<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    __________
                                    FORM 10-K

         ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                   For the fiscal year ended February 2, 2002


<TABLE>
<CAPTION>
Commission                 Registrant, State of Incorporation                   I.R.S. Employer
File Number                Address and Telephone Number                         Identification No.

<S>                        <C>                                                  <C>
333-42427                  J. CREW GROUP, INC.                                  22-2894486
---------                                                                       ----------
                           (Incorporated in New York)
                           770 Broadway
                           New York, New York 10003
                           Telephone: (212) 209-2500

333-42423                  J. CREW OPERATING CORP.                              22-3540930
---------                                                                       ----------
                           (Incorporated in Delaware)
                           770 Broadway
                           New York, New York
                           Telephone: (212) 209-2500

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

J. Crew Group, Inc.        None
J. Crew Operating Corp.    None

                           Securities Registered Pursuant to section 12(g) of the Act:

J. Crew Group, Inc.        None
J. Crew Operating Corp.    None
</TABLE>

Indicate by check mark whether each 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.

Yes      X        No
         -

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of each 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]

The common stock of each registrant is not publicly traded. Therefore, the
aggregate market value is not readily determinable.

As of March 15, 2002, there were 11,748,789 shares of Common Stock, par value
$.01 per share, of J. Crew Group, Inc. outstanding and 100 shares of Common
Stock, par value $.01 per share, of J. Crew Operating Corp. outstanding (all of
which are owned beneficially and of record by J. Crew Group, Inc.).

Documents incorporated by reference:        None

J. Crew Operating Corp. meets the conditions set forth in General Instruction
(I)(1)(a) and (b) of the Form 10-K and is therefore filing this Form 10-K with
the reduced disclosure format.


<PAGE>

FILING FORMAT

This Annual Report on Form 10-K is a combined report being filed by two
different registrants: J. Crew Group, Inc. ("Holdings") and J. Crew Operating
Corp., a wholly-owned subsidiary of Holdings ("Operating Corp."). Except where
the content clearly indicates otherwise, any references in this report to the
"Company", "J. Crew" or "Holdings" include all subsidiaries of Holdings,
including Operating Corp. Operating Corp. makes no representation as to the
information contained in this report in relation to Holdings and its
subsidiaries other than Operating Corp.


FORWARD LOOKING STATEMENTS

Certain statements in this Annual Report on Form 10-K under the captions
"Business", "Selected Financial Data", "Management's Discussion and Analysis of
Financial Condition and Results of Operations", "Financial Statements and
Supplementary Data" and elsewhere constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. We may also
make written or oral forward looking statements in our periodic reports to the
Securities and Exchange Commission on Forms 10-Q, 8-K, etc., in press releases
and other written materials and in oral statements made by our officers,
directors or employees to third parties. Statements that are not historical
facts, including statements about our beliefs and expectations, are
forward-looking statements. Such forward-looking statements involve known and
unknown risks, uncertainties and other important factors that could cause the
actual results, performance or achievements of the Company, or industry results,
to differ materially from historical results, any future results, performance or
achievements expressed or implied by such forward-looking statements. Such risks
and uncertainties include, but are not limited to, competitive pressures in the
apparel industry, changes in levels of consumer spending or preferences in
apparel and acceptance by customers of the Company's products, overall economic
conditions, governmental regulations and trade restrictions, acts of war or
terrorism in the United States or worldwide, political or financial instability
in the countries where the Company's goods are manufactured, postal rate
increases, paper and printing costs, availability of suitable store locations at
appropriate terms, the level of the Company's indebtedness and exposure to
interest rate fluctuations, and other risks and uncertainties described in this
report and the Company's other reports and documents filed or which may be
filed, from time to time, with the Securities and Exchange Commission. These
statements are based on current plans, estimates and projections, and therefore
you should not place undue reliance on them. Forward looking statements speak
only as of the date they are made and we undertake no obligation to update
publicly any of them in light of new information or future events.

References herein to fiscal years are to the fiscal years of J. Crew Group, Inc.
and J. Crew Operating Corp., which end on the Saturday closest to January 31 in
the following calendar year for fiscal years 1997, 1998, 1999, 2000 and 2001.
Accordingly, fiscal years 1997, 1998, 1999, 2000 and 2001 ended on January 31,
1998, January 30, 1999, January 29, 2000, February 3, 2001 and February 2, 2002.
All fiscal years for which financial information is included had 52 weeks,
except fiscal year 2000 which had 53 weeks.

                                     Part I

ITEM 1.          BUSINESS

General

The Company is a leading retailer of women's and men's apparel, shoes and
accessories operating under the J. Crew (R) brand name. The Company has built a
strong and widely recognized brand name known for its timeless styles at price
points that the Company believes represent exceptional product value. The J.
Crew image has been built and reinforced over its 19-year history through the
circulation of approximately 900 million catalogs that use magazine-quality
photography to portray a classic American perspective and aspirational
lifestyle. Many of the original items introduced by the Company in the early
1980s (such as the rollneck sweater, weathered chino, barn jacket and pocket
tee) were instrumental in establishing the J. Crew brand and continue to be core
product offerings. The Company has capitalized on the strength of the J. Crew
brand to provide customers with clothing to meet more of their lifestyle needs,
including casual, career and sport.

                                        1

<PAGE>

The J. Crew merchandising strategy emphasizes timeless styles and a broad
assortment of high-quality products designed to provide customers with one-stop
shopping opportunities at attractive prices. J. Crew retail stores, catalogs and
its Internet site offer a full line of men's and women's basic durables (casual
weekend wear), workwear (casual weekday wear) sport, swimwear, accessories and
shoes, as well as the more tailored men's and women's "Classics" lines.
Approximately 70% of the Company's J.Crew brand sales are derived from its core
offerings of classics, durables and sport clothing, the demand for which the
Company believes is stable and resistant to changing fashion trends. The Company
believes that the J. Crew image and merchandising strategy appeal to
college-educated, professional and affluent customers who, in the Company's
experience, have demonstrated strong brand loyalty and a tendency to make repeat
purchases.

J. Crew products are distributed exclusively through the Company's retail and
factory outlet stores, catalogs and the Company's Internet site, jcrew.com. The
Company currently circulates over 70 million J. Crew catalogs per annum and
operates 136 J. Crew retail stores and 41 J. Crew factory outlet stores. In
addition, J. Crew products are distributed through 61 free-standing and
shop-in-shop stores in Japan under a licensing agreement with Itochu
Corporation.

The Company has three major operating divisions: J. Crew Retail, J. Crew Direct,
and J. Crew Factory, each of which operate under the J. Crew brand name. In
2001, products sold under the J. Crew brand contributed $741.3 million in net
sales. J. Crew brand net sales in 2001 were comprised of $398.0 million from J.
Crew Retail, $258.2 million from J. Crew Direct and $85.1 million from J. Crew
Factory. The Company also markets to its customers through its Internet site
(jcrew.com). Net sales derived from the Internet, which were $122.9 million for
2001, are included in J. Crew Direct net sales. The Company also generated
licensing revenues of $2.6 million and shipping and handling fees of $34.1
million.

J. Crew Brand

Merchandising and Design Strategy

Over time, the J. Crew merchandising strategy has evolved from providing unisex
products to creating full lines of men's and women's clothing, shoes and
accessories. This strategy had the effect of increasing overall J. Crew brand
sales volume, and significantly increasing revenues from sales of women's
apparel to 75% of J.Crew brand sales in 2001.

Every J. Crew product is designed by an in-house design staff, to reflect a
classic, clean aesthetic that is consistent with the brand's American lifestyle
image. Design teams are formed around J. Crew product lines and categories to
develop concepts, themes and products for each of the Company's J. Crew
businesses. Members of the J. Crew technical design team develop construction
and fit specifications for every product to ensure quality workmanship and
consistency across product lines. These teams work in close collaboration with
the product development, merchandising and production staffs in order to gain
market and other input. Product merchandisers provide designers with market
trend and other information at initial stages of the design process. J. Crew
designers and merchants source globally for fabrics, yarns and finished products
to ensure quality and value, while manufacturing teams research and develop key
vendors worldwide to identify and maintain the essential characteristics for
every style.

Sourcing, Production and Quality

The Company maintains separate merchandising, design, manufacturing and quality
assurance teams for the production of J. Crew brand merchandise. The Company's
products are designed exclusively by in-house design and product development
teams which support each line and class of product. These teams provide
individual attention and expertise to every style, ensuring that these styles
fit the J. Crew brand image.

The Company's merchandise is produced for the Company by a variety of
manufacturers, both domestically and outside the United States. The Company does
not own or operate any manufacturing facilities, instead contracting with third
party vendors in over 22 countries for the production of its products. In 2001,
approximately 80% of the Company's J. Crew brand products were sourced in the
Far East, 5% were sourced domestically and 15% were sourced in Europe and other
regions. One vendor supplies approximately 16% of the Company's merchandise.

                                        2

<PAGE>

The Company retains independent buying agents to conduct in-line and final
quality inspections at each manufacturing site. Random inspections of all
incoming merchandise at the Lynchburg and Asheville distribution facilities
further assure that the Company's products are of a consistently high quality.

Due to the high concentration of foreign suppliers of J. Crew brand merchandise,
the Company estimates seven month lead times for its products. The Company has
established through the use of domestic vendors and strategic partnerships, a
core group of long-term suppliers to provide quick response programs at
significantly shorter lead times for certain product categories.

Distribution

The Company operates two major telemarketing and distribution facilities for its
operations. Order fulfillment for J. Crew Direct takes place at the 406,500
square foot telemarketing and distribution center located in Lynchburg,
Virginia. The Lynchburg facility processes approximately 3.6 million orders per
year and employs approximately 900 full and part-time employees during its
non-peak season and an additional 400 employees during its peak season.

A 192,500 square foot telemarketing and distribution facility in Asheville,
North Carolina serves as the main distribution center for the retail and outlet
store operations and also houses a J. Crew Direct telemarketing center. This
facility employs approximately 300 full- and part-time employees during its
non-peak season and an additional 200 employees during the peak holiday season.

The Company ships merchandise via UPS, the United States Postal Service,
Airborne and FedEx. To enhance efficiency, each facility is fully equipped with
a highly advanced telephone system, an automated warehouse locator system and an
inventory bar coding system and the Lynchburg facility has an automated packing
and shipping sorter.

Management Information Systems

The Company's 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 the Company's business. The Company has point-of-sale
registers in its J. Crew Retail and Factory Outlet stores that enable it to
track inventory from store receipt to final sale on a real-time basis. The
Company believes its merchandising and financial systems, coupled with its
point-of-sale registers and software programs, allow for rapid stock
replenishment, concise merchandise planning and real-time inventory accounting
practices. The Company's telephone and telemarketing systems, warehouse package
sorting systems, automated warehouse locator and inventory bar coding systems
utilize advanced technology. These systems have provided the Company with a
number of benefits in the form of enhanced customer service, improved
operational efficiency and increased management control and reporting. In
addition, the Company's real-time inventory systems provide inventory management
on a SKU basis and allow for an efficient fulfillment process.

The Company has installed a SAP enterprise resource planning system for its
information technology requirements. This system was implemented in 2000 and
2001. In fiscal 2000, the Company's accounting systems were implemented. A
corporate wide purchasing system, a retail sales and inventory system (including
new point of sale registers) and a human resource / payroll system were
completed in fiscal 2001. In November 2000, the Company outsourced its data
center, desktop, network and telecommunication services management and
operations support. In February 2001, the Company outsourced the hosting and
support of its Internet website to a third party vendor.

                                        3

<PAGE>

J. Crew Retail

During fiscal 2001, J. Crew Retail generated net sales of $398.0 million,
representing 53.7% of the Company's total net sales.

The principal aspect of the Company's business strategy is an expansion program
designed to reach new and existing customers through the opening of J. Crew
Retail stores. In addition to generating sales of J. Crew products, J. Crew
Retail stores help set and reinforce the J. Crew brand image. The stores are
designed in-house and fixtured to create a distinctive J. Crew environment and
store associates are trained to maintain high standards of visual presentation
and customer service. The result is a complete statement of J. Crew's timeless
American style, classic design and attractive product value.

The Company believes that J. Crew Retail derives significant benefits from the
concurrent operation of J. Crew Direct. The broad circulation of J. Crew
catalogs and distribution of e-mails performs an advertising function, enhancing
the visibility and exposure of the brand, aiding the expansion of the retail
concept and increasing the profitability of the stores.

J. Crew Retail stores that were open during all of fiscal 2001 averaged $3.5
million per store in sales, produced sales per gross square foot of $439 and
generated store contribution margins of approximately 18.0%. The Company
believes that these results are in line with the average among retailers that
the Company believes to be its primary competitors. J. Crew Retail stores have
an average size of 7,752 total square feet.

As of February 2, 2002, J. Crew Retail operated 136 retail stores nationwide,
having expanded from 39 stores in 1997. The Company opened 34 stores in fiscal
2001 and intends to open approximately 15 stores in fiscal 2002. The stores are
located in upscale shopping malls and in retail areas within major metropolitan
markets that have an established higher-end retail business.

The table below highlights certain information regarding J. Crew Retail stores
opened through fiscal 2001.

<TABLE>
<CAPTION>
                                            Stores      Stores                               Average
                                            ------      ------                               -------
                                            Opened      Closed      Stores        Total      Store Total
                                            ------      ------      ------        -----      -----------
                         Stores Open        During      During      Open at       Square     Square
                         -----------        ------      ------      -------       ------     ------
                         At Beginning       Fiscal      Fiscal      End of        Footage    Footage at
                         ------------       ------      ------      ------        -------    ----------
                         Of Fiscal Year     Year        Year        Fiscal Year   (000's)    End of Year
                         --------------     ----        ----        -----------   -------    -----------
<S>                      <C>                <C>         <C>         <C>           <C>        <C>
1997                          39             12          --            51           428       8,392
1998                          51             14          --            65           530       8,150
1999                          65             16          --            81           668       8,243
2000                          81             24          --           105           833       7,933
2001                         105             34           3           136         1,054       7,752
</TABLE>

J. Crew Direct

Since its inception in 1983, J. Crew Direct has distinguished itself from other
catalog retailers by its award-winning catalog, which utilizes magazine-quality
"real moment" pictures to depict an aspirational lifestyle image. During fiscal
2001, J. Crew Direct distributed 36 catalog editions with a total circulation of
approximately 71 million. J. Crew Direct generated $258.2 million in net sales
(including $122.9 million from its Internet site) representing 34.8% of the
Company's total J. Crew brand net sales in fiscal 2001.

Circulation Strategy

J. Crew Direct's circulation strategy focuses on continually improving the
segmentation of customer files and the acquisition of additional customer names.
In 2001, approximately 65% of J. Crew Direct revenues were from customers in the
12-month buyer file (buyers who have made a purchase from any J. Crew catalog or
on the Internet in the prior 12 months).

                                        4

<PAGE>

The Company segments its customer file and tailors its catalog offerings to
address the different product needs of its customer segments. To increase core
catalog productivity and improve the effectiveness of marginal and prospecting
circulation, each customer segment is offered appropriate catalog editions. The
Company currently circulates Base, Women's, Version, Prospect and Sale catalogs
to targeted customer segments.

Descriptions of the Company's current catalogs follow:

Base Books. These catalogs contain the entire mail order product offering and
are sent primarily to 12-month buyers.

Women's Books. The Women's books feature women's merchandise and are sent to
buyers who purchase primarily women's merchandise. These books represent an
additional customer contact potentially generating incremental revenue from
women customers.

Version Books. These editions are abridged versions (in page count) of the Base
Books and are sent to less active and prospective customers in order to cost
effectively reactivate old customers and acquire new customers.

Prospect Books. These editions are abridged versions (in size and page count) of
the Version Books and are sent to prospective customers to cost effectively
acquire new customers.

Sale Books.  These catalogs contain overstock merchandise to be sold at reduced
prices without  adversely  affecting the J. Crew brand image.

In 2001, total circulation decreased to approximately 71 million from 73 million
in 2000, and pages circulated were approximately 8.2 billion in 2001 compared to
8.7 billion in 2000.

J. Crew Direct name acquisition programs are designed to attract new customers
in a cost-effective manner. The Company acquires new names from various sources,
including its Internet site, list rentals, exchanges with other catalog and
credit card companies, "friends' name" card inserts, and through J. Crew Retail
stores which represent an increasingly significant resource in prospecting for
new names. The Company is also in the process of placing telephones in its J.
Crew Retail stores with direct access to the J. Crew Direct telemarketing center
to allow customers in the stores to order catalog-specific or out-of-stock
items.

Catalog Creation and Production

The Company is distinguished from other catalog retailers by its award-winning
catalog, which utilizes magazine-quality "real moment" pictures to depict an
aspirational lifestyle image. All creative work on the catalogs is coordinated
by J. Crew personnel to maintain and reinforce the J. Crew brand image.
Photography is executed both on location and in studios, and creative design and
copy writing are executed on a desk-top publishing system. Digital images are
transmitted directly to outside printers, thereby reducing lead times and
improving reproduction quality. The Company believes that appropriate page
presentation of its merchandise stimulates demand and therefore places great
emphasis on page layout.

J. Crew Direct does not have long-term contracts with paper mills. Projected
paper requirements are communicated on an annual basis to paper mills to ensure
the availability of an adequate supply. Management believes that the Company's
long-standing relationships with a number of the largest coated paper mills in
the United States allow it to purchase paper at favorable prices commensurate
with the Company's size.

Telemarketing and Customer Service

J. Crew Direct's primary telemarketing and fulfillment facilities are located in
Lynchburg, Virginia. An additional telemarketing facility is located in
Asheville, North Carolina. Telemarketing operations are open 24 hours a day,
seven days a week and handled over 4.0 million calls in fiscal 2001. Orders for
merchandise may be received by telephone, facsimile, mail and on the Company's
Internet site. The telemarketing centers are staffed by a total of 550 full-time
and part-time telemarketing associates, and up to 300 additional associates
during peak periods, who are trained to assist

                                        5

<PAGE>

customers in determining the customer's correct size and to describe merchandise
fabric, texture and function. Each telemarketing associate utilizes a terminal
with access to an IBM mainframe computer which houses complete and up-to-date
product and order information. The fulfillment operations are designed to
process and ship customer orders in a quick and cost-effective manner. Orders
placed before 9:00 p.m. are shipped the following day. Same-day shipping is
available for orders placed before noon.

