicorp), as administrative agent, Citicorp,
as collateral agent, and Bank of America, N.A. and Wachovia Bank, National Association, as syndication agents.

The Credit Facility
provides for revolving loans and letters of credit of up to $200 million (which amount may be increased to up to $250 million subject to certain conditions) at floating interest rates based on the base rate, as defined, plus a margin of up to 0.25%
or LIBOR plus a margin ranging from 1.0% to 1.25%. The margin is based upon quarterly excess availability levels specified in the Credit Facility. The total amount of availability is limited to the sum of: (a) 100% of qualified cash,
(b) 90% of eligible receivables, (c) the lesser of 90% of eligible inventory and 92.5% of the net recovery percentage of inventories (as determined by periodic inventory appraisals) for the period August 1 through December 31, or
90% of the net recovery percentage of inventories for the period January 1 through July 31, (d) 65% of the fair market value of eligible real estate, and (e) less any reserves established by Citicorp. The Credit Facility expires
on May 4, 2013.

Borrowings under the Credit Facility are guaranteed by the Company and certain of its subsidiaries, and are secured
by a perfected first priority security interest in substantially all of the Companys assets and those of certain of its subsidiaries. The Credit Facility includes restrictions on the Companys ability and the ability of certain of its
subsidiaries to incur additional indebtedness and liens, pay dividends or make other distributions,



F-16



---

make investments, dispose of assets and merge. If excess availability under the Credit Facility is less than $20 million at any time, then the Companys
fixed charge coverage ratio for the most recently ended period of four consecutive fiscal quarters may not be less than 1.10 to 1.00 for that period.

If an event of default occurs under the Credit Facility, the lenders may declare all amounts outstanding under the Credit Facility immediately due and payable. In such event, the lenders may exercise any rights and
remedies they may have by law or agreement, including the ability to cause all or any part of the collateral securing the Credit Facility to be sold.

Operating has at all times been in compliance with all financial covenants.

There was $192.7 million
available for borrowings under the Credit Facility at January 31, 2009. There were no borrowings outstanding in fiscal 2008, 2007 or 2006.

Demand Letter of Credit Facility

On October 31, 2007, Operating entered into an unsecured, demand letter of credit
facility with HSBC which provides for the issuance of up to $35 million of documentary letters of credit on a no fee basis. Availability under this facility was $22.8 million at January 31, 2009.

Outstanding letters of credit under our facilities established primarily to facilitate international merchandise purchases at February 2, 2008 and
January 31, 2009 amounted to $43,300 and $19,500 respectively. The decrease in outstanding letters of credit reflects the transition of certain vendors to open account terms.

7. Long-Term Debt

Long-term debt consists of the following:



|                     |  |                 |         |                 |   |         |  
|-------------------- |  | --------------- | ------- | --------------- | - | ------- | -
|                     |  | February 2,2008 |         | January 31,2009 |  
|Term Loan            |  | $               | 125,000 |                 | $ | 100,000 |  
|Less current portion |  |                 |        |                 |   | (800    | )
|                     |  |                 |         |                 |   |         |  
|Long-term debt       |  | $               | 125,000 |                 | $ | 99,200  |  
|                     |  |                 |         |                 |   |         |  

On May 15, 2006 (the Closing Date), Operating, as borrower, Group and certain of
Operatings direct and indirect subsidiaries, as guarantors, entered into a Credit and Guaranty Agreement (the Credit and Guaranty Agreement) with certain lenders named therein as lenders, Goldman Sachs Credit Partners L.P.
(GSCP) and Bear, Stearns & Co. Inc. as joint lead arrangers and joint bookrunners, GSCP as administrative agent and collateral agent, Bear Stearns Corporate Lending Inc. as syndication agent and Wachovia Bank, National
Association as documentation agent.

The total amount of the term loan (the Term Loan) borrowed by Operating under the Credit
and Guaranty Agreement on the Closing Date was $285.0 million. Borrowings bear interest, at the Companys option, at the base rate plus a margin of 0.75% or at LIBOR plus a margin of 1.75% per annum, payable quarterly. All borrowings will
mature on May 15, 2013.

The Company is required to make the following annual principal payments based upon certain conditions as set
forth in the Term Loan: (i) 1% per annum of the original principal balance of the Term Loan due in quarterly installments and (ii) an amount equal to 50% of excess cash flow, as defined in the agreement, due within 90 days of the fiscal
year-end. The Company made aggregate voluntary prepayments of $75.0 and $25.0 million in fiscal 2007 and 2008, respectively.



F-17



---

8. Loss on Refinancing of Debt

During the second quarter of 2006, the Company redeemed in full the outstanding 93/4% Senior Subordinated Notes and 131/8% Senior Subordinated Notes. Funds used for the redemption were generated from the proceeds of the Term Loan and internally available funds. In connection with the redemption of these notes the Company recorded a loss
on refinancing of debt of $10.0 million in fiscal 2006 which included $4.8 million of tender fees and other expenses and $5.2 million related to the write-off of unamortized deferred financing costs.