J. Crew Factory

The Company extends its reach to additional consumers through its 41 J. Crew
Factory outlet stores. Offering J. Crew products at an average of 30% below full
retail prices, J. Crew Factory targets value-oriented consumers. The factory
outlet stores also serve to liquidate excess, irregular or out-of-season J. Crew
products outside of the Company's three primary distribution channels. During
fiscal 2001, J. Crew Factory generated net sales of $85.1 million, representing
11.5% of the Company's total J. Crew brand net sales.

J. Crew Factory offers selections of J. Crew menswear and womenswear. Ranging in
size from 3,500 to 10,000 square feet with an average of 6,500 square feet, the
stores are generally located in major outlet centers in 25 states across the
United States. The Company believes that the outlet stores, which are designed
in-house, maintain fixturing, visual presentation and service standards superior
to those typically associated with outlet stores.

Trademarks and International Licensing

J. Crew International,  Inc., an indirect subsidiary of J. Crew Group, Inc.,
currently owns all of the trademarks and domain names for the J. Crew name that
the Company holds throughout the world, as well as its international licensing
contracts with third parties.

The Company derives revenues from the international licensing of its trademarks
in the J. Crew name and the know-how it has developed. The Company has a
licensing agreement with Itochu Corporation in Japan which gives the Company the
right to receive payments of percentage royalty fees in exchange for the
exclusive right to use the Company's trademarks in Japan. Under the license
agreement, the Company retains a high degree of control over the manufacture,
design, marketing and sale of merchandise under the J. Crew trademarks. This
agreement expires in January 2003. In 2001, licensing revenues totaled $2.6
million.

Employees

The Company focuses significant resources on the selection and training of sales
associates in both its mail order, retail and factory operations. Sales
associates are required to be familiar with the full range of merchandise of the
business in which they are working and have the ability to assist customers with
merchandise selection. Both retail and factory store management are compensated
in a combination of annual salary plus performance-based bonuses. Retail,
telemarketing and factory associates are compensated on an hourly basis and may
earn team-based performance incentives.

At February 2, 2002, the Company had approximately 5,800 associates, of whom
approximately 2,700 were full-time associates and 3,100 were part-time
associates. In addition, approximately 2,000 associates are hired on a seasonal
basis to meet demand during the peak holiday buying season. None of the
associates employed by J. Crew are represented by a union. The Company believes
that its relationship with its associates is good.

Competition

All aspects of the Company's businesses are highly competitive. The Company
competes primarily with specialty brand retailers, other catalog operations,
department stores, and mass merchandisers engaged in the retail sale of men's
and women's apparel, accessories, footwear and general merchandise. The Company
believes that the principal bases upon which it competes are quality, design,
efficient service, selection and price.

                                        6

<PAGE>

ITEM 2.   PROPERTIES

The Company is headquartered in New York City. The New York City headquarters'
offices are leased under a lease agreement expiring in 2012 (not including
renewal options). The Company owns two telemarketing and distribution
facilities: a 406,500-square-foot telemarketing and distribution center for J.
Crew Direct operations in Lynchburg, Virginia and a 192,500-square-foot
telemarketing and distribution center in Asheville, North Carolina servicing the
J. Crew Retail operations.

As of February 2, 2002, the Company operated 136 J. Crew retail stores and 41
factory outlet stores in 38 states and the District of Columbia. All of the
retail and factory outlet stores are leased from third parties, and the leases
in most cases have terms of 10 to 12 years, not including renewal options. As a
general matter, 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.
Substantially all the leases are guaranteed by Holdings.

The table below sets forth the number of stores by state operated by the Company
in the United States as of February 2, 2002.

<TABLE>
<CAPTION>
                                                                        Total
                                                                        -----
                                      Retail             Outlet         Number
                                      ------             ------         ------
                                      Stores             Stores       Of Stores
                                      ------             ------       ---------
<S>                                   <C>                <C>          <C>
Alabama                                  1                1                2
Arizona                                  4                --               4
California                              18                3               21
Colorado                                 4                2                6
Connecticut                              5                1                6
Delaware                                 1                1                2
Florida                                  4                3                7
Georgia                                  3                2                5
Illinois                                 7                --               7
Indiana                                  2                2                4
Kansas                                   1                --               1
Kentucky                                 1                --               1
Louisiana                                1                --               1
Maine                                    --               2                2
Maryland                                 3                1                4
Massachusetts                            6                1                7
Michigan                                 4                1                5
Minnesota                                3                --               3
Missouri                                 2                1                3
Nevada                                   1                1                2
New Hampshire                            1                2                3
New Jersey                               7                1                8
New Mexico                               1                --               1
New York                                14                4               18
North Carolina                           3                --               3
Ohio                                     7                --               7
Oklahoma                                 1                --               1
Oregon                                   2                --               2
Pennsylvania                             6                3                9
Rhode Island                             1                -                1
South Carolina                           2                2                4
Tennessee                                3                1                4
Texas                                    6                2                8
Utah                                     2                --               2
Vermont                                  --               1                1
Virginia                                 5                1                6
Washington                               2                1                3
Wisconsin                                1                1                2
District of Columbia                     1                --               1
                                         -                --               -
Total.                                 136                41             177
                                       ===                ==             ===
</TABLE>

                                        7

<PAGE>

ITEM 3.   LEGAL PROCEEDINGS

Routine litigation is pending against Holdings and Operating Corp. with respect
to matters incidental to their business. Although the outcome of litigation
cannot be predicted with certainty, in the opinion of Holdings and Operating
Corp. none of those actions should have a material adverse effect on the
consolidated financial position or results of operations of Holdings and
Operating Corp.

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
February 2, 2002.

                                        8

<PAGE>

                                     PART II

ITEM 5.     MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
            STOCKHOLDER MATTERS

There is no established public trading market for Holdings or Operating Corp.
Common Stock. As of March 15, 2002, there were 39 shareholders of record of the
Holdings Common Stock. See "Item 12. Security Ownership of Certain Beneficial
Owners and Management" for a discussion of the ownership of Holdings. Holdings
owns 100% of the Common Stock of Operating Corp.

Holdings has not paid cash dividends on its Common Stock and does not anticipate
paying any such dividends in the foreseeable future. Operating Corp. may from
time to time pay cash dividends on its Common Stock to permit Holdings to make
required payments relating to its Senior Discount Debentures.

The credit agreement (the "Credit Agreement") and the Indenture relating to the
Senior Discount Debentures (the "Holdings Indenture") prohibit the payment of
dividends by Holdings on shares of its Common Stock (other than dividends
payable solely in shares of capital stock of Holdings). Additionally, because
Holdings is a holding company, its ability to pay dividends is dependent upon
the receipt of dividends from its direct and indirect subsidiaries. Each of the
Credit Agreement, the Holdings Indenture and the Indenture relating to the
Senior Subordinated Notes of Operating Corp., contains covenants which impose
substantial restrictions on Operating Corp.'s ability to pay dividends or make
distributions to Holdings.

The Directors of Holdings have the right to receive all or a portion of the fees
for their services as a Director in Holdings Common Stock. In fiscal year 2001,
certain Directors elected to receive a total of 5,524 shares of Holdings Common
Stock in payment of their fees, at purchase price per share equal to the fair
market value thereof. Holdings issued the Common Stock to the Directors in
transactions which did not involve any public offering in reliance upon Section
4(2) of the Securities Act of 1933, as amended (the "Securities Act").

ITEM 6.      SELECTED FINANCIAL DATA

The following table sets forth selected consolidated historical financial,
operating, balance sheet and other data of the Company. The selected income
statement and balance sheet data for each of the five fiscal years ended
February 2, 2002 are derived from the Consolidated Financial Statements of the
Company, which have been audited by KPMG LLP, independent auditors. The data
presented below should be read in conjunction with the Consolidated Financial
Statements, including the related Notes thereto, included herein, the other
financial information included herein, and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
                                                                                Fiscal Year Ended
                                                 January 31,       January 30,     January 29,       February 3,   February 2,
                                                 -----------       -----------     -----------       -----------   -----------
                                                    1998              1999            2000              2001          2002
                                                    ----              ----            ----              ----          ----
                                                               (dollars in thousands, except per square foot data)
<S>                                            <C>               <C>               <C>              <C>          <C>
Income Statement Data:
  Revenues                                     $  881,044        $  870,842        $ 750,696        $  825,975   $  777,940
  Cost of goods sold(a)                           517,378           511,716          431,193           463,909      462,371
  Selling, general and administrative             354,614           332,050          279,302           301,865      295,568
   expenses
  Other charges                                        --             7,995            7,018                --           --
  Charges incurred in connection with
   discontinuance of Clifford & Wills                  --            13,300            4,000             4,130           --
  Income from operations                            9,052             5,781           29,183            56,071       20,001
  Interest expense-net                             20,494            39,323           38,861            36,642       36,512
  Gain on sale of Popular Club Plan                  ----           (10,000)          (1,000)               ---           --
  Expenses incurred-Recapitalization               20,707                --               --              ----           --
  Provision (benefit) for income taxes             (5,262)           (8,162)          (2,050)            7,500       (5,500)
  Extraordinary items and cumulative effect
  of accounting changes, net of taxes              (4,500)               --               --                --           --
                                               ----------        ----------        ---------        ----------   ----------
  Net income (loss)                            $  (31,387)       $  (15,380)       $  (6,628)       $   11,929   $  (11,011)
                                               ==========        ==========        =========        ==========   ==========
</TABLE>

                                       9

<PAGE>

<TABLE>
<CAPTION>
                                                                            Fiscal Year Ended

                                              January 31,       January 30,      January 29,   February 3, February 2,
                                                 1998               1999            2000          2001        2002
                                                 ----               ----            ----          ----        ----
<S>                                           <C>               <C>             <C>           <C>          <C>
Balance Sheet Data (at period end):
  Cash and cash equivalents                   $  12,166          $  9,643       $   38,693    $  32,930    $   16,201
  Working capital                               142,677            95,710           75,929       49,482        39,164
  Total assets                                  421,878           376,330          373,604      389,861       401,320
  Total long term debt and redeemable
  preferred stock                               428,457           433,243          458,218      464,310       510,147
  Stockholders' deficit                        (201,642)         (235,773)        (264,593)    (278,347)     (319,043)

Operating Data:
Revenues:
J. Crew retail                                $ 209,559          $273,972       $  333,575    $ 406,784    $  397,998
J. Crew direct
    Catalog                                     260,853           230,752          213,308      177,535       135,353
    Internet                                      4,000            22,000           65,249      107,225       122,844
                                              ---------          --------       ----------    ---------    ----------
                                                264,853           252,752          278,557      284,760       258,197
                                              ---------          --------       ----------    ---------    ----------


J. Crew factory                                 100,285            96,461          101,987       96,114        85,085
J. Crew licensing                                 2,897             2,712            2,505        3,020         2,560
J. Crew shipping & handling fees                 28,936            30,575           34,072       35,297        34,100
                                              ---------          --------       ----------    ---------    ----------

Total J. Crew brand                             606,530           656,472          750,696      825,975       777,940
Other divisions(b)                              274,514           214,370               --          ---           ---
                                                -------           -------       ----------    ---------    ----------

Total                                         $ 881,044          $870,842       $  750,696    $ 825,975    $  777,940
                                              =========          ========       ==========    =========    ==========

J. Crew Direct:

Number of catalogs circulated (in                76,994            73,440           75,479       72,522        70,762
thousands)
Number of pages circulated (in millions)          9,830             8,819            9,319        8,677         8,242

J. Crew Retail:

Sales per gross square foot(c)                $     542          $    558       $      571    $     567    $      439
Store contribution margin(c)                       23.4%             25.0%            26.0%        23.9%         18.0%
Number of stores open at end of period               51                65               81          105           136
Comparable store sales change(c)                   (6.6)%             9.0%             1.8%         1.7%        (15.5)%

Depreciation and amortization                 $  15,255          $ 15,972       $   19,241    $  22,600    $   31,718

Net capital expenditures(d)
New store openings                            $  19,802          $ 14,749       $   13,300    $  16,700    $   17,572
Other                                            11,565            21,605           27,953       25,475        25,003
                                              ---------          --------       ----------    ---------    ----------

Total net capital expenditures                $  31,367          $ 36,354       $   41,253    $  42,175    $   42,575
                                              =========          ========       ==========    =========    ==========
</TABLE>

(a) Includes buying and occupancy costs.
(b) Includes revenues from the Company's Popular Club Plan, Inc. ("PCP") and
    Clifford & Wills, Inc. ("C&W") divisions and finance charge income from PCP
    installment sales. PCP was sold effective October 30, 1998 and the Company
    made a decision in 1998 to exit the catalog and outlet store operations of
    C&W.
(c) Includes stores that have been opened for a full twelve month period.
(d) Capital expenditures are net of proceeds from construction allowances.

                                       10

<PAGE>

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS - J.CREW GROUP, INC.

This discussion summarizes the significant factors affecting the consolidated
operating results, financial condition and liquidity of J. Crew Group, Inc. and
subsidiaries during the three-year period ended February 2, 2002. This
discussion should be read in conjunction with the audited consolidated financial
statements of J. Crew Group, Inc. and subsidiaries for the three-year period
ended February 2, 2002 and notes thereto included elsewhere in this Annual
Report on Form 10-K.

Critical Accounting Policies

Management's discussion and analysis of financial condition and results of
operations is based upon the consolidated financial statements which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires estimates
and judgements that effect the reported amounts of assets, liabilities, revenues
and expenses. The Company bases its estimates on historical experience and other
assumptions that are believed 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 more significant
estimates and judgements used in the preparation of the consolidated financial
statements.

     (a)      Inventory Valuation

              Merchandise inventories are carried at the lower of cost or
              market. Cost is determined on a first-in first-out basis. We
              evaluate all of our inventories to determine excess inventories
              based on estimated future sales. Excess inventories may be
              disposed of through outlet stores, clearance catalogs, Internet
              clearance sales and other liquidations. Based on the historical
              results experienced by the Company through the various methods of
              disposition the Company writes down the carrying value of
              inventories which are not expected to be sold at or above costs.

     (b)      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 approximates four 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,
              the future revenue streams would be adjusted accordingly.

     (c)      Asset impairment

              The Company is exposed to potential impairment if the book value
              of its assets exceeds their future cash flows. The major component
              of our long lived assets represents 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 future net
              cash flows is less than net book value.

     (d)      Sales Returns

              The Company 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 its
              products when evaluating the adequacy of the reserve for sales
              returns.

                                       11

<PAGE>

          (e) Income taxes

              Deferred tax assets are carried at the amount that the Company
              believes is more likely than not to be realized. The Company has
              considered future taxable income and prudent and feasible tax
              strategies in assessing the need for a valuation allowance. If the
              Company were to determine that it would not be able to realize all
              or part of its net deferred tax assets in the future an adjustment
              to the deferred tax assets would be charged to income in the
              period such determination was made.

Results of Operations

Consolidated statements of operations presented as a percentage of revenues are
as follows:

<TABLE>
<CAPTION>
                                                                                         Fiscal year ended
                                                                                February 2,  February 3,  January 29,
                                                                                   2002         2001         2000
                                                                                   ----         ----         ----
<S>                                                                            <C>          <C>          <C>
Revenues                                                                           100.0%       100.0%         100.0%
Cost of goods sold, including buying and occupancy costs                            59.4         56.2           57.4
Selling, general and administrative expenses                                        38.0         36.5           37.2
Other charges                                                                         --           --             .9
Charges incurred in connection with discontinuance of C&W                             --           .5             .5
Income from operations                                                               2.6          6.8            3.9
Interest expense, net                                                               (4.7)        (4.4)          (5.2)
Gain on the sale of Popular Club Plan                                                 --           .1             .1
Income/(loss) before income taxes                                                   (2.1)         2.4           (2.2)
Income taxes                                                                          .7          (.9)            .3
                                                                                --------     --------      ---------
Net income/(loss)                                                                   (1.4)%        1.5%           (.9)%
                                                                                ========     ========      =========
</TABLE>

Fiscal 2001  Compared to Fiscal 2000

Revenues
--------

Revenues in the fiscal year ended February 2, 2002 decreased 5.8% to $778.0
million from $826.0 million in the fiscal year ended February 3, 2001. The
fiscal year ended February 2, 2002 consisted of 52 weeks compared to 53 weeks in
fiscal year 2000. Net sales for the fifty-third week were $10.8 million.

J. Crew Retail net sales decreased by 2.2% from $406.8 million in fiscal 2000 to
$398.0 million in fiscal 2001. The percentage of the Company's total net sales
derived from J. Crew Retail increased to 53.7% in fiscal year 2001 compared to
51.6% in fiscal 2000. The decrease in net sales was due to a decrease of 15.5%
in comparable store sales. This decrease offset a 30% increase in the number of
stores from 105 at February 3, 2001 to 136 at February 2, 2002.

J. Crew Direct net sales (which includes net sales from catalog and internet
operations) decreased by 9.3% from $284.8 million in fiscal 2000 to $258.2
million in fiscal 2001. The percentage of the Company's total net sales derived
from J. Crew Direct decreased to 34.8% in fiscal 2001 from 36.2% in fiscal 2000.
Catalog net sales decreased to $135.3 million in fiscal 2001 from $177.5 million
in fiscal 2000. Pages circulated decreased from 8.7 million in fiscal 2000 to
8.2 billion in fiscal 2001. Internet net sales increased to $122.9 million in
fiscal 2001 from $107.3 million in fiscal 2000 as the Company continued to
migrate catalog customers to the Internet.

J. Crew Factory net sales decreased from $96.1 million in fiscal 2000 to $85.1
million in fiscal 2001. The percentage of the Company's total net sales derived
from J. Crew Factory decreased to 11.5% in fiscal 2001 from 12.2% in fiscal
2000. Comparable store sales for J. Crew Factory decreased by 10.5% in fiscal
2001. There were 41 J. Crew Factory outlet stores at February 2, 2002 and
February 3, 2001.

                                       12

<PAGE>

Other revenues which consist of shipping and handling fees and royalties
decreased to $36.7 million in fiscal 2001 from $38.3 million in fiscal 2000,
primarily as a result of a decrease in shipping and handling fees which is
attributable to the decrease in net sales of J.Crew Direct.

Cost of sales, including buying and occupancy costs
---------------------------------------------------

Cost of sales (including buying and occupancy costs) as a percentage of revenues
increased to 59.4% in fiscal 2001 from 56.2% in fiscal 2000. This increase was
caused by a significant increase in markdowns as a result of the highly
promotional retail environment and an increase in buying and occupancy costs
caused by a decrease in leverage related to the decline in comp store sales.

Selling, general and administrative expenses
--------------------------------------------

Selling, general and administrative expenses decreased to $295.6 million in
fiscal 2001 (38.0% of revenues) from $301.9 million in fiscal 2000 (36.6% of
revenues).

General and administrative expenses of the J.Crew brand decreased to $234.8
million in fiscal 2001 (30.2% of revenues) from $239.2 million in fiscal 2000
(29.0% of revenues). This decrease resulted from a decrease in bonus provision
in fiscal 2001 and the cost cutting initiatives instituted in the first quarter
of 2001 which were offset by the additional retail stores in operation during
fiscal 2001 and a $10.1 million increase in depreciation and amortization.

Selling expenses were $60.8 million in fiscal 2001 (7.8% of revenues) compared
to $62.7 million in fiscal 2000 (7.6% of revenues). This decrease was due
primarily to a decrease in pages circulated from 8.7 billion pages in fiscal
year 2000 to 8.2 billion pages in fiscal 2001.

Interest expense
----------------

Interest expense, net was $36.5 million in fiscal year 2001 compared to $36.6
million in fiscal 2000. The increase resulting from higher average borrowings in
fiscal 2001 under the Revolving Credit Facility and higher non-cash interest was
offset by the pay off of the term loan in January 2001 and a decrease in
interest rates. Average borrowings under the Revolving Credit Facility required
to fund inventories and capital expenditures were $43.1 million in fiscal 2001
compared to $9.8 million in fiscal 2000.

Interest expense included non-cash interest and amortization of deferred
financing costs of $17.4 million in fiscal 2001 compared to $16.4 million in
fiscal 2000.

Income Taxes
------------

The effective tax rate was a benefit of 33.3% in fiscal 2001 compared to a
provision of 38.6% in fiscal 2000. The effective rate in 2001 was less than the
normal rate due primarily to the inability of subsidiaries to carry back net
operating losses for state tax purposes, resulting in a lower tax benefit.

Fiscal 2000 Compared to Fiscal 1999

Revenues
--------

Revenues increased 10.0% to $826.0 million in the fiscal year ended February 3,
2001 from $750.7 million in the fiscal year ended January 29, 2000. The fiscal
year ended February 3, 2001 consisted of 53 weeks compared to 52 weeks in the
prior year. Net sales for the fifty-third week were $10.8 million. The increase
in revenues was due primarily to the increase of $73.2 million in the net sales
for J.Crew Retail.

J. Crew Retail net sales increased by 21.9% from $333.6 million in fiscal 1999
to $406.8 million in fiscal 2000. The percentage of the Company's total net
sales derived from J. Crew Retail increased to 51.6% in fiscal year 2000
compared to 46.7% in fiscal 1999. This increase was attributed primarily to net
sales from stores not opened for a full fiscal year.

                                       13

<PAGE>

Comparable store sales increased by 1.7% in fiscal 2000. The number of stores
opened at February 3, 2001 increased to 105 from 81 at January 29, 2000.

J. Crew Direct net sales (which includes net sales from catalog and Internet
operations) increased by 2.2% from $278.6 million in fiscal 1999 to $284.8
million in fiscal 2000. The percentage of the Company's total net sales derived
from J. Crew Direct decreased to 36.2% in fiscal 2000 from 39.0% in fiscal 1999.
Catalog net sales decreased to $177.5 million in fiscal 2000 from $213.3 million
in fiscal 1999. Internet net sales increased to $107.3 million in fiscal 2000
from $65.2 million in fiscal 1999 as the Company continued to migrate catalog
customers to the Internet.

J.Crew Factory net sales decreased by 5.8% from $102.0 million in fiscal 1999 to
$96.1 million in fiscal 2000. The percentage of the Company's total net sales
derived from J. Crew Factory decreased to 12.2% in fiscal 2000 from 14.3% in
fiscal 1999. Comparable store sales for J. Crew Factory decreased by 2.9% in
fiscal 2000. J. Crew Factory closed one store in fiscal 2000 and 41 stores were
open at February 3, 2001.

Other revenues which consist of shipping and handling fees and royalties
increased from $36.6 million to $38.3 million, primarily as a result of an
increase in shipping and handling fees.

Cost of sales, including buying and occupancy costs
---------------------------------------------------

Cost of sales, including buying and occupancy costs as a percentage of revenues
decreased to 56.2% in fiscal 2000 from 57.4% in fiscal 1999. This decrease was
caused primarily by an increase in initial mark up due to a decrease in the cost
of merchandise and an improvement in inventory mix in our factory division.

Selling, general and administrative expenses
--------------------------------------------

Selling, general and administrative expenses increased to $301.9 million in
fiscal 2000 (36.6% of revenues) from $279.3 million in fiscal 1999 (37.2% of
revenues).

General and administrative expenses of the J.Crew brand increased to $239.2
million in fiscal 2000 (29.0% of revenues) from $203.6 million in fiscal 1999
(27.1% of revenues). This increase resulted primarily from (a) an increase in
the expenses attributable to the increased number of retail stores in operation
during fiscal 2000 compared to fiscal 1999 and (b) an increase in bonus
provision in fiscal 2000 as a result of the increase in operating income.

Selling expenses were $62.7 million in fiscal 2000 (7.6% of revenues) compared
to $75.7 million in fiscal 1999 (10.1% of revenues). This decrease was due
primarily to $6.0 million of direct advertising related to the Internet that was
incurred in fiscal 1999, a decrease in pages circulated from 9.3 billion pages
in fiscal 1999 to 8.7 billion pages in fiscal year 2000 and catalog production
efficiencies.

Write-down of assets and other charges in connection with the discontinuance of
-------------------------------------------------------------------------------
Clifford & Wills
----------------

An additional charge of $4.1 million was incurred in fiscal 2000 to write off
the remaining balance of the net assets of the Company's Clifford & Wills
catalog and factory outlet subsidiaries, primarily inventories.

Interest expense
----------------

Interest expense, net decreased to $ 36.6 million in fiscal 2000 from $38.9
million in fiscal 1999. This decrease resulted from lower average borrowings
during fiscal 2000 under the Revolving Credit Facility and the reduced term loan
balance offset by higher non-cash interest. Average borrowings under the
Revolving Credit Facility required to fund inventories and capital expenditures
were $9.8 million in fiscal 2000 compared to $30.8 million in fiscal 1999.

Interest expense included non-cash interest and amortization of deferred
financing costs of $16.4 million in fiscal 2000 compared to $14.2 million in
fiscal 1999.

                                       14

<PAGE>

Income Taxes
------------

The effective tax rate was a provision of 38.6% in fiscal 2000 compared to a
benefit of (23.6%) in fiscal 1999. The effective tax rate in 1999 was less than
the normal rate due primarily to the inability of certain subsidiaries to deduct
net operating losses for state tax purposes.

Liquidity and Capital Resources

The Company's sources of liquidity have been primarily cash flows from
operations and borrowings under the Revolving Credit Facility. The Company's
primary cash needs have been for capital expenditures incurred primarily for
opening new stores and system enhancements, debt service requirements and
working capital.

Cash provided by operating activities was $25.6 million in fiscal 2001 compared
to $70.3 million in fiscal 2000. The decrease in cash provided by operations
resulted from a decrease in earnings before interest, taxes and depreciation and
amortization of $30.1 million and a change in working capital items of $14.6
million.

Capital expenditures, net of construction allowances, were approximately $42.6
million in fiscal 2001. These expenditures consisted primarily of the opening of
34 new J. Crew retail stores and for systems enhancements, primarily the SAP
enterprise resource planning system.

Capital expenditures are expected to be approximately $25.0 million in fiscal
2002, primarily for the opening of at least 15 J. Crew retail stores. The
expected capital expenditures will be funded from internally generated cash
flows and by borrowings from available financing sources.

There were no borrowings under the Revolving Credit Facility at February 2, 2002
and February 3, 2001. Average borrowings under the Revolving Credit Facility
were $43.1 for fiscal 2001 and $9.8 million for fiscal 2000. There are no
scheduled principal payments of the Company's long term debt during the next
five years.

Effective October 15, 2002, the interest payments accruing on the 13 1/8% Senior
Discount Debentures will become payable in cash on April 15 and October 15 of
each year subsequent thereto. The annual cash payments will be approximately
$18.6 million.

Management believes that cash flow from operations and availability under the
Revolving Credit Facility will provide adequate funds for the Company's
foreseeable working capital needs, planned capital expenditures and debt service
obligations. The Company's ability to fund its operations and make planned
capital expenditures, to make scheduled debt payments, to refinance indebtedness
and to remain in compliance with all of the financial covenants under its debt
agreements depends on its future operating performance and cash flow, which in
turn, are subject to prevailing economic conditions and to financial, business
and other factors, some of which are beyond its control.

The following summarizes the Company's contractual and other commercial
obligations as of February 2, 2002 and the effect such obligations are expected
to have on its liquidity and cash flows in future periods.

<TABLE>
<CAPTION>
Contractual Obligations               Within 1 year       2 - 3 years     4 - 5 years   after 5 years        Total
-----------------------               -------------       -----------     -----------   -------------        -----
                                                                        ($ in millions)
<S>                                   <C>                 <C>             <C>           <C>                  <C>
Long term debt                                $  --             $  --           $ --           $279.7        $279.7
Operating lease obligations                    46.4              88.6            76.8           139.3         351.1
                                              -----             -----           -----          ------        ------
                                               46.4              88.6            76.8           419.0         630.8
                                              =====             =====           =====          ======        ======
</TABLE>

                                       15

<PAGE>

<TABLE>
<CAPTION>
Other Commerical commitments          Within 1 year       2 - 3 years     4 - 5 years   after 5 years         Total
----------------------------          -------------       -----------     -----------   -------------         -----
<S>                                   <C>                 <C>             <C>           <C>                  <C>
Letters of Credit                                                 ($ in  millions)

       Standby                                $  --             $  --          $   --          $  1.8        $  1.8
       Import                                  44.5                --              --              --          44.5
                                              -----             -----          ------          ------        ------
                                               44.5                --              --             1.8          46.3
                                              =====             =====          ======          ======        ======
</TABLE>

Impact of Inflation

The Company's results of operations and financial condition are presented based
upon historical cost. While it is difficult to accurately measure the impact of
inflation due to the imprecise nature of the estimates required, the Company
believes that the effects of inflation, if any, on its results of operations and
financial condition have been minor. However, there can be no assurance that
during a period of significant inflation, the Company's results of operations
would not be adversely affected.

Seasonality

The Company's retail and direct businesses experience two distinct selling
seasons, spring and fall. The spring season is comprised of the first and second
quarters and the fall season is comprised of the third and fourth quarters. Net
sales are usually substantially higher in the fall season and selling, general
and administrative expenses as a percentage of net sales are usually higher in
the spring season. Approximately 35% of annual net sales in fiscal 2001 occurred
in the fourth quarter. The Company's working capital requirements also fluctuate
throughout the year, increasing substantially in September and October in
anticipation of the holiday season inventory requirements.

Recent Accounting Pronouncements

In July 2001, the FASB issued Statement of Financial Standards No. 141,
"Business Combinations" and Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets". SFAS 141 eliminates the
pooling-of-interests method of accounting for business combinations initiated
after June 30, 2001 and modifies the application of the purchase accounting
method effective for transactions that are completed after June 30, 2001. SFAS
142 eliminates the requirement to amortize goodwill and intangible assets having
indefinite useful lives but requires testing at least annually for impairment.
Intangible assets that have finite lives will continue to be amortized over
their useful lives. SFAS 142 will apply to goodwill and intangible assets
arising from transactions completed before and after the Statement's effective
date of January 1, 2002. These statements had no effect on the Company's
financial statements in fiscal 2001 and are not anticipated to have any effect
in fiscal 2002.

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS No. 143 requires the Company to record the fair value of an
asset retirement obligation as a liability in the period in which it incurs a
legal obligation associated with the retirement of tangible long-lived assets.
The Company also records a corresponding asset which is depreciated over the
life of the asset. Subsequent to the initial measurement of the asset retirement
obligation, the obligation will be adjusted at the end of each period to
reflect the passage of time and changes in the estimated future cash flows
underlying the obligation. SFAS No. 143 is effective for fiscal years beginning
after June 15, 2002. Management does not believe that the adoption of SFAS No.
143 will have a significant impact on the Company's financial statements.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and requires
companies to separately report discontinued operations and extends that
reporting to a component of an entity that either has been disposed of or is
classified as held for sale. This Statement requires that long-lived assets be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. SFAS No. 144 is
effective for fiscal years beginning after December 15, 2001. The adoption of
SFAS No. 144 will not have any impact on the Company's financial statements.

                                       16

<PAGE>


EITF Issue No. 00-14 "Accounting for Certain Sales Incentives" will be effective
in the first quarter of fiscal 2002. This EITF addresses the accounting for and
classification of various sales incentives. The adoption of the provisions of
this EITF will not have a material effect on the Company's financial statements
in fiscal 2002.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - J. CREW OPERATING CORP.

This discussion should be read in conjunction with the audited consolidated
financial statements of J. Crew Operating Corp. and subsidiaries for the
two-year period ended February 2, 2002 and notes thereto included elsewhere in
this Annual Report on Form 10-K.

Results of Operations
---------------------

Fiscal 2001 Compared to Fiscal 2000

Revenues
--------

Revenues in the fiscal year ended February 2, 2002 decreased 5.8% to $778.0
million from $826.0 million in the fiscal year ended February 3, 2001. The
fiscal year ended February 2, 2002 consisted of 52 weeks compared to 53 weeks in
fiscal year 2000. Net sales for the fifty-third week were $10.8 million.

J. Crew Retail net sales decreased by 2.2% from $406.8 million in fiscal 2000 to
$398.0 million in fiscal 2001. The percentage of the Company's total net sales
derived from J. Crew Retail increased to 53.7% in fiscal year 2001 compared to
51.6% in fiscal 2000. The decrease in net sales was due to a decrease of 15.5%
in comparable store sales. This decrease offset a 30% increase in the number of
stores from 105 at February 3, 2001 to 136 at February 2, 2002.

J. Crew Direct net sales (which includes net sales from catalog and Internet
operations) decreased by 9.3% from $284.8 million in fiscal 2000 to $258.2
million in fiscal 2001. The percentage of the Company's total net sales derived
from J. Crew Direct decreased to 34.8% in fiscal 2001 from 36.2% in fiscal 2000.
Catalog net sales decreased to $135.3 million in fiscal 2001 from $177.5 million
in fiscal 2000 pages circulated decreased from 8.7 million in fiscal 2000 to 8.2
billion in fiscal 2001. Internet net sales increased to $122.9 million in fiscal
2001 from $107.3 million in fiscal 2000 as the Company continued to migrate
catalog customers to the Internet.

J.Crew Factory net sales decreased from $96.1 million in fiscal 2000 to $85.1
million in fiscal 2001. The percentage of the Company's total net sales derived
from J. Crew Factory decreased to 11.5% in fiscal 2001 from 12.2% in fiscal
2000. Comparable store sales for J. Crew Factory decreased by 10.5% in fiscal
2001. There were 41 J. Crew Factory stores at February 2, 2002 and February 3,
2001.

Other revenues which consist of shipping and handling fees and royalties
decreased to $36.7 million in fiscal 2001 from $38.3 million in fiscal 2000,
primarily as a result of a decrease in shipping and handling fees which is
attributable to the decrease in net sales of J.Crew Direct.

Cost of sales, including buying and occupancy costs
----------------------------------------------------

Cost of sales (including buying and occupancy costs) as a percentage of revenues
increased to 59.4% in fiscal 2001 from 56.2% in fiscal 2000. This increase was
caused by a significant increase in markdowns as a result of the highly
promotional retail environment and an increase in buying and occupancy costs
caused by a decrease in leverage related to the decline in comp store sales.

Selling, general and administrative expenses
--------------------------------------------

Selling, general and administrative expenses decreased to $294.9 million in
fiscal 2001 (37.9% of revenues) from $301.2 million in fiscal 2000 (36.5% of
revenues).

                                       17

<PAGE>

General and administrative expenses of the J.Crew brand decreased to $234.1
million in fiscal 2001 (30.1% of revenues) from $238.5 million in fiscal 2000
(28.9% of revenues). This decrease resulted from a decrease in bonus provision
in fiscal 2001 and the cost cutting initiatives instituted in the first quarter
of 2001 which were offset by the additional retail stores in operation and a
$10.1 million increase in depreciation and amortization during fiscal 2001.

Selling expenses were $60.8 million in fiscal 2001 (7.8% of revenues) compared
to $62.7 million in fiscal 2000 (7.6% of revenues). This decrease was due
primarily to a decrease in pages circulated from 8.7 billion pages in fiscal
year 2000 to 8.2 billions pages in fiscal 2001.