9. Income per Share

The calculation of basic net
income per share and diluted net income per share is presented below:



|                                             |  |                                           |        |   |      |   |        |  |   |       
|-------------------------------------------- |  | ----------------------------------------- | ------ | - | ---- | - | ------ |  | - | ------
|                                             |  | 2006                                      |        |   | 2007 |   | 2008  
|                                             |  | ($ in thousands, exceptper share amounts)
|Net income                                   |  | $                                         | 77,782 |   |      | $ | 97,075 |  | $ | 54,117
|Preferred stock dividends                    |  |                                           | (6,141 | ) |      |   |       |  |   |      
|                                             |  |                                           |        |   |      |   |        |  |   |       
|Net income applicable to common shareholders |  | $                                         | 71,641 |   |      | $ | 97,075 |  | $ | 54,117
|                                             |  |                                           |        |   |      |   |        |  |   |       
|Income per Share:                            |  |                                           |        |   |      |   |        |  |   |       
|Basic                                        |  | $                                         | 1.61   |   |      | $ | 1.61   |  | $ | 0.88  
|                                             |  |                                           |        |   |      |   |        |  |   |       
|Diluted                                      |  | $                                         | 1.49   |   |      | $ | 1.52   |  | $ | 0.85  
|                                             |  |                                           |        |   |      |   |        |  |   |       
|Weighted average common shares outstanding:  |  |                                           |        |   |      |   |        |  |   |       
|Basic                                        |  |                                           | 44,558 |   |      |   | 60,346 |  |   | 61,687
|                                             |  |                                           |        |   |      |   |        |  |   |       
|Diluted                                      |  |                                           | 48,039 |   |      |   | 63,748 |  |   | 64,027
|                                             |  |                                           |        |   |      |   |        |  |   |       

The number of potentially dilutive securities excluded from the calculation of diluted earnings
per share were as follows:



|                                    |  |                        |  |      |  |      
|----------------------------------- |  | ---------------------- |  | ---- |  | -----
|                                    |  | 2006                   |  | 2007 |  | 2008 
|                                    |  | (amounts in thousands)
|Stock options                       |  | 78                     |  | 87   |  | 2,225
|Unvested shares of restricted stock |  |                       |  |     |  | 18   
|                                    |  |                        |  |      |  |      
|                                    |  | 78                     |  | 87   |  | 2,243
|                                    |  |                        |  |      |  |      

10. Commitments and Contingencies

(a) Operating Leases

As of
January 31, 2009, the Company was obligated under various long-term operating leases for retail and factory stores, warehouses, office space and equipment requiring minimum annual rentals.

These operating leases expire on varying dates through 2023. At January 31, 2009 aggregate minimum rentals are as follows:



|            |  |        |        
|----------- |  | ------ | -------
|Fiscal year |  | Amount
|2009        |  | $      | 88,282 
|2010        |  | $      | 85,852 
|2011        |  | $      | 78,199 
|2012        |  | $      | 68,246 
|2013        |  | $      | 57,351 
|Thereafter  |  | $      | 226,689



F-18



---

Certain of these leases include renewal options and escalation clauses and provide for contingent rentals
based upon sales and require the lessee to pay taxes, insurance and other occupancy costs.

Rent expense for fiscal 2006, 2007 and 2008 was
$54,694, $62,662 and $74,922 respectively, including contingent rent, based on store sales, of $4,406, $4,186 and $4,070, respectively.

(b) Employment Agreements

The Company is party to employment agreements with certain executives, which provide for
compensation and certain other benefits. The agreements also provide for severance payments under certain circumstances.

(c) Litigation

The Company is subject to various legal proceedings and claims that arise in the ordinary conduct of its business. Although the outcome
of these claims cannot be predicted with certainty, management does not believe that it is reasonably possible that resolution of these legal proceedings will result in unaccrued losses that would be material.

11. Employee Benefit Plan

The Company has a 401(K)
Savings Plan pursuant to Section 401 of the Internal Revenue Code whereby all eligible employees may contribute up to 15% of their annual base salaries subject to certain limitations. The Companys contribution is based on a percentage
formula set forth in the plan agreement. Company contributions to the 401(K) Savings Plan were $1,894, $2,520 and $3,019 for fiscal 2006, 2007 and 2008, respectively. The Company suspended its 401(k) Savings Plan matching contribution in 2009. See
Note 19 for additional information.

12. License Agreement

The Company had a licensing agreement through January 2009 with Itochu Corporation, a Japanese trading company. The agreement permitted Itochu to distribute J.Crew merchandise in Japan. In February 2008, the Company
provided notice that it did not intend to renew this agreement, which expired at the end of January 2009.

The Company earns royalty
payments under the agreement based on the sales of its merchandise. Royalty income, which is included in other revenues, for fiscal 2006, 2007, and 2008, was $2,776, $2,589, and $1,656, respectively.

13. Other Revenues

Other revenues consist of the
following:



|                           |  |      |        |      |   |        |  |   |       
|-------------------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------
|                           |  | 2006 |        | 2007 |   | 2008  
|Shipping and handling fees |  | $    | 31,319 |      | $ | 37,958 |  | $ | 39,368
|Royalties                  |  |      | 2,776  |      |   | 2,589  |  |   | 1,656 
|Other                      |  |      | 852    |      |   | 1,922  |  |   | 3,746 
|                           |  |      |        |      |   |        |  |   |       
|                           |  | $    | 34,947 |      | $ | 42,469 |  | $ | 44,770
|                           |  |      |        |      |   |        |  |   |       



F-19



---

14. Financial Instruments

The fair value of the Companys long-term debt is estimated to be approximately $116,250 and $83,000 at February 2, 2008 and January 31, 2009, respectively, and is based on current rates offered to the
Company for debt of similar maturities or quoted market prices of the same or similar instruments. The carrying amounts of long-term debt were $125,000 and $100,000 at February 2, 2008 and January 31, 2009, respectively. The carrying
amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts payable and other current liabilities approximate fair value because of the short-term maturity of those financial instruments. The estimates presented
herein are not necessarily indicative of amounts the Company could realize in a current market exchange.