Interest expense
----------------

Interest expense, net was $20.9 million in fiscal 2001 compared to $22.8 million
in fiscal 2000. The decrease resulted from the pay off of the term loan in
January 2001 and a decrease in interest rates offset by higher average
borrowings in fiscal 2001. Average borrowings under the Revolving Credit
Facility required to fund inventories and capital expenditures were $43.1
million in fiscal 2001 compared $9.8 million in fiscal 2000.

Income Taxes
------------

The effective tax rate was a benefit of 46.7% in fiscal 2001 compared to a
provision of 35.9% in fiscal 2000. The state tax provision in 2000 was reduced
by the utilization of net operating loss carryovers.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's principal market risk relates to interest rate sensitivity, which
is the risk that future changes in interest rates will reduce net income or the
net assets of the Company. The Company's variable rate debt consists of
borrowings under the Revolving Credit Facility. The interest rates are a
function of the bank prime rate or LIBOR. A one percentage point change in the
base interest rate would result in approximately $500,000 change in income
before income taxes.

The Company enters into letters of credit to facilitate the international
purchase of merchandise. The letters of credit are primarily denominated in U.S.
dollars. Outstanding letters of credit at February 2, 2002 were approximately
$46.3 million.

The Company has a licensing agreement in Japan which provides for royalty
payments based on sales of J. Crew merchandise as denominated in yen. The
Company has from time to time entered into forward foreign exchange contracts to
minimize this risk. There were no forward foreign exchange contracts outstanding
during fiscal year 2001.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements are set forth herein commencing on page F-1 of this
Report.

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

Not applicable.

                                       18

<PAGE>

                                    PART III

Information required by Items 10-14 with respect to Operating Corp. has been
omitted pursuant to General Instruction I of Form 10-K. Information required by
Items 10-14 with respect to Holdings is described below.

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the name, age and position of individuals who are
serving as directors of Holdings and executive officers of Holdings and
Operating Corp. Each Director of Holdings will hold office until the next annual
meeting of shareholders or until his or her successor has been elected and
qualified. Officers are elected by the respective Boards of Directors and serve
at the discretion of such Board.

<TABLE>
<CAPTION>
Name                                        Age               Position
----                                        ---               --------
<S>                                         <C>               <C>
Emily Woods............................     40                Director, Chairman of the Board
Mark A. Sarvary........................     42                Director, Chief Executive Officer
David Bonderman........................     59                Director
Richard W. Boyce.......................     47                Director
Gregory D. Brenneman...................     40                Director
John W. Burden, III....................     65                Director
Basha Cohen............................     41                Senior Vice President, Womens Product Development
James G. Coulter.......................     42                Director
Donald Fleming.........................     54                Executive Vice President, Stores
Scott Formby...........................     40                Executive Vice President, Design
Blair Gordon...........................     39                Executive Vice President, Creative Director
Arlene S. Hong.........................     33                Senior Vice President, General Counsel and
                                                              Corporate Secretary
Scott D. Hyatt.........................     44                Senior Vice President, Manufacturing
Walter Killough........................     47                Chief Operating Officer
David F. Kozel.........................     46                Executive Vice President, Human Resources
Nicholas Lamberti......................     59                Vice President, Corporate Controller
Scott M. Rosen.........................     43                Executive Vice President, Chief Financial Officer
Michael J. Scandiffio..................     53                Executive Vice President, Mens
David M. Schwarz.......................     51                Director
Thomas W. Scott........................     36                Director
Carol Sharpe...........................     47                Executive Vice President, Womens
Brian T. Swette........................     48                Director
Josh S. Weston.........................     73                Director
</TABLE>

                                       19

<PAGE>

Emily Woods
         Ms. Woods became Chairman of the Board of  Directors of Holdings in
1997. Ms. Woods is also a director and Chairman of the Board of Operating Corp.
Ms. Woods co-founded the J. Crew brand in 1983. Ms. Woods has also served as
Chief Executive Officer and Vice-Chairman of Holdings and as Chief Executive
Officer of Operating Corp. She is also a director of Yankee Candle Company, Inc.

Mark A. Sarvary
         Mr. Sarvary has been Chief Executive Officer of the Company and a
director of Holdings since May 1999. He was President/General Manager of the
Nestle Frozen Food Division of Nestle USA from 1996 to 1999.

David Bonderman
         Mr. Bonderman became a director of Holdings in 1997. Mr. Bonderman is a
founding partner of Texas Pacific Group and has been Managing General Partner of
TPG since 1992. Mr. Bonderman serves on the Boards of Directors of Proquest
Company, Continental Airlines, Inc., Co-Star Group, Inc., Denbury Resources
Inc., Ducati Motor Holdings S.p.A., Magellan Health Services, Inc., Oxford
Health Plans, Inc., Paradyne Networks, Inc., RyanAir Holdings PLC., ON
Semiconductor Corporation, Washington Mutual, Inc., Agenesys, Inc. and Seagate
Technology, Inc.

Richard W. Boyce
         Mr. Boyce became a director of Holdings in 1997 and served as Chief
Executive Officer of the Company during portions of 1997 and 1999 while also
providing operating oversight to the remainder of the TPG portfolio. Mr. Boyce
is the senior operating partner of Texas Pacific Group. Prior to joining Texas
Pacific Group in 1997, Mr. Boyce was employed by PepsiCo from 1992 to 1997, most
recently as Senior Vice President of Operations for Pepsi-Cola, North America.
He was Chairman of Favorite Brands International Holding Corp., which filed for
protection under Chapter 11 of the Bankruptcy Code in 1999. He also serves on
the Boards of Directors of Del Monte Foods Corp., MEMC Electronic Materials,
Inc., Punch Group Ltd., and ON Semiconductor Corporation.

Gregory D. Brenneman
         Mr. Brenneman became a director of Holdings in 1998. Mr. Brenneman has
been Chairman and Chief Executive Officer of Turnworks, Inc. (private equity
firm) since 1994. He was President and Chief Operating Officer of Continental
Airlines, Inc. from 1995 to 2001. He also serves as director of Automatic Data
Processing and Home Depot, Inc.

John W. Burden, III
         Mr. Burden became a director of Holdings in 1998.  Mr. Burden has been
a retail consultant for more than five years. He also serves as a director of
Saks Incorporated and Chicos Fas Inc.

Basha Cohen
         Ms. Cohen has been Senior Vice President, Womens Product Development of
the Company since 2000. Prior thereto, she was Senior Vice President, General
Merchandising Manager, Womens Mail Order and Retail since 1999 and Senior Vice
President, General Merchandising Manager, Womens Mail Order from 1998 to 1999.
Prior to joining the Company, Ms. Cohen was Senior Vice President, Design and
Buying of Laura Ashley PLC (retail apparel company) for three years.

James G. Coulter
         Mr. Coulter became a director of Holdings in 1997. Mr. Coulter is a
founding partner of Texas Pacific Group and has been Managing General Partner of
TPG for more than eight years. Mr. Coulter serves on the Boards of Directors of
Genesis Health Ventures, Inc., Globespan, Inc., Seagate Technology, Inc., MEMC
Electronic Materials, Inc., Evolution Global Partners and Zhone Technologies.

Donald Fleming
         Mr. Fleming has been Executive Vice President, Stores of the Company
since May 2001 and prior thereto he was Senior Vice President, Factory since
1999. Before joining the Company, he was Northeast Regional Director of
Victoria's Secret (retail apparel company) since 1996.

                                       20

<PAGE>

Scott Formby
        Mr. Formby has been Executive Vice President, Design of the Company
since 1999. His employment with the Company terminated on April 18, 2002.
Prior thereto, he was Vice President, Design for more than five years.

Blair Gordon
         Mr. Gordon has been Executive Vice President, Creative Director of the
Company since January 2002. Prior thereto, he was Executive Vice President,
Specialty Retail of Nautica Enterprises, Inc. (retail apparel company) since
2000 and Vice President, Creative Services of Polo Ralph Lauren Corporation
(retail apparel company) from 1997 to 2000.

Arlene S. Hong
         Ms. Hong has been Senior Vice President, General Counsel and Corporate
Secretary of the Company since February 2002 and Vice President and Associate
General Counsel since 2000. Prior to joining the Company, she practiced law at
the New York offices of the international law firm of Proskauer Rose LLP for
more than three years.

Scott D. Hyatt
         Mr. Hyatt has been Senior Vice President, Manufacturing of the Company
since 1998. Prior thereto, he was with Express, a division of the Limited, Inc.
(retail apparel company), as Vice President, Production and Sourcing from 1996
to 1998

Walter Killough
         Mr. Killough has been Chief Operating Officer of the Company since
1999. He was Senior Vice President, General Manager, Mail Order from 1997 to
1999 and prior thereto, he was Senior Vice President of Clifford & Wills, a
subsidiary of the Company, for more than five years.

David F. Kozel
         Mr. Kozel has been Executive Vice-President, Human Resources of the
Company since February 2002 and Senior Vice President, Human Resources since
1999. Prior thereto, he was with Grey Advertising Inc. (advertising services
company) as Vice President, Human Resources since 1998, and Vice President,
Human Resources of Deluxe Corporation (check printing and electronic payment
processing services company) from 1997 to 1998.

Nicholas Lamberti
         Mr. Lamberti has been Vice President - Corporate Controller of the
Company for more than five years.

Scott M. Rosen
         Mr. Rosen has been Executive Vice President and Chief Financial Officer
of the Company since 1999, Senior Vice President and Chief Financial Officer
from 1998 until then and Chief Financial Officer of the Mail Order division of
the Company for four years prior thereto.

Michael J. Scandiffio
         Mr. Scandiffio has been Executive Vice President, Mens since June 2001.
Prior thereto, he was Executive Vice President, Merchandising and Design of
Pacific Sunwear of California, Inc. (retail apparel company) since 1999 and
President of the retail division of Brooks Brothers (retail apparel company)
from 1997 to 1999.

David M. Schwarz
         Mr. Schwarz became a director of Holdings in October 2001.  Mr. Schwarz
has been President and Chief Executive Officer of David M. Schwarz /
Architectural Services, Inc. (architectural services firm) for more than five
years.

Thomas W. Scott
         Mr. Scott became a director of Holdings  in January 2002.  Mr. Scott is
a founding partner of Nantucket Allserve Inc. (beverage supplier) and has been
Co-Chairman since 1989 and Co-Chairman and Co-Chief Executive Officer from 1989
to 2000. Mr. Scott has also been Co-Chairman of Shelflink (supply chain software
company) since 2000.

                                       21

<PAGE>

     Ms. Sharpe has been Executive Vice President, Womens of the Company since
June 2001 and prior thereto was in the positions of Executive Vice President -
Merchandising - Brand, Senior Vice President, General Merchandising Manager,
Retail and Senior Vice President and General Merchandising Manager-Women's since
1998. She was Vice President, Women's for more than 5 years prior to 1998.

Brian T. Swette
     Mr. Swette became a director of Holdings in 1998. He has been
Vice-President of Corporate Development of eBay Inc. (person-to-person trading
community on the Internet), since 2001 and prior thereto he was Chief Operating
Officer since 1999 and Senior Vice President of Marketing and International from
1998 to 1999. Prior to joining eBay, he was Executive Vice President and Chief
Marketing Officer-Global Beverages of Pepsi-Cola Beverages from 1996 and
Executive Vice President Marketing-North America of Pepsi-Cola Beverages from
1994 to 1996. He is also a director of eBay.

Josh S. Weston
     Mr. Weston became a director of Holdings in 1998.  He has been Honorary
Chairman of the Board of Directors of Automatic Data Processing (computing
services business) since 1998. He was Chairman of the Board of Automatic Data
Processing from 1996 until 1998 and Chairman and Chief Executive Officer for
more than five years prior thereto. Mr. Weston is also a director of Gentiva
Health Services, Inc., Aegis Communications Group, Inc., and Russ Berrie &
Company, Inc.

                                       22

<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth compensation paid by the Company for fiscal years
2001, 2000, and 1999 to each individual serving as its chief executive officer
during fiscal 2001 and to each of the four other most highly compensated
executive officers of the Company as of the end of fiscal 2001.

<TABLE>
<CAPTION>
                                                                                      Long-Term Compensation
                                              Annual Compensation                  Awards              Payouts
                                        ------------------------------------------------------------------------
                                                                                                Securities
Name                                                           Other Annual      Restricted     Underlying    LTIP       All Other
And                           Fiscal      Salary     Bonus     Compensation        Stock         Options/    Payouts   Compensation
Principal Position             Year        ($)        ($)          ($)          Award(s)($)(1)   SARS (#)(1)   ($)         ($)
-----------------------------------------------------------------------------------------------------------------------------------
<S>                           <C>      <C>          <C>        <C>              <C>             <C>          <C>      <C>
 Emily Woods                   2001    $1,000,000          --    $        --           --           --          --    $  5,250(4)
 Chairman  (2)                 2000     1,000,000   1,000,000             --           --           --          --       5,250(4)
                               1999     1,000,000   1,000,000             --           --           --          --       5,000(4)

 Mark Sarvary                  2001       675,000          --             --           --           --          --       5,250(4)
 Chief Executive Officer                                                                                                 5,250(4)
                               2000       675,000     502,500             --           --           --          --      60,000(5)
                               1999       425,000     335,000      1,000,000(3)        --      272,000          --     135,000(5)

 Basha Cohen                   2001       400,000          --             --           --           --          --       5,250(4)
 Senior Vice President,
 Womens Product Development    2000       400,000     210,000             --           --           --          --       5,250(4)
                               1999       400,000     100,000             --           --           --          --          --

 Scott Formby
 Executive Vice President,     2001       450,000          --             --           --           --          --       4,558(4)
 Design (6)
                               2000       450,000     337,500             --           --       10,000          --       4,558(4)
                               1999       422,000     106,800             --           --        8,800          --       5,000(4)

 Carol Sharpe
 Executive Vice President,     2001       400,000          --             --           --           --          --       5,250(4)
 Women's                       2000       400,000     360,000             --           --           --          --       5,250(4)
                               1999       362,500     240,000        360,000(3)        --       12,000          --       5,000(4)

</TABLE>
____________
(1)   There is no established public market for shares of Holdings Common Stock.
      Holders of restricted stock have the same right to receive dividends as
      other holders of Holdings Common Stock. Holdings has not paid any cash
      dividends on its Common Stock.
(2)   Ms. Woods was granted 661,600 shares of Holdings Common Stock ("Woods
      Restricted Shares"), on October 17, 1997 of which 78,600 shares vested
      immediately upon grant, 194,400 shares vested on each of October 17, 2000
      and 2001 and 194,200 shares will vest on October 17, 2002.
(3)   This amount is a signing bonus.
(4)   Represents Company matching contributions to 401(k) plan.
(5)   Relocation.
(6)   Mr. Formby's employment with the Company terminated on April 18, 2002.

                                       23

<PAGE>

The following Table shows information concerning stock options to purchase
shares of Holdings Common Stock granted to any of the named executive officers
during fiscal year 2001.

<TABLE>
<CAPTION>
                                                Option Grants In Fiscal Year 2001


                                                                                          Assumed Annual Rates Of
                                                                                       Stock Price Appreciation For
                            Individual Grants                                                  Option Term
-------------------------------------------------------------------------------------------------------------------------
                     Number of           Percent Of
                    Securities          Total Options
                    Underlying           Granted To
                      Options           Employees In         Exercise       Expiration
Name             Granted(#) (1)          Fiscal Year        Price($/Sh)        Date           5%($)        10% ($)
-------------------------------------------------------------------------------------------------------------------------
<S>              <C>                    <C>                 <C>             <C>               <C>          <C>

None
</TABLE>
___________
(1)     The Company has not granted any SARs.


        The following Table shows the number of stock options held to purchase
shares of Holdings Common Stock by the named executive officers at the end of
fiscal year 2001. The named executive officers did not exercise any stock
options in fiscal year 2001.

<TABLE>
<CAPTION>
              Aggregated Option Exercises in Fiscal Year 2001 and Fiscal Year-End Option Values

                                                                                      Number Of Securities
                                                                                     Underlying Unexercised
                                                                                 Options At Fiscal Year End (1)
                                                                                               (#)
Name                                                                                Exercisable/Unexercisable
----                                                                                -------------------------
<S>                                                                              <C>
Basha Cohen.................................................................             20,000/  5,000
Scott Formby (2)............................................................             34,240/ 15,760
Mark Sarvary ...............................................................            108,800/163,200
Carol Sharpe ...............................................................             24,800/ 12,200
Emily Woods ................................................................            131,200/361,000
</TABLE>

__________


(1)   There is no established public market for shares of Holdings Common Stock.
(2)   Mr. Formby's employment with the Company terminated on April 18, 2002.

                                       24

<PAGE>

Employment Agreements and Other Compensation Arrangements

Ms. Woods has an employment agreement with Holdings and Operating Corp. (the
"Employers") which provides that, for a period of five years beginning on
October 17, 1997, she will serve as Chairman of the Board of Directors of
Holdings. The employment agreement provides for a minimum annual base salary of
$1.0 million, and an annual target bonus of up to $1.0 million based on
achievement of earnings objectives to be determined each year. The employment
agreement also provided for the grant of 661,600 shares of Holdings Common Stock
(the "Woods Restricted Shares") and the reimbursement of income taxes incurred
by Ms. Woods in connection with such grant. (See footnote 2 to the Executive
Compensation Table for information on the vesting of the Woods Restricted
Shares). Ms. Woods is also entitled to various executive benefits and
perquisites under the employment agreement.

Under the terms of stock options awarded to Ms. Woods under the Company's Stock
Option Plan, all unvested options shall become exercisable (i) if Ms. Woods'
employment is terminated by Holdings without cause, by Ms. Woods for good reason
or by reason of death or disability, or (ii) in the event of a change in control
of Holdings. Because of a change in Ms. Woods' duties and responsibilities, upon
the termination of Ms. Woods' employment, she will be entitled to severance
benefits and other benefits as described in the February 4, 2000 amendment to
her employment agreement.

Mr. Sarvary has an employment agreement with Operating Corp., which provides
that, for a period of five years commencing on May 10, 1999, he will serve as
Chief Executive Officer of Operating Corp. The Employers also agreed to cause
Mr. Sarvary to be elected to the Board of Directors of Holdings. The employment
agreement provides for a minimum annual base salary of $670,000 and an annual
target bonus of 50% of his annual base salary based on achievement of earnings
objectives to be determined each year. The employment agreement also provides
for the payment of a signing bonus of $1,000,000 and the grant of options to
purchase 272,000 shares of Holdings Common Stock as well as the grant of
additional stock options to purchase 68,000 shares on the earlier of the date of
an initial public offering of Holdings Common Stock or May 10, 2004. Mr. Sarvary
is also entitled to various executive benefits and perquisites under the
employment agreement.

In the event of a change in Mr. Sarvary's duties and responsibilities, upon the
termination of Mr. Sarvary's employment, he will be entitled to receive
severance and other benefits described in the January 15, 2002 amendment to his
employment agreement. These include the payment of an amount equal to two times
his base salary and the continuation of medical and life insurance benefits for
a period of time after the termination date. In addition, the portion of his
stock options that are vested as of the termination of his employment will
remain exercisable for three years.

Ms. Cohen has a letter agreement with Operating Corp. which provides that, in
the event of her termination by Operating Corp. without Cause (as that term is
defined in the letter agreement), she will receive a continuation of her base
salary and medical benefits for a period of one year after the termination date
and the payment of any bonus that she would otherwise have received for the
fiscal year ending before the termination date.

Mr. Formby has a letter agreement with Operating Corp. which provides that, in
the event of the termination of his employment with Operating Corp. without
Cause (as that term is defined in the letter agreement), he will receive a
continuation of his base salary and medical benefits for a period of one year
after the termination date. Mr. Formby's employment with the Company terminated
on April 18, 2002 as a result of which he is entitled to receive the
aforementioned benefits.

                                       25

<PAGE>
Ms. Sharpe has an employment agreement with Operating Corp. which provides that,
for a period of five years commencing on April 30, 1999, she will serve as
Executive Vice President-Merchandising of Operating Corp. The employment
agreement provides for a minimum annual base salary of $400,000 and an annual
target bonus of 60% of her annual base salary based on achievement of earnings
objectives to be determined for each year. The employment agreement also
provides for a signing bonus of $360,000 and the grant of options to purchase
12,000 shares of Holdings Common Stock. The employment agreement provides for
continuation of salary for a period of one year if Ms. Sharpe's employment is
terminated without Cause (as defined in the Agreement). Ms. Sharpe's employment
agreement also provides that if, on April 30, 2003, the aggregate spread between
the fair market value per share and the exercise price per share of her options
to purchase 34,600 shares of Holdings Common Stock does not equal or exceed
$1,124,500, then Operating Corp. will pay her a cash payment equal to any such
shortfall, subject to adjustment in the event she has disposed of any of the
shares underlying such options.

The Woods Restricted Shares and any shares of Holdings Common Stock acquired by
Ms. Woods, Mr. Sarvary, Mr. Formby, Ms. Sharpe and Ms. Cohen pursuant to the
exercise of options are subject to a shareholders' agreement providing for
certain transfer restrictions, registration rights and customary tag-along and
drag-along rights.


Compensation Committee Interlocks and Insider Participation

Ms. Woods, Chairman, and Mr. Boyce, a director and former Chief Executive
Officer of the Company, are members of the Compensation Committee of Holdings.

Compensation of Directors

An attendance fee of $10,000 for each Board of Directors meeting (up to a
maximum of $40,000 per year) is paid to each Director who is neither an employee
of the Company nor a representative of TPG. Directors have the option to receive
all or a portion of that fee paid in cash or in shares of Holdings Common Stock
at a per share purchase price equal to the fair market value thereof.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding the beneficial ownership of
the Common Stock of Holdings as of March 15, 2002 for each person who is known
to Holdings to be the beneficial owner of 5% or more of Holdings Common Stock.
The holders listed have sole voting power and investment power over the shares
held by them, except as indicated by the notes following the table.

<TABLE>
<CAPTION>
                               Name and Address                          Amount and Nature of         Percent of
Title of Class                 of Beneficial Owner                       Beneficial Ownership           Class
----------------------------------------------------------------------------------------------------------------------
<S>                            <C>                                       <C>                          <C>
Common Stock                   TPG Partners II, L.P.                     7,313,797.6 shares (1)          59%
                               301 Commerce Street, Suite 3300
                               Fort Worth, TX 76102

Common Stock                   Emily Woods                               2,396,376.6 shares (2)          19%
                               J. Crew Group, Inc.
                               770 Broadway
                               New York, NY 10003
</TABLE>

___________

(1)   These shares of Common Stock are held by TPG and the following affiliates
      of TPG (collectively, "TPG Affiliates"): TPG Parallel II L.P., TPG
      Partners II L.P. and TPG Investors II, L.P.

(2)   Includes (a) 131,200 shares not currently owned but which are issuable
      upon the exercise of stock options awarded under the Company's Stock
      Option Plan that are currently exercisable, and (b) 194,200 shares of
      Common Stock that have not vested and are held in custody by the Company
      until vesting thereof.

                                       26

<PAGE>

         The following table sets forth information regarding the beneficial
ownership of each class of equity securities of Holdings as of March 15, 2002
for (i) each director, (ii) each of the executive officers identified in the
table set forth under Item 11. "Executive Compensation", and (iii) all directors
and executive officers as a group. The holders listed have sole voting power and
investment power over the shares held by them, except as indicated by the notes
following the table.

<TABLE>
<CAPTION>
                                                                          Number of Shares
                                                                              and Nature of           Percent of
Title of Class                       Name of Beneficial Owner           Beneficial Ownership             Class
----------------------------------------------------------------------------------------------------------------------
<S>                                  <C>                                <C>                           <C>
Common Stock                         David Bonderman                       7,313,797.6(1)                 59%
Common Stock                         Richard W. Boyce                           55,200(2)                  *
Common Stock                         Gregory D. Brenneman                       13,000                     *
Common Stock                         John W. Burden, III                     4,466.276                     *
Common Stock                         Basha Cohen                                20,000(2)
Common Stock                         James G. Coulter                      7,313,797.6(1)                 59%
Common Stock                         Scott Formby                               34,240(2)(4)               *
Common Stock                         Mark A. Sarvary                           163,200(2)                  *
Common Stock                         David M. Schwarz                            1,232                     *
Common Stock                         Thomas W. Scott                                 0                     *
Common Stock                         Carol Sharpe                               27,200(2)                  *
Common Stock                         Brian T. Swette                        20,012.276                     *
Common Stock                         Josh S. Weston                         19,612.276                     *
Common Stock                         Emily Woods                           2,396,376.6(3)                 19%
Common Stock                         All Directors and executive            10,156,617(1)(2)(3)           81%
                                     officers as a group
Series A Preferred Stock             David Bonderman                         73,474.58(1)                 79%
Series A Preferred Stock             Gregory D. Brenneman                           60                     *
Series A Preferred Stock             James G. Coulter                        73,474.58(1)                 79%
Series A Preferred Stock             Brian T. Swette                                60                     *
Series A Preferred Stock             Josh S. Weston                                 60                     *
Series A Preferred Stock             Emily Woods                             2,978.505                     3%
Series A Preferred Stock             All Directors and executive            76,633.085                    83%
                                     officers as a group
</TABLE>

__________
*Represents less than 1% of the class.

(1)  Attributes ownership of the shares owned by TPG Affiliates to Messrs.
     Bonderman and Coulter, who are partners of TPG. Each of Messrs. Bonderman
     and Coulter disclaim beneficial ownership of the shares owned by TPG
     Affiliates.

(2)  These are shares not currently owned but which are issuable upon the
     exercise of stock options awarded under the Company's Stock Option Plan
     that are currently exercisable or become exercisable within 60 days.

(3)  Includes (a) 131,200 shares not currently owned but which are issuable upon
     the exercise of stock options awarded under the Company's Stock Option Plan
     that are currently exercisable, and (b) 194,200 shares of Common Stock that
     have not vested and are held in custody by the Company until vesting
     thereof.

(4)  Mr. Formby's employment with the Company terminated on April 18, 2002.

                                       27

<PAGE>

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     In connection with Mr. Sarvary's relocation to the Company's headquarters,
the Company loaned Mr. Sarvary $1.0 million on an interest-free basis to
purchase a residence. The largest amount outstanding in fiscal year 2001 was
$950,000. The loan is secured by a mortgage on that residence and $850,000 is
still outstanding.

     Holdings and its subsidiaries entered into a tax sharing agreement
providing (among other things) that each of the subsidiaries will reimburse
Holdings for its share of income taxes determined as if such subsidiary had
filed its tax returns separately from Holdings.

                                       28

<PAGE>

                                     PART IV

ITEM 14.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

J. Crew Group, Inc.
-------------------

(a)      1.    Financial Statements

               The following financial statements of J. Crew Group, Inc. and
               subsidiaries are included in Item 8:

               (i)    Report of KPMG LLP, Independent Auditors
               (ii)   Consolidated Balance Sheets as of February 2, 2002 and
                      February 3, 2001
               (iii)  Consolidated Statements of Operations - Years ended
                      February 2, 2002, February 3, 2001 and January 29, 2000
               (iv)   Consolidated Statements of changes in Stockholders'
                      Deficit -Years ended February 2, 2002, February 3, 2001
                      and January 29, 2000
               (v)    Consolidated Statements of Cash Flows - Years ended
                      February 2, 2002, February 3, 2001 and January 29, 2000
               (vi)   Notes to consolidated financial statements

         2.    Financial Statements Schedules

               Schedule II    Valuation and Qualifying Accounts

         3.    Exhibits

               The exhibits listed on the accompanying Exhibit Index are
               incorporated by reference herein and filed as part of this
               report.

(b)      Reports on Form 8-K

         J. Crew Group, Inc., has not filed any reports on Form 8-K during the
         fiscal quarter ended February 2, 2002.

(c)      Exhibits

         See Item 14(a)3 above

(d)      Financial Statement Schedules

         See Item 14(a)1 and 14(a)2 above

                                       29

<PAGE>

J. Crew Operating Corp.
----------------------

(a)      1.    Financial Statements

               The following financial statements of J. Crew Operating Corp. and
               subsidiaries are included in Item 8:

               (i)    Report of KPMG LLP, Independent Auditors
               (ii)   Consolidated Balance Sheets - as of February 2, 2002 and
                      February 3, 2001
               (iii)  Consolidated Statements of Operations - Years ended
                      February 2, 2002, February 3, 2001and January 31, 2000
               (iv)   Consolidated Statements of Cash Flows - Years ended
                      February 2, 2002, February 3, 2001 and January 29, 2000
               (v)    Notes to consolidated financial statements

         2.    Financial Statement Schedules

               Schedule II Valuation and Qualifying Accounts

         3.    Exhibits

               The exhibits listed in the accompanying Exhibit Index are
               incorporated by reference herein and filed as part of this
               report.

(b)      Reports on Form 8-K

         J. Crew Operating Corp., has not filed any reports on Form 8-K during
         the fiscal quarter ended February 2, 2002.

(c)      Exhibits

               See Item 14(a)3 above

(d)      Financial Statement Schedules

               See Item 14(a) 1 and 14(a) 2 above

                                       30

<PAGE>

                                   SIGNATURES

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

                                              J. CREW GROUP, INC.
Date: April 17, 2002                          J. CREW OPERATING CORP.
                                              By: /s/ Mark A. Sarvary
                                                  -------------------
                                                  Mark A. Sarvary
                                                  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 each
registrant and in the capacities indicated, on April 17, 2002.

<TABLE>
<CAPTION>
              Signature                                                Title
              ---------                                                ------
         <S>                                              <C>
         /s/ Emily Woods                                  Director; Chairman of the Board
         ---------------------------
         Emily Woods

         /s/ Mark A. Sarvary                              Director; Chief Executive Officer
         ---------------------------                      (Principal Executive Officer)
         Mark A. Sarvary

         /s/ Scott M. Rosen                               Executive Vice President, Chief Financial
         ---------------------------                      Officer (Principal Financial Officer)
         Scott M. Rosen

         /s/ Nicholas Lamberti                            Vice President, Corporate Controller
         ---------------------------                      (Principal Accounting Officer)
         Nicholas Lamberti

         /s/ David Bonderman                              Director
         ---------------------------
         David Bonderman

         /s/ Richard W. Boyce                             Director
         ---------------------------
         Richard W. Boyce

         /s/ Gregory D. Brenneman                         Director
         ---------------------------
         Gregory D. Brenneman

         /s/ John W. Burden, III                          Director
         ---------------------------
         John W. Burden, III

         /s/ James G. Coulter                             Director
         ---------------------------
         James G. Coulter

         /s/ David M. Schwarz                             Director
         ---------------------------
         David M. Schwarz

         /s/ Thomas W. Scott                              Director
         ---------------------------
         Thomas W. Scott

         /s/ Brian T. Swette                              Director
         ---------------------------
         Brian T. Swette

         /s/ Josh S. Weston                               Director
         ---------------------------
         Josh S. Weston
</TABLE>

                                      S-1

<PAGE>

Independent Auditors' Report

The Board of Directors and Stockholders
J. Crew Group, Inc. and Subsidiaries:

We have audited the consolidated financial statements of J. Crew Group, Inc. and
subsidiaries (the "Company") as listed in the accompanying Index. In connection
with our audits of the consolidated financial statements, we also have audited
the financial statement schedule listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 J. Crew Group, Inc.
and subsidiaries as of February 2, 2002 and February 3, 2001 and the results of
their operations and their cash flows for each of the years in the three-year
period ended February 2, 2002, in conformity with accounting principles
generally accepted in the United States of America. 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.

                                                       KPMG LLP

March 25, 2002, except as to note 6,
which is as of April 17, 2002
New York, NY

                                       F-1

<PAGE>

                             J. CREW GROUP, INC. AND
                                  SUBSIDIARIES

                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                 February 2,         February 3,
                                 Assets                                             2002                 2001
                                 ------                                             ----                 ----
                                                                                          (in thousands)
<S>                                                                               <C>                  <C>
Current assets:
     Cash and cash equivalents                                                    $  16,201            $  32,930
     Merchandise inventories                                                        138,918              140,667
     Prepaid expenses and other current assets                                       27,026               23,740
                                                                                  ---------            ---------

          Total current assets                                                    $ 182,145            $ 197,337
                                                                                  ---------            ---------

Property and equipment - at cost:

     Land                                                                             1,610                1,460
     Buildings and improvements                                                      11,700               11,432
     Furniture, fixtures and equipment                                              105,292               70,541
     Leasehold improvements                                                         170,195              144,906
     Construction in progress                                                         4,903               22,983
                                                                                  ---------            ---------
                                                                                    293,700              251,322

          Less accumulated depreciation and amortization                            106,427               85,746
                                                                                  ---------            ---------
                                                                                    187,273              165,576
                                                                                  ---------            ---------

Deferred income tax assets                                                           18,071               14,362

Other assets                                                                         13,831               12,586
                                                                                  ---------            ---------

          Total assets                                                            $ 401,320            $ 389,861
                                                                                  =========            =========

                            Liabilities and Stockholders' Deficit
                            -------------------------------------

Current liabilities:
     Accounts payable                                                             $  66,703            $  49,705
     Other current liabilities                                                       61,788               75,168
     Income taxes payable                                                             8,840               17,581
     Deferred income tax liabilities                                                  5,650                5,401
                                                                                  ---------            ---------

          Total current liabilities                                                 142,981              147,855
                                                                                  ---------            ---------

Deferred credits and other long-term liabilities                                     67,235               56,043
                                                                                  ---------            ---------

Long-term debt                                                                      279,687              264,292
                                                                                  ---------            ---------

Redeemable preferred stock                                                          230,460              200,018
                                                                                  ---------            ---------

Stockholders' deficit                                                              (319,043)            (278,347)
                                                                                  ---------            ---------

          Total liabilities and stockholders' deficit                             $ 401,320            $ 389,861
                                                                                  =========            =========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-2

<PAGE>

                             J. CREW GROUP, INC. AND
                                  SUBSIDIARIES

                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                                                    Years ended
                                                                                    -----------
                                                                   February 2,      February 3,         January 29,
                                                                   -----------      ----------          -----------
                                                                      2002              2001                2000
                                                                      ----              ----                ----
                                                                                    (in thousands)
<S>                                                                <C>               <C>                 <C>
Revenues:

   Net sales                                                       $ 741,280          $ 787,658          $ 714,119
   Other                                                              36,660             38,317             36,577
                                                                   ---------          ---------          ---------
                                                                     777,940            825,975            750,696

Operating costs and expenses:

   Cost of goods sold, including buying and occupancy costs          462,371            463,909            431,193
   Selling, general and administrative expenses                      295,568            301,865            279,302
   Write off of software development costs                                --                 --              7,018
   Write down of assets and other charges in connection with
    discontinuance of Clifford & Wills                                    --              4,130              4,000
                                                                   ---------          ---------          ---------
                                                                     757,939            769,904            721,513
                                                                   ---------          ---------          ---------

         Income from operations                                       20,001             56,071             29,183

Interest expense - net                                               (36,512)           (36,642)           (38,861)

Gain on sale of Popular Club Plan                                         --                 --              1,000
                                                                   ---------          ---------          ---------

         Income/(loss) before income taxes                           (16,511)            19,429             (8,678)

(Provision) benefit for income taxes                                   5,500             (7,500)             2,050
                                                                   ---------          ---------          ---------

         Net income/(loss)                                         $ (11,011)         $  11,929          $  (6,628)
                                                                   =========          =========          =========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-3