15. Income Taxes

Group files a consolidated federal income tax return, which includes all of its wholly owned subsidiaries. Each subsidiary files separate, or combined
where required, state tax returns in required jurisdictions. Group and its subsidiaries have entered into a tax sharing agreement providing (among other things) that each of the subsidiaries will reimburse Group for its share of income taxes based
on the proportion of such subsidiaries tax liability on a separate return basis to the total tax liability of Group.

The following
table summarizes the components of the income tax provision (benefit):



|                      |  |                 |       |   |                 |   |                 |  |   |     
|--------------------- |  | --------------- | ----- | - | --------------- | - | --------------- |  | - | ----
|                      |  | Years Ended    
|(Dollars in millions) |  | February 3,2007 |       |   | February 2,2008 |   | January 31,2009
|Current:              |  |                 |       |   |                 |   |                 |  |   |     
|Federal               |  | $               | (0.2  | ) |                 | $ | 45.6            |  | $ | 19.0
|State and local       |  |                 | 4.6   |   |                 |   | 10.2            |  |   | 4.6 
|Foreign               |  |                 | 0.3   |   |                 |   | 0.3             |  |   |    
|                      |  |                 |       |   |                 |   |                 |  |   |     
|                      |  |                 | 4.7   |   |                 |   | 56.1            |  |   | 23.6
|Deferred:             |  |                 |       |   |                 |   |                 |  |   |     
|Federal               |  |                 | (10.2 | ) |                 |   | 8.0             |  |   | 12.9
|State and local       |  |                 | (0.7  | ) |                 |   | 0.1             |  |   | 0.1 
|                      |  |                 |       |   |                 |   |                 |  |   |     
|                      |  |                 | (10.9 | ) |                 |   | 8.1             |  |   | 13.0
|                      |  |                 |       |   |                 |   |                 |  |   |     
|Total                 |  | $               | (6.2  | ) |                 | $ | 64.2            |  | $ | 36.6
|                      |  |                 |       |   |                 |   |                 |  |   |     

The following table summarizes the principal reasons for the difference between the effective tax
(benefit) and the U.S. federal statutory income tax (benefit) rate:



|                                                       |  |                 |    |  |                 |   |  |                 |  
|------------------------------------------------------ |  | --------------- | -- |  | --------------- | - |  | --------------- | -
|                                                       |  | Years Ended     |   
|                                                       |  | February 3,2007 |    |  | February 2,2008 |   |  | January 31,2009 |  
|Federal income tax rate                                |  | 35.0            | %  |  | 35.0            | % |  | 35.0            | %
|State and local income taxes, net of federal benefit   |  | 10.1            |    |  | 4.1             |   |  | 5.9             |  
|Valuation allowance                                    |  | (64.5           | )  |  |                |   |  |                |  
|Non-deductible expenses, primarily preferred dividends |  | 10.2            |    |  |                |   |  |                |  
|Other                                                  |  | 0.5             |    |  | 0.7             |   |  | (0.5            | )
|                                                       |  |                 |    |  |                 |   |  |                 |  
|Effective tax rate                                     |  | (8.7            | )% |  | 39.8            | % |  | 40.4            | %
|                                                       |  |                 |    |  |                 |   |  |                 |  



F-20



---

The tax effect of temporary differences which give rise to deferred tax assets and liabilities are as
follows:



|                                                            |  |                 |       |   |                 |   |       |  
|----------------------------------------------------------- |  | --------------- | ----- | - | --------------- | - | ----- | -
|(Dollars in millions)                                       |  | February 2,2008 |       |   | January 31,2009 |  
|Deferred tax assets:                                        |  |                 |       |   |                 |   |       |  
|Rent                                                        |  | $               | 19.2  |   |                 | $ | 19.8  |  
|Reserve for sales returns                                   |  |                 | 2.8   |   |                 |   | 2.4   |  
|Credit carryovers                                           |  |                 | 1.3   |   |                 |   | 0.7   |  
|Share-based payments                                        |  |                 | 4.3   |   |                 |   | 7.2   |  
|State taxes and interest                                    |  |                 | 2.7   |   |                 |   | 2.5   |  
|Other                                                       |  |                 | 1.5   |   |                 |   | 2.5   |  
|                                                            |  |                 |       |   |                 |   |       |  
|                                                            |  |                 | 31.8  |   |                 |   | 35.1  |  
|Deferred tax liabilities:                                   |  |                 |       |   |                 |   |       |  
|Prepaid catalog and other prepaid expenses                  |  |                 | (8.0  | ) |                 |   | (9.2  | )
|Difference in book and tax basis for property and equipment |  |                 | (6.0  | ) |                 |   | (21.1 | )
|                                                            |  |                 |       |   |                 |   |       |  
|                                                            |  |                 | (14.0 | ) |                 |   | (30.3 | )
|                                                            |  |                 |       |   |                 |   |       |  
|Net deferred income tax assets                              |  | $               | 17.8  |   |                 | $ | 4.8   |  
|                                                            |  |                 |       |   |                 |   |       |  
|Amounts included in consolidated balance sheets:            |  |                 |       |   |                 |   |       |  
|Non-current assets                                          |  | $               | 20.2  |   |                 | $ | 8.9   |  
|Current liabilities                                         |  |                 | (2.4  | ) |                 |   | (4.1  | )
|                                                            |  |                 |       |   |                 |   |       |  
|                                                            |  | $               | 17.8  |   |                 | $ | 4.8   |  
|                                                            |  |                 |       |   |                 |   |       |  

In fiscal 2004, the Company established a valuation allowance against its net deferred tax assets.
In accordance with SFAS No. 109, Accounting for Income Taxes, management continued to reevaluate the necessity of this valuation allowance on an ongoing basis. Due to several factors, including significant improvement in
results of operations in fiscal 2005 and 2006 and changes in the Companys debt and equity structure resulting from its initial public offering in July 2006, management determined that the valuation allowance was not necessary at
February 3, 2007. As a result of this revaluation, a deferred tax benefit of $10.9 million was recognized for the year ended February 3, 2007 and stockholders equity was increased by $12.9 million relating to the excess tax benefit
from share based compensation. Management believes that the net deferred tax asset balance of $4.8 million as of January 31, 2009 is more likely than not to be realized.

On February 4, 2007, the Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxesan Interpretation of
FASB Statement No. 109, (FIN 48). As a result of the implementation of FIN 48, the Company recognized a $0.6 million net increase in unrecognized tax benefits with a corresponding decrease in retained earnings. The total effect
of the adoption was a $1.7 million increase in our non-current deferred tax assets, a $4.1 million decrease in current income taxes payable to reclassify unrecognized tax benefits to non-current liabilities, a $6.4 million increase in non-current
liabilities representing the liability for unrecognized tax benefits including interest, and the previously mentioned $0.6 million decrease to retained earnings.

As of January 31, 2009, the Company has $7.4 million in unrecognized tax benefits (including interest and penalties of $1.2 million) reflected in other liabilities. The amount, if recognized, that would affect
the effective tax rate is $4.0 million. While the Company expects the amount of unrecognized tax benefits to change in the next twelve months, the change is not expected to have a significant effect on the estimated effective annual tax rate, the
results of operations or financial position.



F-21



---

A reconciliation of unrecognized tax benefits is as follows:



|                                                      |  |             |      |   |             |   |      |  
|----------------------------------------------------- |  | ----------- | ---- | - | ----------- | - | ---- | -
|(Dollars in millions)                                 |  | Fiscal 2007 |      |   | Fiscal 2008 |  
|Balance at beginning of fiscal year                   |  | $           | 5.7  |   |             | $ | 6.6  |  
|Additions for tax positions taken during current year |  |             | 2.4  |   |             |   | 1.2  |  
|Reductions for tax positions taken during prior years |  |             | (0.6 | ) |             |   | (0.2 | )
|Settlements                                           |  |             | (0.1 | ) |             |   | (0.1 | )
|Expirations of statues of limitations                 |  |             | (0.8 | ) |             |   | (1.3 | )
|                                                      |  |             |      |   |             |   |      |  
|Balance at end of fiscal year                         |  | $           | 6.6  |   |             | $ | 6.2  |  
|                                                      |  |             |      |   |             |   |      |  

In fiscal 2008, audits of tax years ended January 2002 through January 2003 were closed by the
IRS, and the Company collected $9.3 million of refundable income taxes including interest. Tax years ended January 2004 through January 2006 are currently under audit by the IRS. The results of these audits are not expected to have a significant
effect on the results of operations or financial position. Various state and local jurisdiction tax authorities are in the process of examining income tax returns of Groups subsidiaries for various tax years ranging from 2001 to 2006.

16. Related Party Transaction

On
October 20, 2005, the Company, Millard Drexler, Chairman of the Board and Chief Executive Officer and Millard S. Drexler, Inc. entered into a Trademark License Agreement whereby Mr. Drexler granted the Company a thirty-year exclusive,
worldwide license to use the Madewell trademark and associated intellectual property rights owned by him (the Properties). In consideration for the license, the Company reimbursed Mr. Drexlers actual costs expended in
acquiring and developing the Properties (which amounted to $242,300) and agreed to pay royalties of $1 per year during the term of the license. In January 2007, the Company provided notice to Mr. Drexler that the Company had met certain
conditions outlined in the agreement, and Mr. Drexler assigned to the Company all of his residual rights in the Properties. The Company also agreed that it would not assign or spin off ownership of the Properties during the term of
Mr. Drexlers employment without his consent other than as part of a sale of the entire company (except that the Company may pledge or hypothecate its interest in the Properties as part of a bank or other financings).

17. Stock Split

Effective June 13, 2006, the
Companys Board of Directors approved a 1.935798 for one split of the Companys common stock in the form of a stock dividend. Accordingly, all references to share and per share information in the consolidated financial statements and the
accompanying notes to the consolidated financial statements have been adjusted to reflect the stock split for all periods presented. The par value per share of the common stock did not change as a result of the stock split.

18. Recent Accounting Pronouncements

In September
2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 establishes a framework for measuring fair value in generally accepted accounting principles and expands
disclosures about fair value measurements. SFAS No. 157 is effective for the Company beginning February 1, 2009. The adoption of SFAS No. 157 will not have a significant impact on the financial condition or results of operations of
the Company.

19. Subsequent Event

On
February 27, 2009, the Company announced that is has initiated a workforce reduction as part of a cost reduction program. The workforce reduction impacted approximately 95 positions, including positions that are



F-22



---

currently unfilled, primarily in the Companys New York offices and support functions in the field and distribution centers. In addition, the program
includes the suspension of the 401(k) Plan Company matching contributions at least through the balance of 2009, elimination of 2009 merit based wage increases for the entire workforce, and other cost reductions. The Company expects to incur a
pre-tax charge of approximately $1.5 million during the first quarter of fiscal 2009 mainly to reflect anticipated severance and related costs for affected individuals.