<PAGE>

                             J. CREW GROUP, INC. AND
                                  SUBSIDIARIES

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                        Years ended
                                                                                        -----------
                                                                     February 2,        February 3,        January 29,
                                                                     -----------        -----------        -----------
                                                                        2002               2001               2000
                                                                        ----               ----               ----
                                                                                       (in thousands)
<S>                                                                  <C>                <C>                <C>
Cash flows from operating activities:
Net income/(loss)                                                    $(11,011)          $ 11,929           $ (6,628)
Adjustments to reconcile net income/(loss) to net cash
  provided by operating activities:
     Depreciation and amortization                                     31,718             22,600             19,241
     Write off of software development costs                               --                 --              7,018
     Amortization of deferred financing costs                           1,997              2,793              2,196
     Non-cash interest expense                                         15,395             13,608             11,989
     Deferred income taxes                                             (3,460)                27             (6,840)
     Non-cash compensation expense                                      1,574                649                636
     Gain on sale of subsidiary                                            --                 --             (1,000)
     Write down of assets and other charges in connection
     with discontinued catalog                                             --              4,130              4,000
Changes in operating assets and liabilities:
  Merchandise inventories                                               1,749            (10,739)            26,094
  Net assets held for disposal                                             --              4,797              4,450
  Prepaid expenses and other current assets                            (3,286)             6,343             16,646
  Other assets                                                         (3,416)            (2,788)              (777)
  Accounts payable                                                     16,998              8,754                821
  Other liabilities                                                   (13,767)             5,263             12,892
  Income taxes payable                                                 (8,741)             2,894              3,407
                                                                     --------           --------           --------
     Net cash provided by operating activities                         25,750             70,260             94,145
                                                                     --------           --------           --------

Cash flows from investing activities:
  Capital expenditures                                                (61,862)           (55,694)           (48,684)
  Proceeds from construction allowances                                19,287             13,519              7,431
                                                                     --------           --------           --------
     Net cash used in investing activities                            (42,575)           (42,175)           (41,253)
                                                                     --------           --------           --------

Cash flows from financing activities:
  Decrease in notes payable, bank                                          --                 --            (14,000)
  Repayment of long-term debt                                              --            (34,000)           (10,000)
  Proceeds from the issuance of common stock                               96                178                158
  Repurchase of common stock                                               --                (26)                --
                                                                     --------           --------           --------
     Net cash provided by/(used in) financing activities                   96            (33,848)           (23,842)
                                                                     --------           --------           --------
  Increase (decrease) in cash and cash equivalents                    (16,729)            (5,763)            29,050

  Cash and cash equivalents at beginning of year                       32,930             38,693              9,643
                                                                     --------           --------           --------
  Cash and cash equivalents at end of year                           $ 16,201           $ 32,930           $ 38,693
                                                                     ========           ========           ========

  Supplementary cash flow information:
     Income taxes paid (refunded)                                    $  6,442           $  4,279           $ (7,570)
                                                                     ========           ========           ========
     Interest paid                                                   $ 19,389           $ 20,513           $ 24,792
                                                                     ========           ========           ========

  Noncash financing activities:
     Dividends on redeemable preferred stock                         $ 30,442           $ 26,484           $ 22,986
                                                                     ========           ========           ========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-4

<PAGE>

                             J. CREW GROUP, INC. AND
                                  SUBSIDIARIES

           Consolidated Statements of Changes in Stockholders' Deficit

                          (in thousands, except shares)

<TABLE>
<CAPTION>

                                           Common stock          Additional    Retained                     Deferred       Stock-
                                           ------------            paid-in     earnings        Treasury      compen-      holders'
                                          Shares       Amount      capital    (Deficit)         stock        sation       deficit
                                          ------       ------      -------    ---------         -----        ------       -------
<S>                                   <C>          <C>          <C>          <C>           <C>           <C>           <C>
Balance at January 30, 1999           12,196,600   $        1   $   70,379   $ (301,564)   $   (2,325)   $   (2,264)   $ (235,773)

Net loss                                      --           --           --       (6,628)           --            --        (6,628)

Preferred stock dividends                     --           --           --      (22,986)           --            --       (22,986)

Issuance of common stock                  17,665           --          158           --            --            --           158

Amortization of restricted stock              --           --           --           --            --           636           636
                                      ----------   ----------   ----------   ----------    ----------    ----------    ----------

Balance at January 29, 2000           12,214,265   $        1   $   70,537   $ (331,178)   $   (2,325)   $   (1,628)   $ (264,593)
                                      ==========   ==========   ==========   ==========    ==========    ==========    ==========

Net loss                                      --           --           --       11,929            --            --        11,929

Preferred stock dividends                     --           --           --      (26,484)           --            --       (26,484)

Issuance of common stock                  18,400           --          178           --            --            --           178

Amortization of restricted stock              --           --           --           --            --           649           649

Repurchase of common stock                    --           --           --           --           (26)           --           (26)
                                      ----------   ----------   ----------   ----------    ----------    ----------    ----------

Balance at February 3, 2001           12,232,665   $        1   $   70,715   $ (345,733)   $   (2,351)   $     (979)   $ (278,347)
                                      ==========   ==========   ==========   ==========    ==========    ==========    ==========

Net loss                                      --           --           --      (11,011)           --            --       (11,011)

Preferred stock dividends                     --           --           --      (30,442)           --            --       (30,442)

Issuance of common stock                   5,524           --           96           --            --            --            96

Amortization of restricted stock              --           --           --           --            --           661           661
                                      ----------   ----------   ----------   ----------    ----------    ----------    ----------

Balance at February 2, 2002           12,238,189   $        1   $   70,811   $ (387,186)   $   (2,351)   $     (318)   $ (319,043)
                                      ==========   ==========   ==========   ==========    ==========    ==========    ==========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-5

<PAGE>

                             J. CREW GROUP, INC. AND
                                  SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000

(1) Nature Of Business And Summary Of Significant Accounting Policies

     (a) Principles of Consolidation

         The accompanying consolidated financial statements include the accounts
         of J. Crew Group, Inc. ("Holdings") and its wholly-owned subsidiaries
         (collectively, the "Company"). All significant intercompany balances
         and transactions have been eliminated in consolidation.

     (b) Business

         The Company designs, contracts for the manufacture of, markets and
         distributes men's and women's apparel and accessories. The Company's
         products are marketed, primarily in the United States, through retail
         stores, catalogs, and the Internet. The Company is also party to a
         licensing agreement which grants the licensee exclusive rights to use
         the Company's trademarks in connection with the manufacture and sale of
         products in Japan. The license agreement provides for payments based on
         a specified percentage of net sales.

         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 include the
         back-to-school and holiday seasons) of each fiscal year.

         A significant amount of the Company's products are produced in the Far
         East 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 2001, 2000, and 1999 ended on February 2, 2002 (52
         weeks), February 3, 2001 (53 weeks) and January 29, 2000 (52 weeks).

     (d) 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 $7,895,000 and $18,331,000 at February 2, 2002 and February
         3, 2001, are stated at cost, which approximates market value.

                                       F-6

<PAGE>

                             J. CREW GROUP, INC. AND
                                  SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000

     (e) Merchandise Inventories

         Merchandise inventories are stated at the lower of cost (determined on
         a first-in, first-out basis) or market. The Company capitalizes certain
         design, purchasing and warehousing costs in inventory.

     (f) 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 ("SOP") 93-7,
         "Reporting on Advertising Costs." 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. Deferred catalog costs, included in prepaid
         expenses and other current assets, as of February 2, 2002 and February
         3, 2001 were $7,959,000 and $10,600,000. Catalog costs, which are
         reflected in selling and administrative expenses, for the fiscal years
         2001, 2000, and 1999 were $65,477,000, $69,000,000, and $84,077,000.

         All other advertising costs are expensed as incurred. Advertising
         expenses were $6,671,000 for fiscal year 1999. Advertising costs were
         not significant in all other years.

     (g) Property and Equipment

         Property and equipment are stated at cost. Buildings and improvements
         are depreciated by the straight-line method over the estimated useful
         lives of twenty years. Furniture, fixtures and equipment are
         depreciated by the straight-line method over the estimated useful
         lives, ranging from three to ten years. Leasehold improvements are
         amortized over the shorter of their useful lives or related lease
         terms.

         Significant systems development costs are capitalized and amortized on
         a straight-line basis over periods ranging from three to five years.
         Approximately $8.5 million and $15.0 million of system development
         costs were capitalized in fiscal years 2001 and 2000.

         The Company receives construction allowances upon entering into certain
         store leases. These construction allowances are recorded as deferred
         credits and are amortized over the term of the related lease.

     (h) Debt Issuance Costs

         Debt issuance costs (included in other assets) of $6,906,000 and
         $8,703,000 at February 2, 2002 and February 3, 2001 are amortized over
         the term of the related debt agreements.

     (i) Income Taxes

         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 assets and
         liabilities, in accordance with Statement of Financial Accounting
         Standards ("SFAS") No. 109, "Accounting for Income Taxes."

                                       F-7

<PAGE>

                             J. CREW GROUP, INC. AND
                                  SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000

     (j) Revenue Recognition

         Revenue is recognized for catalog and internet sales when merchandise
         is shipped to customers and at the time of sale for retail sales. 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. 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. Expenses associated
         with shipping and handling functions are included in cost of goods
         sold.

     (k) Store Preopening Costs

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

     (l) Derivative Financial Instruments

         Derivative financial instruments are used by the Company from time to
         time to manage its interest rate and foreign currency exposures. The
         Company may enter into (a) interest rate swaps to convert fixed rate
         debt to variable rates or (b) forward foreign exchange contracts as
         hedges relating to identifiable currency positions to reduce the risk
         from exchange rate fluctuations. Effective in the first quarter of 2001
         the Company adopted SFAS No. 133, "Accounting for Derivative
         Instruments and Certain Hedging Activities," as amended by SFAS No.
         138, "Accounting for Certain Derivative Instruments and Certain Hedging
         Activities." SFAS No. 133 and SFAS No. 138 require that all derivative
         instruments be recorded either as assets or liabilities on the balance
         sheet at their respective fair values. SFAS No. 133 also establishes
         criteria for a derivative to qualify as a hedge for accounting
         purposes. Changes in the fair value of derivative financial instruments
         are either recognized periodically in income or stockholders' equity,
         depending on whether the derivative is being used to hedge changes in
         fair value or cash flows. The adoption of SFAS 133 did not have a
         material effect on the Company's financial statements; therefore a
         transition adjustment was not necessary. There were no derivative
         financial instruments outstanding at February 2, 2002.

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

         The preparation of financial statements in conformity with generally
         accepted accounting principles 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.

     (n) Impairment of Long-Lived Assets and for Long-Lived Assets to Be
         Disposed of

         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 undiscounted cash flow forecasts.

         During fiscal 1999 the Company wrote off $7,018,000 of capitalized
         computer software costs which were impaired by the Company's decision
         to adopt an enterprise resource planning system for its future
         information technology requirements.


                                      F-8

<PAGE>

     (o) Stock Based Compensation

         The Company accounts for stock-based compensation using the intrinsic
         value method of accounting for employee stock options as permitted by
         SFAS No. 123, "Accounting for Stock-Based Compensation". Accordingly,
         compensation expense is not recorded for options granted if the option
         price is equal to or in excess of the fair market price at the date of
         grant, as determined by management.

     (p) Reclassifications

         Certain amounts in the prior year have been reclassified to conform
         with the current year presentation.

     (q) Recent Accounting Pronouncements

         In July 2001, the FASB issued Statement of Financial Standards No. 141,
         "Business Combinations" and Statement of Financial Accounting Standards
         No. 142, "Goodwill and Other Intangible Assets". SFAS 141 eliminates
         the pooling-of-interests method of accounting for business combinations
         initiated after June 30, 2001 and modifies the application of the
         purchase accounting method effective for transactions that are
         completed after June 30, 2001. SFAS 142 eliminates the requirement to
         amortize goodwill and intangible assets having indefinite useful lives
         but requires testing at least annually for impairment. Intangible
         assets that have finite lives will continue to be amortized over their
         useful lives. SFAS 142 will apply to goodwill and intangible assets
         arising from transactions completed before and after the Statement's
         effective date of January 1, 2002. These statements had no effect on
         the Company's financial statements in fiscal 2001 and are not
         anticipated to have any effect in fiscal 2002.

         In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
         Retirement Obligations. SFAS No. 143 requires the Company to record the
         fair value of an asset retirement obligation as a liability in the
         period in which it incurs a legal obligation associated with the
         retirement of tangible long-lived assets. The Company also records a
         corresponding asset which is depreciated over the life of the asset.
         Subsequent to the initial measurement of the asset retirement
         obligation, the obligation will be adjusted at the end of each period
         to reflect the passage of time and changes in the estimated future cash
         flows underlying the obligation. SFAS No. 143 is effective for fiscal
         years beginning after June 15, 2002. Management does not believe that
         the adoption of SFAS No. 143 will have a significant impact on the
         Company's financial statements.

         In August 2001, the FASB issued SFAS No. 144, Accounting for the
         Impairment or Disposal of Long-Lived Assets. SFAS No. 144 addresses
         financial accounting and reporting for the impairment or disposal of
         long-lived assets and requires companies to separately report
         discontinued operations and extends that reporting to a component of an
         entity that either has been disposed of or is classified as held for
         sale. This Statement requires that long-lived assets be reviewed for
         impairment whenever events or changes in circumstances indicate that
         the carrying amount of an asset may not be recoverable. SFAS No. 144 is
         effective for fiscal years beginning after December 15, 2001. The
         adoption of SFAS No. 144 will not have any impact on the Company's
         financial statements.

         EITF Issue No. 00-14 "Accounting for Certain Sales Incentives" will be
         effective in the first quarter of fiscal 2002. This EITF addresses the
         accounting for and classification of various sales incentives. The
         adoption of the provisions of this EITF will not have a material effect
         on the Company's financial Statements in fiscal 2002.

                                       F-9

<PAGE>

                             J. CREW GROUP, INC. AND
                                  SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000

(2)      Events of September 11, 2001

         The terrorist events of September 11, 2001 resulted in the destruction
         of the Company's retail store located at the World Trade Center in New
         York City, resulting in the loss of inventories and store fixtures,
         equipment and leasehold improvements. These losses and the resulting
         business interruption are covered by insurance policies maintained by
         the Company.

         The statement of operations for the year ended February 2, 2002
         includes losses of $1.9 million relating to inventories and stores
         fixtures, equipment and leasehold improvements. Insurance recoveries
         have been recorded to the extent of the losses recognized. Additional
         insurance recoveries will be recorded at the time of settlement
         including recoveries for business interruption which were not
         determinable as of February 2, 2002.

 (3)     Disposal of Businesses

         (a) Popular Club Plan

         In accordance with a sale agreement dated November 24, 1998 the Company
         sold all of the capital stock of Popular Club Plan, Inc. and
         subsidiaries ("PCP") to The Fingerhut Companies, Inc. effective as of
         October 30, 1998 for gross proceeds of $42.0 million in cash. A gain on
         the sale of PCP of $10.0 million was included in the statement of
         operations for fiscal 1998. An additional gain of $1.0 million was
         recognized in fiscal 1999 from the reversal of certain estimated
         liabilities recorded at the date of sale.

         (b) Clifford & Wills

         In 1998, management of the Company made a decision to exit the catalog
         and outlet store operations of Clifford & Wills ("C&W"). Revenues and
         expenses of C&W for fiscal 1999 and 2000 were not material and as a
         result have been netted in the accompanying consolidated statements of
         operations.

         In February 2000, the Company sold certain intellectual property assets
         to Spiegel Catalog Inc. for $3.9 million. In connection with this sale
         the Company agreed to cease the fulfillment of catalog orders but
         retained the right to operate C&W outlet stores and conduct other
         liquidation sales of inventories through December 31, 2000. After
         consideration of the proceeds from the sale and other terms of the
         agreement the Company provided an additional $4,000,000 to write down
         inventories to net realizable value as of January 29, 2000. At February
         3, 2001, the Company determined that the realizable value of the
         remaining net assets of C&W, primarily inventories, was less than their
         carrying amounts and an additional charge of $4,130,000 was taken.

                                       F-10

<PAGE>

                             J. CREW GROUP, INC. AND
                                  SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000

(4)   Other Current Liabilities

      Other current liabilities consist of:

<TABLE>
<CAPTION>
                                                                                      February 2,          February 3,
                                                                                         2002                 2001
                                                                                         ----                 ----
<S>                                                                                  <C>                  <C>
         Customer liabilities                                                        $ 11,381,000         $ 12,251,000
         Accrued catalog and marketing costs                                            3,655,000            4,515,000
         Taxes, other than income taxes                                                 2,930,000            3,686,000
         Accrued interest                                                               4,690,000            4,746,000
         Accrued occupancy                                                              1,036,000            2,339,000
         Reserve for sales returns                                                      6,475,000            6,530,000
         Accrued compensation                                                           1,697,000           11,051,000
         Other                                                                         29,924,000           30,050,000
                                                                                     ------------         ------------
                                                                                     $ 61,788,000         $ 75,168,000
                                                                                     ------------         ------------


 (5)     Long-Term Debt

         Long term debt consists of:

<CAPTION>

                                                                                      February 2,          February 3,
                                                                                         2002                 2001
                                                                                         ----                 ----
         <S>                                                                         <C>                  <C>
         10-3/8% senior subordinated notes (a)                                        150,000,000          150,000,000
         13-1/8% senior discount debentures (b)                                       129,687,000          114,292,000
                                                                                     ------------         ------------
               Total                                                                 $279,687,000         $264,292,000
                                                                                     ============         ============
</TABLE>

     (a) The senior subordinated notes are unsecured general obligations of
         J. Crew Operating Corp., a subsidiary of Holdings, and are subordinated
         in right of payment to all senior debt. Interest on the notes accrues
         at the rate of 10-3/8% per annum and is payable semi-annually in
         arrears on April 15 and October 15. The notes mature on October 15,
         2007 and may be redeemed at the option of the issuer subsequent to
         October 15, 2002 at prices ranging from 105.188% of principal in 2002
         to 100% in 2005 and thereafter.