20. Quarterly Financial Information (Unaudited)

Summarized quarterly financial results for fiscal
2008 and fiscal 2007 follow:



|                                             |  |              |         |               |   |              |  |                  |         |  |   |         |  
|-------------------------------------------- |  | ------------ | ------- | ------------- | - | ------------ |  | ---------------- | ------- |  | - | ------- | -
|(in thousands, except share related amounts) |  | FirstQuarter |         | SecondQuarter |   | ThirdQuarter |  | FourthQuarter(1) |        
|Fiscal 2008                                  |  |              |         |               |   |              |  |                  |         |  |   |         |  
|Total revenues                               |  | $            | 340,579 |               | $ | 336,275      |  | $                | 363,080 |  | $ | 388,036 |  
|Gross profit                                 |  |              | 159,887 |               |   | 137,732      |  |                  | 150,868 |  |   | 106,936 |  
|Net income (loss)                            |  | $            | 30,501  |               | $ | 18,123       |  | $                | 19,041  |  | $ | (13,548 | )
|Income (loss) per share:                     |  |              |         |               |   |              |  |                  |         |  |   |         |  
|Basic                                        |  | $            | 0.50    |               | $ | 0.29         |  | $                | 0.31    |  | $ | (0.22   | )
|Diluted                                      |  | $            | 0.48    |               | $ | 0.28         |  | $                | 0.30    |  | $ | (0.22   | )
|Weighted average common shares outstanding:  |  |              |         |               |   |              |  |                  |         |  |   |         |  
|Basic                                        |  |              | 61,192  |               |   | 61,693       |  |                  | 61,878  |  |   | 61,991  |  
|Diluted                                      |  |              | 64,076  |               |   | 64,346       |  |                  | 64,078  |  |   | 61,991  |  
|                                             |  |              |         |              
|                                             |  | FirstQuarter |         | SecondQuarter |   | ThirdQuarter |  | FourthQuarter    |        
|Fiscal 2007                                  |  |              |         |               |   |              |  |                  |         |  |   |         |  
|Total revenues                               |  | $            | 297,312 |               | $ | 304,731      |  | $                | 332,744 |  | $ | 399,936 |  
|Gross profit                                 |  |              | 138,538 |               |   | 133,177      |  |                  | 151,835 |  |   | 164,993 |  
|Net income                                   |  |              | 24,649  |               |   | 20,635       |  |                  | 26,837  |  |   | 24,954  |  
|Income per share:                            |  |              |         |               |   |              |  |                  |         |  |   |         |  
|Basic                                        |  | $            | 0.41    |               | $ | 0.34         |  | $                | 0.44    |  | $ | 0.41    |  
|Diluted                                      |  | $            | 0.39    |               | $ | 0.32         |  | $                | 0.42    |  | $ | 0.39    |  
|Weighted average common shares outstanding:  |  |              |         |               |   |              |  |                  |         |  |   |         |  
|Basic                                        |  |              | 59,731  |               |   | 60,316       |  |                  | 60,725  |  |   | 60,752  |  
|Diluted                                      |  |              | 63,248  |               |   | 63,806       |  |                  | 64,195  |  |   | 64,003  |  



|(1) | The fourth quarter of fiscal 2008 includes a reduction in gross profit primarily due to increased markdowns and promotional selling activities.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------

The sum of the quarterly income (loss) per share may not equal the full year amount as the computations of the weighted average common shares outstanding
for basic and diluted shares outstanding for each quarter and the full year are performed independently.



F-23



---

SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS



|                                        |  |                  |       |                               |   |                         |  |               |   |               |   |       |  |   |      
|--------------------------------------- |  | ---------------- | ----- | ----------------------------- | - | ----------------------- |  | ------------- | - | ------------- | - | ----- |  | - | -----
|                                        |  | BeginningBalance |       | Charged toCost andExpenses(a) |   | Charged tootherAccounts |  | Deductions(a) |   | EndingBalance
|                                        |  | (in thousands)  
|Inventory reserve                       |  |                  |       |                               |   |                         |  |               |   |               |   |       |  |   |      
|(deducted from merchandise inventories) |  |                  |       |                               |   |                         |  |               |   |               |   |       |  |   |      
|Year ended:                             |  |                  |       |                               |   |                         |  |               |   |               |   |       |  |   |      
|February 3, 2007                        |  | $                | 8,020 |                               | $ |                        |  | $             |  |               | $ | 322   |  | $ | 7,698
|February 2, 2008                        |  |                  | 7,698 |                               |   | 268                     |  |               |  |               |   |      |  |   | 7,966
|January 31, 2009                        |  |                  | 7,966 |                               |   | 947                     |  |               |  |               |   |      |  |   | 8,913
|                                        |  |                  |       |                               |  
|Allowance for sales returns             |  |                  |       |                               |   |                         |  |               |   |               |   |       |  |   |      
|(included in other current liabilities) |  |                  |       |                               |   |                         |  |               |   |               |   |       |  |   |      
|Year ended:                             |  |                  |       |                               |   |                         |  |               |   |               |   |       |  |   |      
|February 3, 2007                        |  | $                | 6,216 |                               | $ | 5                       |  | $             |  |               | $ |      |  | $ | 6,221
|February 2, 2008                        |  |                  | 6,221 |                               |   | 919                     |  |               |  |               |   |      |  |   | 7,140
|January 31, 2009                        |  |                  | 7,140 |                               |   |                        |  |               |  |               |   | 1,198 |  |   | 5,942



|(a) | The inventory reserve and allowance for sales returns are evaluated at the end of each fiscal quarter and adjusted (plus or minus) based on the quarterly evaluation. During each
period, inventory write-downs and sales returns are charged to the statement of operations as incurred.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-24



---

EXHIBIT INDEX



|                                                                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No.                                                               |  | Document                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|3.1                                                                       |  | Certificate of Incorporation of J.Crew Group, Inc. Incorporated by reference to Exhibit 3.1 to the S-1/A Registration Statement filed on October 11, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                          | 
|3.2                                                                       |  | By-laws of J.Crew Group, Inc. Incorporated by reference to Exhibit 3.2 to the Form 8-K/A filed on October 17, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                         
|Instruments Defining the Rights of Security Holders, Including Indentures
|                                                                          | 
|4.1                                                                       |  | Form of Specimen Common Stock Certificate of J.Crew Group, Inc. Incorporated by reference to Exhibit 4.1 to the S-1/A Registration Statement filed on June 22, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                          | 
|4.2                                                                       |  | Stockholders Agreement, dated as of January 24, 2003, among J.Crew Group, Inc., TPG Partners II, L.P. and Millard Drexler. Incorporated by reference to Exhibit 4.1 to the Form 8-K
filed on February 3, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                          | 
|4.3                                                                       |  | Form of Amendment No. 1 to Stockholders Agreement, by and among J.Crew Group, Inc., Millard S. Drexler and each of TPG Partners II, L.P., TPG Parallel II, L.P., TPG Investors II, L.P. and TPG
1999 Equity II, L.P. Incorporated by reference to Exhibit 4.5(b) to the S-1/A Registration Statement filed on June 22, 2006.                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                         
|Material Contracts                                                       
|                                                                          | 
|10.1                                                                      |  | Amended and Restated Loan and Security Agreement, dated as of December 23, 2004, by and among J.Crew Operating Corp., J.Crew Inc., Grace Holmes, Inc. d/b/a J.Crew Retail, H.F.D. No. 55,
Inc. d/b/a J.Crew Factory as Borrowers, J.Crew Group, Inc., J.Crew International, Inc., J.Crew Intermediate LLC as Guarantors, Wachovia Capital Markets LLC as Arranger and Bookrunner, Wachovia Bank, National Association as Administrative Agent, Bank
of America, N.A. as Syndication Agent, Congress Financial Corporation as Collateral Agent, and the Lenders (the Credit Facility). Incorporated by reference to Exhibit 4.6 to the Form 8-K filed on December 28, 2004.                                  
|                                                                          | 
|10.2                                                                      |  | Amendment No. 1, dated as of October 10, 2005, to the Credit Facility. Incorporated by reference to Exhibit 4.1 to the Form 8-K/A filed on October 17, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                          | 
|10.3                                                                      |  | Joinder Agreement between the Company and Wachovia Bank, National Association, as Agent under the Credit Facility, dated October 12, 2005. Incorporated by reference to Exhibit 4.1 to the Form
8-K filed on October 18, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                          | 
|10.4                                                                      |  | Amendment No. 2, dated as of May 15, 2006, to the Credit Facility by and among Operating, J.Crew Inc., Grace Holmes, Inc., H.F.D. No. 55, Inc., as borrowers, Group, J.Crew International,
Inc. and Madewell Inc., as guarantors, the lenders named therein and Wachovia Bank, National Association, successor by merger to Congress Financial Corporation, a national banking association, in its capacity as administrative agent and collateral
agent for lenders (the Agent), and Amendment No. 1 to Guarantee, dated as of May 15, 2006, by the borrowers and guarantors in favor of the Agent. Incorporated by reference to Exhibit 10.1(c) to the S-1/A Registration Statement filed
on May 16, 2006.
|                                                                          | 
|10.5                                                                      |  | Amendment No. 3, dated as of May 15, 2006, to the Credit Facility by and among Operating, J.Crew Inc., Grace Holmes, Inc., H.F.D. No. 55, Inc., as borrowers, Group, J.Crew International, Inc.
and Madewell Inc., as guarantors, the lenders named therein and the Agent. Incorporated by reference to Exhibit 10.1(d) to the S-1/A Registration Statement filed on May 16, 2006.                                                                                                                                                                                                                                                                                                                            
|                                                                          | 
|10.6                                                                      |  | Amendment No. 4, dated as of June 26, 2006, to the Credit Facility by and among Operating, J.Crew Inc., Grace Holmes, Inc., H.F.D. No. 55, Inc., as borrowers, Group, J.Crew International, Inc.
and Madewell Inc., as guarantors, the lenders named therein and the Agent. Incorporated by reference to Exhibit 10.1 to the Form 8-K filed on June 30, 2006.                                                                                                                                                                                                                                                                                                                                                 