     (b) The senior discount debentures were issued in aggregate principal
         amount of $142.0 million at maturity and mature on October 15, 2008.
         These debentures are senior unsecured obligations of Holdings. Cash
         interest will not accrue prior to October 15, 2002. However, the
         Company records non-cash interest expense as an accretion of the
         principal amount of the debentures at a rate of 13-1/8% per annum.
         Interest will be payable in arrears on April 15 and October 15 of each
         year subsequent to October 15, 2002. The senior discount debentures may
         be redeemed at the option of Holdings on or after October 15, 2002 at
         prices ranging from 106.563% of principal to 100% in 2005 and
         thereafter.

         There are no maturities of long-term debt required during the next five
         years.


                                      F-11

<PAGE>

                             J. CREW GROUP, INC. AND
                                  SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000

(6)      Lines of Credit

         On October 17, 1997, the Company entered into a syndicated revolving
         credit agreement (the "Revolving Credit Agreement") with a group of
         banks. This agreement was amended on March 18, 1998, November 23, 1998,
         April 20, 1999 and April 17, 2002. Borrowings may be utilized to fund
         the working capital requirements of the Company including issuance of
         stand-by and trade letters of credit and bankers' acceptances. The
         maximum amount available under this agreement is $175.0 million.

         Borrowings are secured by a perfected first priority security interest
         in all assets of the Company's subsidiaries and bear interest, at the
         Company's option, at a base rate equal to the Administrative Agent's
         Eurodollar rate plus an applicable margin or an alternate base rate
         equal to the highest of the Administrative Agent's prime rate, a
         certificate of deposit rate plus 1% or the Federal Funds effective rate
         plus one-half of 1% plus, in each case, an applicable margin. The
         Revolving Credit Agreement matures on October 17, 2003.

         Maximum borrowings under revolving credit agreements were $95,000,000,
         $34,000,000, and $58,000,000 during fiscal years 2001, 2000 and 1999
         and average borrowings were $ 43,100,000, $9,800,000, and $30,800,000.
         There were no borrowings outstanding at February 2, 2002 and February
         3, 2001.

         Outstanding letters of credit established to facilitate international
         merchandise purchases at February 2, 2002 and February 3, 2001 amounted
         to $46,300,000 and $50,948,000.

         The provisions of the Revolving Credit Agreement, as amended, require
         that the Company maintain certain levels of (i) leverage ratio, (ii)
         interest coverage ratio and (iii) inventory coverage ratio; provide for
         limitations on capital expenditures, sale and leaseback transactions,
         liens, investments, sales of assets and indebtedness; and prohibit the
         payment of cash dividends on shares of common stock.

 (7)     Common Stock

         The restated certificate of incorporation authorizes Holdings to issue
         up to 100,000,000 shares of common stock; par value $.01 per share. At
         February 2, 2002, shares issued were 12,238,189 and shares outstanding
         were 11,748,789. In April 1999 the Board of Directors approved a 200
         for 1 stock split of Holdings common stock in the form of a stock
         dividend. During 1999, 2000 and 2001 directors converted fees into
         17,665, 18,400 and 5,524 shares of Holdings common stock.

 (8)     Redeemable Preferred Stock

         The restated certificate of incorporation authorizes Holdings to issue
         up to:

         (a) 1,000,000 shares of Series A cumulative preferred stock; par value
         $.01 per share; and

         (b) 1,000,000 shares of Series B cumulative preferred stock; par value
         $.01 per share.

         At February 2, 2002, 92,800 shares of Series A Preferred Stock and
         32,500 shares of Series B Preferred Stock were outstanding.


                                       F-12

<PAGE>

                             J. CREW GROUP, INC. AND
                                  SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000

         The Preferred Stock accumulates dividends at the rate of 14.5% per
         annum (payable quarterly) for periods ending on or prior to October 17,
         2009. Dividends compound to the extent not paid in cash. On October 17,
         2009, Holdings is required to redeem the Series B Preferred Stock and
         to pay all accumulated but unpaid dividends on the Series A Preferred
         Stock. Thereafter, the Series A Preferred Stock will accumulate
         dividends at the rate of 16.5% per annum. Subject to restrictions
         imposed by certain indebtedness of the Company, Holdings may redeem
         shares of the Preferred Stock at any time at redemption prices ranging
         from 103% of liquidation value plus accumulated and unpaid dividends at
         October 17, 1998 to 100% of liquidation value plus accumulated and
         unpaid dividends at October 17, 2000 and thereafter. In certain
         circumstances (including a change of control of Holdings), subject to
         restrictions imposed by certain indebtedness of the Company, Holdings
         may be required to repurchase shares of the Preferred Stock at
         liquidation value plus accumulated and unpaid dividends.

         Accumulated but unpaid dividends amounted to $105,460,000 at February
         2, 2002. Dividends are recorded as an increase to redeemable preferred
         stock and a reduction of retained earnings.

 (9)     Commitments and Contingencies

         (a)  Operating Leases
              As of February 2, 2002, the Company was obligated under various
              long-term operating leases for retail and outlet stores,
              warehouses, office space and equipment requiring minimum annual
              rentals. These operating leases expire on varying dates through
              2014. At February 2, 2002 aggregate minimum rentals in future
              periods are, as follows:

               Fiscal year                                            Amount
               -----------                                            ------
                  2002                                              $ 46,354,000
                  2003                                                45,979,000
                  2004                                                42,585,000
                  2005                                                40,051,000
                  2006                                                36,785,000
                  Thereafter                                         139,305,000


              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 2001, 2000, and 1999 was $46,573,000,
              $45,138,000, and $39,474,000, including contingent rent based on
              store sales of $1,023,000, $1,974,000, and $2,600,000.

         (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 the ultimate resolution of these
              matters will have a material adverse effect on the Company's
              financial condition or results of operations.


                                       F-13

<PAGE>

                             J. CREW GROUP, INC. AND
                                  SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000

(10)     Employee Benefit Plan

         The Company has a thrift/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 thrift/savings plan
         were $1,334,000, $1,241,000, and $1,320,000 for fiscal 2001, 2000 and
         1999.

(11)     License Agreement

         The Company has a licensing agreement through January 2003 with Itochu
         Corporation, a Japanese trading company. The agreement permits Itochu
         to distribute J. Crew merchandise in Japan. 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 2001,
         2000, and 1999 was $2,560,000, $3,020,000, and $2,505,000

(12)     Interest Expense - Net

         Interest expense, net consists of the following:

                                 2001             2000             1999
                                 ----             ----             ----
Interest expense             $34,810,000      $34,390,000      $36,903,000
Amortization of
 deferred financing costs      1,997,000        2,793,000        2,196,000
Interest income                 (295,000)        (541,000)        (238,000)
                             -----------      -----------      -----------
Interest expense, net        $36,512,000      $36,642,000      $38,861,000
                             -----------      -----------      -----------

         Interest expense in fiscal 1999 includes $1,029,000 incurred in
         connection with the settlement of a sales and use tax assessment.

(13)     Other Revenues

         Other revenue consists of the following:

                                  2001             2000                 1999
                                  ----             ----                 ----
Shipping and handling fees    $34,100,000      $35,297,000          $34,072,000
Royalties                       2,560,000        3,020,000            2,505,000
                              -----------      -----------          -----------
                              $36,660,000      $38,317,000          $36,577,000
                              ===========      ===========          ===========

(14)     Financial Instruments

         The following disclosure about the fair value of financial instruments
         is made in accordance with the requirements of SFAS No. 107,
         "Disclosures About Fair Value of Financial Instruments." The fair value
         of the Company's long-term debt is estimated to be approximately
         $187,191,000 and $202,793,000 at February 2, 2002 and February 3, 2001,
         and is based on dealer quotes or quoted market prices of the same or
         similar instruments The carrying amounts of long-term debt were
         $279,687,000 and $264,292,000 at February 2, 2002 and February 3, 2001.
         The carrying amounts reported in the consolidated balance sheets for
         cash and cash equivalents, notes payable-bank, 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.

                                       F-14

<PAGE>

                             J. CREW GROUP, INC. AND
                                  SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000


(15)     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 income tax provision/(benefit) consists of:

<TABLE>
<CAPTION>
                                                                         2001                2000            1999
                                                                         ----                ----            ----
<S>                                                                <C>                  <C>             <C>
         Current:
             Foreign                                               $     260,000        $   300,000     $    250,000
             Federal                                                  (2,400,000)         6,253,000        3,100,000
             State and local                                             100,000            920,000        1,440,000
                                                                   -------------        -----------     ------------
                                                                      (2,040,000)         7,473,000        4,790,000
                                                                   -------------        -----------     ------------
         Deferred - Federal, state and local                          (3,460,000)            27,000       (6,840,000)
                                                                   -------------        -----------     ------------
                 Total                                             $  (5,500,000)       $ 7,500,000     $ (2,050,000)
                                                                   =============        ===========     ============
</TABLE>

A reconciliation between the provision/(benefit) for income taxes based on the
U.S. Federal statutory rate and the Company's effective rate is as follows.

<TABLE>
<CAPTION>
                                                                         2001                   2000            1999
                                                                         ----                   ----            ----
<S>                                                                     <C>                     <C>              <C>
              Federal income tax rate                                   (35.0)%                 35.0 %           (35.0)%
              State and local income taxes, net
                 of federal benefit                                      (2.3)                   7.6               7.0
              Nondeductible expenses and other                            4.0                   (4.0)              4.4
                                                                        -------                ------            ------
              Effective tax rate                                        (33.3)%                 38.6 %           (23.6)%
                                                                        =======                ======            ======
</TABLE>


                                       F-15

<PAGE>

                             J. CREW GROUP, INC. AND
                                  SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000



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

<TABLE>
<CAPTION>
                                                                                February 2,              February 3,
                                                                                   2002                     2001
                                                                                   ----                     ----
<S>                                                                           <C>                         <C>
         Deferred tax assets:

              Original issue discount                                         $  20,836,000               $ 15,007,000
              State and local NOL carryforwards                                   1,900,000                  1,900,000
              Reserve for sales returns                                           2,603,000                  2,625,000
              Other                                                               3,766,000                  3,412,000
                                                                              -------------               ------------
                                                                                 29,105,000                 22,944,000
                                                                              -------------               ------------
         Deferred tax liabilities:

              Prepaid catalog and other prepaid expenses                         (8,841,000)                (8,026,000)
              Difference in book and tax basis
                  for property and equipment                                     (7,903,000)                (5,957,000)
                                                                              -------------               ------------
                                                                                (16,744,000)               (13,983,000)
                                                                              -------------               -------------


                Net deferred income tax asset                                 $  12,421,000               $  8,961,000
                                                                              ==============              ============
</TABLE>


         Management believes that it is more likely than not that the results of
         future operations will generate sufficient taxable income to realize
         the deferred tax assets. The Company has state and local income tax net
         operating loss carryforwards of varying amounts.


                                      F-16

<PAGE>

                             J. CREW GROUP, INC. AND
                                  SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000

(16)     Stock Options

         The J. Crew Group, Inc. Stock Option Plan (the "Option Plan") was
         adopted by the Company in 1997. Under the terms of the Option Plan, an
         aggregate of 1,910,000 shares are available for grant to certain key
         employees or consultants. The options have terms of seven to ten years
         and become exercisable over a period of five years. Options granted
         under the Option Plan are subject to various conditions, including
         under some circumstances, the achievement of certain performance
         objectives.

         A summary of stock option activity for the Plan was, as follows:

<TABLE>
<CAPTION>
                                               2001                         2000                      1999
                                               ----                         ----                      ----
                                                     Weighted                    Weighted                   Weighted
                                                     --------                    --------                   --------
                                                      average                     average                    average
                                                      -------                     -------                    -------
                                      Shares   exercise price      Shares  exercise price     Shares  exercise price
                                      -------  --------------      ------  --------------     ------  --------------

<S>                                 <C>                <C>       <C>               <C>        <C>             <C>
Outstanding, beginning of year      1,788,750          $ 9.15    1,532,800         $ 8.87     997,200         $ 8.00

              Granted                 283,000           14.53      374,700          10.17     772,800           9.47

              Exercised                    --             --        (2,000)          6.82           -              -

              Cancelled              (262,960)           9.31     (116,750)          8.72    (237,200)          7.14
                                   ----------          ------    ---------         ------   ---------         ------

Outstanding, end of year            1,808,790          $ 9.97    1,788,750         $ 9.15   1,532,800         $ 8.87
                                   ----------          ------    =========         ======   =========         ======

Options exercisable at end of year    728,950          $ 9.21      583,000         $ 9.24     318,040         $ 7.97
                                   ==========          ======    =========         ======   =========         ======
</TABLE>

(17)     Employee Restricted Stock

         Under the terms of an employment agreement with a key executive 661,600
         shares of restricted stock were awarded in fiscal 1997. These shares
         vest through October 2002. Deferred compensation is charged to expense
         over the vesting period.

(18)     Segment Information

         The Company operates in one business segment. The Company designs,
         contracts to manufacture and markets men's, women's, and children's
         apparel, shoes and accessories under the J. Crew brand name. The brand
         is marketed through various channels of distribution including retail
         and factory outlet stores, catalogs, the Internet and licensing
         arrangements with third parties. During 1998, the Company decided to
         discontinue the operations of its C&W brand. Fiscal 1999 and 2000
         include charges of $4,000,000 and $4,130,000 primarily to write down
         inventories to net realizable value. (See note 3 to the consolidated
         financial statements).

         All of the Company's identifiable assets are located in the United
         States. Export sales are not significant.

                                      F-17

<PAGE>

                             J. CREW GROUP, INC. AND
                                  SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000

Corporate and other expenses include expenses incurred by the corporate office
and certain non-recurring expenses that are not allocated to specific business
units. Corporate and other expenses in fiscal 1999 include the write off of
impaired software development costs.

Segment assets represent the assets used directly in the operations of each
business unit such as inventories and property and equipment. Corporate assets
consist principally of investments, deferred financing costs deferred income tax
assets and certain capitalized software.

The accounting policies used for segment reporting are consistent with those
described in the summary of significant accounting policies.

<TABLE>
<CAPTION>
                                                                    [$ in thousands]
Revenues                                          2001                    2000                    1999
                                                  ----                    ----                    ----
<S>                                            <C>                     <C>                     <C>
J. Crew                                        $ 777,940               $ 825,975               $ 750,696
                                               ---------               ---------               ---------

Income from operations

J. Crew                                           21,575                  61,094                  41,052
Clifford & Wills                                      --                  (4,130)                 (4,000)
Corporate and other expenses                      (1,574)                   (893)                 (7,869)
                                               ---------               ---------               ---------
Income from operations                            20,001                  56,071                  29,183
                                               ---------               ---------               ---------

Interest expense, net                             36,512                 (36,642)                (38,861)
Gain on sale of PCP                                   --                      --                   1,000
                                               ---------               ---------               ---------

Income/(loss) before income taxes              $ (16,511)              $  19,429               $  (8,678)
                                               =========               =========               =========

Depreciation and amortization
J. Crew                                        $  31,568               $  22,448               $  19,051
Corporate                                            150                     152                     190
                                               ---------               ---------               ---------
                                               $  31,718               $  22,600               $  19,241
                                               =========               =========               =========

<CAPTION>
Identifiable assets

<S>                                            <C>                     <C>                     <C>
J. Crew                                        $ 360,882               $ 342,541               $ 305,552
Clifford & Wills                                      --                      --                   8,927
Corporate                                         40,438                  47,320                  59,125
                                               ---------               ---------               ---------
                                               $ 401,320               $ 389,861               $ 373,604
                                               =========               =========               =========

Capital expenditures
J. Crew                                        $  59,846               $  55,394               $  39,435
Corporate                                          2,016                     300                   9,249
                                               ---------               ---------               ---------
                                               $  61,862               $  55,694               $  48,684
                                               =========               =========               =========
</TABLE>

                                      F-18

<PAGE>

                             J. CREW GROUP, INC. AND
                                  SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000

(19)     Quarterly Financial Information (Unaudited)
         -------------------------------

<TABLE>
<CAPTION>
                                                           ($ in millions)

                           13 weeks         13 weeks          13 weeks         13 weeks          52 weeks
                              ended            ended             ended            ended             ended
                             5/5/01           8/4/01           11/3/01           2/2/02            2/2/02
                             ------           ------           -------           ------            ------
<S>                         <C>               <C>              <C>              <C>               <C>
Net sales                    $158.9           $160.5            $187.1           $234.8            $741.3
Gross profit                   68.2             60.5              82.8            104.1             315.6
Net income (loss)            $ (9.3)          $ (8.6)           $   .3           $  6.6            $(11.0)

<CAPTION>
                           13 weeks         13 weeks          13 weeks         14 weeks          53 weeks
                              ended            ended             ended            ended             ended
                            4/29/00          7/29/00          10/28/00        2/3/01(a)           2/03/01
                            -------          -------          --------        ---------           -------
<S>                         <C>               <C>              <C>              <C>               <C>
Net sales                    $158.0           $162.2            $194.0           $273.5            $787.7
Gross profit                   72.8             71.0              90.2            128.1             362.1
Net income (loss)            $ (5.2)          $ (5.1)           $  4.5           $ 17.7            $ 11.9
</TABLE>

(a)  includes $4.1 million writedown of net assets of C&W.

                                      F-19

<PAGE>

SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                           beginning     charged to cost  charged to other               ending
                                            balance        and expenses      accounts       deductions   balance

                                                                             ($ in thousands)
<S>                                        <C>           <C>               <C>              <C>          <C>
Inventory reserve
-----------------
 (deducted from inventories)

fiscal year ended:

February 2, 2002                            $ 7,360        $ 1,007(a)         $   --        $    --      $ 8,367

February 3, 2001                              4,447          2,913(a)             --             --        7,360

January 29, 2000                              6,122         (1,675)(a)            --             --        4,447

Allowance for sales returns
---------------------------
 (included in other current liabilities)

fiscal year ended:

February 2, 2002                            $ 6,530        $   (55)(a)        $   --        $    --      $ 6,475

February 3, 2001                              5,011          1,519(a)                            --        6,530

January 29, 2000                              3,473          1,538(a)             --             --        5,011
</TABLE>

(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-20

<PAGE>

Independent Auditors' Report

The Board of Directors and Stockholders
J. Crew Operating Corp. and Subsidiaries:

We have audited the consolidated financial statements of J. Crew Operating Corp.
and subsidiaries (the "Company") as listed in the accompanying Index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule listed in the accompanying index.
These consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 J. Crew Operating
Corp. and subsidiaries as of February 2, 2002 and February 3, 2001 and the
results of their operations and their cash flows for each of the years in the
three-year period ended February 2, 2002, in conformity with accounting
principles generally accepted in the United States of America. 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.