---

|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Document                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.7        |  | Amendment No. 5, dated as of July 10, 2006, to the Credit Facility by and among Operating, J.Crew Inc., Grace Holmes, Inc., H.F.D. No. 55, Inc., as borrowers, Group, J.Crew International, Inc.,
and Madewell Inc., as guarantors, the lenders named therein and the Agent. Incorporated by reference to Exhibit 10.1 to the Form 8-K filed on July 13, 2006.                                                                                                                                                                                                                                                                                                                                                         
|            | 
|10.8        |  | Amendment No. 6, dated as of November 7, 2006, to the Credit Facility by and among Operating, J.Crew Inc., Grace Holmes, Inc., H.F.D. No. 55, Inc., as borrowers, Group, J.Crew
International, Inc., and Madewell Inc., as guarantors, the lenders named therein and the Agent. Incorporated by reference to Exhibit 10.1 to the Form 8-K filed on November 9, 2006.                                                                                                                                                                                                                                                                                                                                                   
|            | 
|10.9        |  | Second Amended and Restated Credit Agreement, dated as of May 4, 2007, among J.Crew Group, Inc. and certain subsidiaries of J.Crew Group, Inc., as borrowers and guarantors, the lenders and
issuers party thereto and Citicorp USA, Inc., as administrative agent (the Credit Agreement). Incorporated by reference to Exhibit 10.1 to the Form 8-K filed on May 9, 2007.                                                                                                                                                                                                                                                                                                                                           
|            | 
|10.10       |  | Amended and Restated Guaranty, dated as of May 4, 2007, by J.Crew Group, Inc. and certain subsidiaries of J.Crew Group, Inc., as guarantors, in favor of Citicorp USA, Inc., as administrative
agent, each lender and each issuer under the Credit Agreement and certain other parties. Incorporated by reference to Exhibit 10.2 to the Form 8-K filed on May 9, 2007.                                                                                                                                                                                                                                                                                                                                                
|            | 
|10.11       |  | Amended and Restated Pledge and Security Agreement, dated as of May 4, 2007, by J.Crew Group, Inc. and certain subsidiaries of J.Crew Group, Inc., as grantors, in favor of Citicorp USA, Inc., as
administrative agent. Incorporated by reference to Exhibit 10.3 to the Form 8-K filed on May 9, 2007.                                                                                                                                                                                                                                                                                                                                                                                                               
|            | 
|10.12       |  | Amended and Restated J.Crew Group, Inc. 1997 Stock Option Plan. Incorporated by reference to Exhibit 10.1 to the Form 10-Q for the period ended August 3, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|            | 
|10.13       |  | J.Crew Group, Inc. 2003 Equity Incentive Plan (the 2003 Plan). Incorporated by reference to Exhibit 10.4 to the Form 10-K for the fiscal year ended February 1, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|            | 
|10.14       |  | Amendment No. 1 to the 2003 Plan. Incorporated by reference to Exhibit 10.4(b) to the Form 10-K for the fiscal year ended January 31, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|            | 
|10.15       |  | Services Agreement, dated January 24, 2003, between the Company, Millard S. Drexler, Inc. and Millard S. Drexler. Incorporated by reference to Exhibit 10.9 to the Form 10-K for the fiscal year
ended February 1, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|            | 
|10.16       |  | Option Surrender Agreement, dated September 25, 2003, between the Company and Millard S. Drexler. Incorporated by reference to Exhibit 10.9(b) to the Form 10-K for the fiscal year ended January
31, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|            | 
|10.17       |  | Trademark License Agreement by and among the Company, Millard S. Drexler and Millard S. Drexler, Inc. dated as of October 20, 2005. Incorporated by reference to Exhibit 10.2 to the Form 8-K
filed on October 21, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|            | 
|10.18       |  | Registration Rights Agreement dated July 3, 2006 among TPG Partners II, L.P., TPG Parallel II, L.P., TPG Investors II, L.P., TPG 1999 Equity II, L.P. and J.Crew Group Inc. Incorporated by
reference to Exhibit 10.1 to the Form 8-K filed on July 3, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|            | 
|10.19       |  | Credit and Guaranty Agreement, dated as of May 15, 2006, by and among J.Crew Operating Corp., J.Crew Group, Inc. and certain subsidiaries of J.Crew Operating Corp. named as guarantors therein,
the lenders party thereto from time to time, Goldman Sachs Credit Partners L.P. and Bear, Stearns & Co. Inc., as joint lead arrangers and joint bookrunners, Goldman Sachs Credit Partners L.P., as administrative agent and collateral agent, Bear
Stearns Corporate Lending Inc., as syndication agent, and Wachovia Bank, National Association, as documentation agent (the Credit and Guaranty Agreement). Incorporated by reference to Exhibit 10.17 to the S-1/A Registration Statement
filed on May 16, 2006.



---

|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Document                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.20       |  | Pledge and Security Agreement Term Loan Collateral, dated as of May 15, 2006, by and among J.Crew Operating Corp., J.Crew Group, Inc. and certain subsidiaries of J.Crew Operating Corp. named as
grantors therein and Goldman Sachs Credit Partners L.P., as collateral agent. Incorporated by reference to Exhibit 10.18 to the S-1/A Registration Statement filed on May 16, 2006.                                                                                                                                                                                                                   
|            | 
|10.21       |  | Trademark Security Agreement, dated as of May 15, 2006, by and among J.Crew Inc. and J.Crew International, as grantors, and Goldman Sachs Credit Partners L.P., as collateral agent. Incorporated
by reference to Exhibit 10.19 to the S-1/A Registration Statement filed on May 16, 2006.                                                                                                                                                                                                                                                                                                              
|            | 
|10.22       |  | Copyright Security Agreement, dated as of May 15, 2006, by and between J.Crew International, as grantor, and Goldman Sachs Credit Partners L.P., as collateral agent. Incorporated by reference to
Exhibit 10.20 to the S-1/A Registration Statement filed on May 16, 2006.                                                                                                                                                                                                                                                                                                                             
|            | 
|10.23       |  | Intercreditor Agreement, dated as of May 15, 2006, by and among J.Crew Operating Corp., J.Crew Group, Inc. and certain subsidiaries of J.Crew Operating Corp. named as guarantors in the
Credit and Guaranty Agreement, Goldman Sachs Credit Partners L.P., in its capacity as administrative agent and collateral agent under the Credit and Guaranty Agreement, and Wachovia Bank, National Association, in its capacity as administrative agent
and collateral agent under the Credit Facility. Incorporated by reference to Exhibit 10.21 to the S-1/A Registration Statement filed on May 16, 2006.
|            | 
|10.24       |  | J.Crew Group, Inc. 2005 Equity Incentive Plan. Incorporated by reference to Exhibit 10.4 to the S-8 Registration Statement filed on June 28, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|            | 
|10.25       |  | Amendment No. 1, dated December 5, 2006, to the J.Crew Group, Inc. 2005 Equity Incentive Plan. Incorporated by reference to Exhibit 10.27 to the Form 10-Q for the period ended October 28, 2006.                                                                                                                                                                                                                                                                                                                                                                                                       
|            | 
|10.26       |  | Stock option grant agreement, dated as of November 15, 2006, between J.Crew Group, Inc. and Tracy Gardner. Incorporated by reference to Exhibit 10.2 to the Form 8-K filed on November 17, 2006.                                                                                                                                                                                                                                                                                                                                                                                                        
|            | 
|10.27       |  | Stock option grant agreement, dated as of November 15, 2006, between J.Crew Group, Inc. and James Scully. Incorporated by reference to Exhibit 10.3 to the Form 8-K filed on November 17, 2006.                                                                                                                                                                                                                                                                                                                                                                                                         
|            | 
|10.28       |  | Standard form of Restricted Stock Grant Agreement (Time-Based Vesting). Incorporated by reference to Exhibit 10.1 to the Form 8-K filed on November 29, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|            | 
|10.29       |  | Standard form of Restricted Stock Grant Agreement (Performance-Based Vesting). Incorporated by reference to Exhibit 10.2 to the Form 8-K filed on November 29, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                    
|            | 
|10.30       |  | Standard form of Stock Option Grant Agreement. Incorporated by reference to Exhibit 10.3 to the Form 8-K filed on November 29, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|            | 
|10.31       |  | J.Crew Group, Inc. 2007 Associate Stock Purchase Plan. Incorporated by reference to Exhibit 10.4 to the S-8 Registration Statement filed on December 13, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                          
|            | 
|10.32       |  | J.Crew Group, Inc. Amended and Restated 2008 Equity Incentive Plan (As of September 10, 2008). Incorporated by reference to Exhibit 10.1 to the Form 8-K filed on December 23,
2008.                                                                                                                                                                                                                                                                                                                                                                                                                    
|            | 
|10.33       |  | Standard Form of Restricted Stock Grant Agreement (Time-Based Vesting). Incorporated by reference to Exhibit 10.1 to the Form 8-K filed on July 17, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                               
|            | 
|10.34       |  | Standard Form of Restricted Stock Grant Agreement (Performance-Based Vesting). Incorporated by reference to Exhibit 10.2 to the Form 8-K filed on July 17, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                        
|            | 
|10.35       |  | Standard Form of Stock Option Grant Agreement. Incorporated by reference to Exhibit 10.3 to the Form 8-K filed on July 17, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|            | 
|10.36       |  | Second Amended and Restated Employment Agreement by and among the Company, Operating and Millard S. Drexler dated as of October 20, 2005 and executed as of December 29,
2008.                                                                                                                                                                                                                                                                                                                                                                                                                         



---

|               |  |                                                                                                                                                                                                  
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No.    |  | Document                                                                                                                                                                                         
|10.37          |  | Amended and Restated Employment Agreement, dated March 14, 2008, between the Company and Tracy Gardner. Incorporated by reference to Exhibit 10.1 to the Form 8-K filed on March 19,
2008.       
|               | 
|10.38          |  | Amended and Restated Employment Agreement, dated September 10, 1008, between the Company and James Scully. Incorporated by reference to Exhibit 10.1 to the Form 8-K filed on September 11, 2008.
|               | 
|10.39          |  | Amended and Restated Non-Disclosure, Non-Solicitation and Non-Competition Agreement, dated December 29, 2008, between the Company and Libby Wadle.                                              
|               | 
|10.40          |  | Amended and Restated Employment Agreement, dated December 17, 2008, between the Company and Jenna Lyons Mazeau.                                                                                 
|               | 
|10.41          |  | Long term incentive agreement, dated April 24, 2006, between the Company and Jenna Lyons.                                                                                                       
|              
|Other Exhibits
|               | 
|21.1           |  | Subsidiaries of J.Crew Group, Inc.                                                                                                                                                              
|               | 
|23.1           |  | Consent of KPMG LLP, Independent Registered Public Accounting Firm.                                                                                                                             
|               | 
|24.1           |  | Power of Attorney                                                                                                                                                                               
|               | 
|31.1           |  | Certification of chief executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                             
|               | 
|31.2           |  | Certification of chief financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                             
|               | 
|32.1           |  | Certification of chief executive officer and chief financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                 



| | Filed herewith.
|- | ---------------

|* | Furnished herewith.
|- | -------------------