                                                                        KPMG LLP

March 25, 2002, except as to note 6,
which is as of April 17, 2002
New York, NY

                                      F-21

<PAGE>

                           J. CREW OPERATING CORP. AND
                                  SUBSIDIARIES

                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                 February 2,          February 3,
                                 Assets                                             2002                 2001
                                 ------                                             ----                 ----
                                                                                          (in thousands)
<S>                                                                                 <C>                <C>
Current assets:
     Cash and cash equivalents                                                      $ 16,201           $ 32,930
     Merchandise inventories                                                         138,918            140,667
     Prepaid expenses and other current assets                                        27,026             23,740
                                                                                    --------           --------

           Total current assets                                                      182,145            197,337
                                                                                    --------           --------

Property and equipment - at cost:

     Land                                                                              1,610              1,460
     Buildings and improvements                                                       11,700             11,432
     Furniture, fixtures and equipment                                               105,292             70,541
     Leasehold improvements                                                          170,195            144,906
     Construction in progress                                                          4,903             22,983
                                                                                    --------           --------
                                                                                     293,700            251,322
     Less accumulated depreciation and amortization                                  106,427             85,746
                                                                                    --------           --------
                                                                                     187,273            165,576
                                                                                    --------           --------

Other assets                                                                          12,310             10,839
                                                                                    --------           --------

           Total assets                                                             $381,728           $373,752
                                                                                    ========           ========
                            Liabilities and Stockholder's Equity
                            ------------------------------------

Current liabilities:
     Accounts payable                                                               $ 66,703           $ 49,705
     Other current liabilities                                                        61,788             75,168
     Federal and state income taxes payable                                           10,109             18,850
     Deferred income taxes                                                             5,604              3,731
                                                                                    --------           --------

           Total current liabilities                                                 144,204            147,454
                                                                                    --------           --------

Long-term debt                                                                       150,000            150,000
                                                                                    --------           --------

Deferred credits and other long-term liabilities                                      67,235             56,043
                                                                                    --------           --------

Due to J.Crew Group, Inc.                                                              1,142              1,047
                                                                                    --------           --------

Stockholder's equity                                                                  19,147             19,208
                                                                                    --------           --------

           Total liabilities and stockholder's equity                               $381,728           $373,752
                                                                                    ========           ========
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-22

<PAGE>

                           J. CREW OPERATING CORP. AND
                                  SUBSIDIARIES

                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                                                            Years ended
                                                                                            -----------
                                                                            February 2,      February 3,       January 29,
                                                                            -----------      ----------        -----------
                                                                              2002              2001               2000
                                                                              ----              ----               ----
                                                                                          (in thousands)
<S>                                                                         <C>                <C>                <C>
Revenues:

   Net sales                                                                $ 741,280          $ 787,658          $ 714,119
   Other                                                                       36,660             38,317             36,577
                                                                            ---------          ---------          ---------
                                                                              777,940            825,975            750,696

Operating costs and expenses:

   Cost of goods sold, including buying and occupancy
     costs                                                                    462,371            463,909            431,193
   Selling, general and administrative expenses                               294,907            301,216            278,666
   Write off of software development costs                                         --                 --              7,018
   Write down of assets and other charges in
     connection with discontinuance of Clifford & Wills                            --              4,130              4,000
                                                                            ---------          ---------          ---------
                                                                              757,278            769,255            720,877
                                                                            ---------          ---------          ---------

         Income from operations                                                20,662             56,720             29,819

Interest expense - net                                                        (20,890)           (22,787)           (26,626)

Gain on sale of Popular Club Plan                                                  --                 --              1,000
                                                                            ---------          ---------          ---------


         Income/(loss) before income taxes                                       (228)            33,933              4,193

(Provision) benefit for income taxes                                              167            (12,180)            (2,293)
                                                                            ---------          ---------          ---------


         Net income/(loss)                                                  $     (61)         $  21,753          $   1,900
                                                                            =========          =========          =========
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-23

<PAGE>

                           J. CREW OPERATING CORP. AND
                                  SUBSIDIARIES

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                                 Years ended
                                                                                                 ------------
                                                                        February 3,              January 29,             January 30,
                                                                        -----------              -----------             -----------
                                                                            2001                    2000                     1999
                                                                            ----                    ----                     ----
                                                                                                 (in thousands)
<S>                                                                      <C>                       <C>                     <C>
Cash flows from operating activities:
Net income/(loss)                                                        $    (61)                 $ 21,753                $  1,900
Adjustments to reconcile net income/(loss) to net cash
  provided by operating activities:
     Depreciation and amortization                                         31,718                    22,600                  19,241
     Write off of software development costs                                   --                        --                   7,018
     Amortization of deferred financing costs                               1,770                     2,548                   1,950
     Non-cash compensation expense                                            913                        --                      --
     Deferred income taxes                                                  1,873                     4,706                  (2,497)
     Gain on sale of subsidiary                                                --                        --                  (1,000)
     Write down of assets and other charges
     in connection with discontinued catalog                                   --                     4,130                   4,000
Changes in operating assets and liabilities:

  Merchandise inventories                                                   1,749                   (10,739)                 26,094
  Net assets held for disposal                                                 --                     4,797                   4,450
  Prepaid expenses and other current assets                                (3,286)                    6,343                  16,646
  Other assets                                                             (3,416)                   (2,781)                   (770)
  Accounts payable                                                         16,998                     8,754                     821
  Other liabilities                                                       (13,671)                    5,407                  13,044
   Federal and state income taxes payable                                  (8,741)                    2,894                   3,406
                                                                         --------                  --------                --------
     Net cash provided by operating activities                             25,846                    70,412                  94,303
                                                                         --------                  --------                --------

Cash flows from investing activities:

  Capital expenditures                                                    (61,862)                  (55,694)                (48,684)
  Proceeds from construction allowances                                    19,287                    13,519                   7,431
                                                                         --------                  --------                --------
     Net cash provided by (used in) investing activities                  (42,575)                  (42,175)                (41,253)
                                                                         --------                  --------                --------

Cash flows from financing activities:

  (Decrease)/increase in notes payable, bank                                   --                        --                 (14,000)
  Repayment of long-term debt                                                  --                   (34,000)                (10,000)
                                                                         --------                  --------                --------
     Net cash used in financing activities                                     --                   (34,000)                (24,000)
                                                                         --------                  --------                --------

  Increase (decrease) in cash and cash equivalents                        (16,729)                   (5,763)                 29,050

  Cash and cash equivalents at beginning of year                           32,930                    38,693                   9,643
                                                                         --------                  --------                --------
  Cash and cash equivalents at end of year                               $ 16,201                  $ 32,930                $ 38,693
                                                                         ========                  ========                ========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-24

<PAGE>

                           J. CREW OPERATING CORP. AND
                                  SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000

(1) Nature Of Business And Summary Of Significant Accounting Policies

     (a) Principles of Consolidation

         The accompanying consolidated financial statements include the accounts
         of J. Crew Operating Corp ("Operating Corp") and its wholly-owned
         subsidiaries (collectively, the "Company"). Operating Corp. is a wholly
         owned subsidiary of J.Crew Group, Inc. ("Holdings"). All significant
         intercompany balances and transactions have been eliminated in
         consolidation.

     (b) Business

         The Company designs, contracts for the manufacture of, markets and
         distributes men's and women's apparel and accessories. The Company's
         products are marketed, primarily in the United States, through retail
         stores, catalogs, and the Internet. The Company is also party to a
         licensing agreement which grants the licensee exclusive rights to use
         the Company's trademarks in connection with the manufacture and sale of
         products in Japan. The license agreement provides for payments based on
         a specified percentage of net sales.

         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 include the
         back-to-school and holiday seasons) of each fiscal year.

         A significant amount of the Company's products are produced in the Far
         East 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 2001, 2000, and 1999 ended on February 2, 2002 (52
         weeks), February 3, 2001 (53 weeks) and January 29, 2000 (52 weeks).

     (d) 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 $7,895,000 and $18,331,000 at February 2, 2002 and February
         3, 2001 are stated at cost, which approximates market value.

     (e) Merchandise Inventories

         Merchandise inventories are stated at the lower of cost (determined on
         a first-in, first-out basis) or market. The Company capitalizes certain
         design, purchasing and warehousing costs in inventory.

     (f) 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 ("SOP") 93-7,
         "Reporting on Advertising Costs." SOP 93-7 requires that the
         amortization of capitalized advertising costs be the amount computed
         using the ratio that current period revenues

                                      F-25

<PAGE>

                           J. CREW OPERATING CORP. AND
                                  SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000

         for the catalog cost pool bear to the total of current and estimated
         future period revenues for that catalog cost pool. Deferred catalog
         costs, included in prepaid expenses and other current assets, as of
         February 2, 2002 and February 3, 2001 were $7,959,000 and $10,600,000.
         Catalog costs, which are reflected in selling and administrative
         expenses, for the fiscal years 2001, 2000, and 1999 were $ 65,477,000,
         $69,000,000, and $84,077,000.

         All other advertising costs are expensed as incurred. Advertising
         expenses were $6,671,000 for fiscal year 1999. Advertising costs were
         not significant in all other years.

     (g) Property and Equipment

         Property and equipment are stated at cost. Buildings and improvements
         are depreciated by the straight-line method over the estimated useful
         lives of twenty years. Furniture, fixtures and equipment are
         depreciated by the straight-line method over the estimated useful
         lives, ranging from three to ten years. Leasehold improvements are
         amortized over the shorter of their useful lives or related lease
         terms.

         Significant systems development costs are capitalized and amortized on
         a straight-line basis over periods ranging from three to five years.
         Approximately $8.5 million and $15.0 million of systems development
         costs were capitalized in fiscal years 2001 and 2000.

         The Company receives construction allowances upon entering into certain
         store leases. These construction allowances are recorded as deferred
         credits and are amortized over the term of the related lease.

     (h) Debt Issuance Costs

         Debt issuance costs (included in other assets) of $5,195,000 and
         $6,965,000 at February 2, 2002 and February 3, 2001 are amortized over
         the term of the related debt agreements.

     (i) Income Taxes

         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 assets and
         liabilities, in accordance with Statement of Financial Accounting
         Standards ("SFAS") No. 109, "Accounting for Income Taxes."

     (j) Revenue Recognition

         Revenue is recognized for catalog and internet sales when merchandise
         is shipped to customers, and at the time of sale for retail sales. 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. 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. Expenses
         associated with shipping and handling functions are included in cost
         of goods sold.

     (k) Store Preopening Costs

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

                                      F-26

<PAGE>

                           J. CREW OPERATING CORP. AND
                                  SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000

     (l) Derivative Financial Instruments

         Derivative financial instruments are used by the Company from time to
         time to manage its interest rate and foreign currency exposures. The
         Company may enter into (a) interest rate swaps to convert fixed rate
         debt to variable rates or (b) forward foreign exchange contracts as
         hedges relating to identifiable currency positions to reduce the risk
         from exchange rate fluctuations. Effective in the first quarter of 2001
         the Company adopted SFAS No, 133, "Accounting for Derivative
         Instruments and Certain Hedging Activities." as amended by SFAS No.
         138, "Accounting for Certain Derivative Instruments and Certain Hedging
         Activities." SFAS No. 133 and SFAS No. 138 require that all derivative
         instruments be recorded either as assets or liabilities on the balance
         sheet at their respective fair values. SFAS No. 133 also establishes
         criteria for a derivative to qualify as a hedge for accounting
         purposes. Changes in the fair value of derivative financial instruments
         are either recognized periodically in income or stockholders' equity,
         depending on whether the derivative is being used to hedge changes in
         fair value or cash flows. The adoption of SFAS 133 did not have a
         material effect on the Company's financial statements, therefore a
         transition adjustment was not necessary. There were no derivative
         financial instruments outstanding at February 2, 2002.

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

         The preparation of financial statements in conformity with generally
         accepted accounting principles 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.

     (n) Impairment of Long-Lived Assets and for Long-Lived Assets to Be
         Disposed of

         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 undiscounted cash flow forecasts.

         During fiscal 1999 the Company wrote off $7,018,000 of capitalized
         computer software costs which were impaired by the Company's decision
         to adopt an enterprise resource planning system for its future
         information technology requirements.

     (o) Stock Based Compensation

         The Company accounts for stock-based compensation using the intrinsic
         value method of accounting for employee stock options as permitted by
         SFAS No. 123, "Accounting for Stock-Based Compensation". Accordingly,
         compensation expense is not recorded for options granted if the option
         price is equal to or in excess of the fair market price at the date of
         grant, as determined by management.

     (p) Reclassifications

         Certain amounts in the prior year have been reclassified to conform
         with the current year presentation.



                                      F-27

<PAGE>
 (q) Recent Accounting Pronouncements

         In July 2001, the FASB issued Statement of Financial Standards No. 141,
         "Business Combinations" and Statement of Financial Accounting Standards
         No. 142, "Goodwill and Other Intangible Assets". SFAS 141 eliminates
         the pooling-of-interests method of accounting for business combinations
         initiated after June 30, 2001 and modifies the application of the
         purchase accounting method effective for transactions that are
         completed after June 30, 2001. SFAS 142 eliminates the requirement to
         amortize goodwill and intangible assets having indefinite useful lives
         but requires testing at least annually for impairment. Intangible
         assets that have finite lives will continue to be amortized over their
         useful lives. SFAS 142 will apply to goodwill and intangible assets
         arising from transactions completed before and after the Statement's
         effective date of January 1, 2002. These statements had no effect on
         the Company's financial statements in fiscal 2001 and are not
         anticipated to have any effect in fiscal 2002.

         In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
         Retirement Obligations. SFAS No. 143 requires the Company to record the
         fair value of an asset retirement obligation as a liability in the
         period in which it incurs a legal obligation associated with the
         retirement of tangible long-lived assets. The Company also records a
         corresponding asset which is depreciated over the life of the asset.
         Subsequent to the initial measurement of the asset retirement
         obligation, the obligation will be adjusted at the end of each period
         to reflect the passage of time and changes in the estimated future cash
         flows underlying the obligation. SFAS No. 143 is effective for fiscal
         years beginning after June 15, 2002. Management does not believe that
         the adoption of SFAS No. 143 will have a significant impact on the
         Company's financial statements.

         In August 2001, the FASB issued SFAS No. 144, Accounting for the
         Impairment or Disposal of Long-Lived Assets. SFAS No. 144 addresses
         financial accounting and reporting for the impairment or disposal of
         long-lived assets and requires companies to separately report
         discontinued operations and extends that reporting to a component of an
         entity that either has been disposed of or is classified as held for
         sale. This Statement requires that long-lived assets be reviewed for
         impairment whenever events or changes in circumstances indicate that
         the carrying amount of an asset may not be recoverable. SFAS No. 144 is
         effective for fiscal years beginning after December 15, 2001. The
         adoption of SFAS No. 144 will not have any impact on the Company's
         financial statements.

         EITF Issue No. 00-14 "Accounting for Certain Sales Incentives" will be
         effective in the first quarter of fiscal 2002. This EITF addresses the
         accounting for and classification of various sales incentives. The
         adoption of the provisions of this EITF will not have a material effect
         on the Company's financial Statements in fiscal 2002.

                                      F-28

<PAGE>

                           J. CREW OPERATING CORP AND
                                  SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000

(2)      Events of September 11, 2001

         The terrorist actions of September 11, 2001 resulted in the destruction
         of our retail store located at the World Trade Center, resulting in the
         loss of inventories and store fixtures, equipment and leasehold
         improvements. These losses and the resulting business interruption are
         covered by insurance policies maintained by the Company.

         The statement of operations for the year ended February 2, 2002
         includes losses of $1.9 million relating to inventories and stores
         fixtures, equipment and leasehold improvements. Insurance recoveries
         have been recorded to the extent of the losses recognized. Additional
         insurance recoveries will be recorded at the time of settlement
         including recoveries for business interruption which were not
         determinable as of February 2, 2002.

 (3)     Disposal of Businesses

         (a) Popular Club Plan

         In accordance with a sale agreement dated November 24, 1998 the Company
         sold all of the capital stock of Popular Club Plan, Inc. and
         subsidiaries ("PCP") to The Fingerhut Companies, Inc. effective as of
         October 30, 1998 for gross proceeds of $42.0 million in cash. A gain on
         the sale of PCP of $10.0 million was included in the statement of
         operations for fiscal 1998. An additional gain of $1.0 million was
         recognized in fiscal 1999 from the reversal of certain estimated
         liabilities recorded at the date of sale.

         (b) Clifford & Wills

         In 1998, management of the Company made a decision to exit the catalog
         and outlet store operations of Clifford & Wills ("C&W"). Revenues and
         expenses (C&W) for fiscal 1999 and 2000 were not material and as a
         result have been netted in the accompanying consolidated statement of
         operations.

         In February 2000 the Company sold certain intellectual property assets
         to Spiegel Catalog Inc. for $3.9 million. In connection with this sale
         the Company agreed to cease the fulfillment of catalog orders but
         retained the right to operate C&W outlet stores and conduct other
         liquidation sales of inventories through December 31, 2000. After
         consideration of the proceeds from the sale and other terms of the
         agreement the Company provided an additional $4,000,000 to write down
         inventories to net realizable value as of January 29, 2000. At February
         3, 2001 the Company determined that the realizable value of the
         remaining net assets of C&W, primarily inventories, was less than their
         carrying amounts and an additional charge of $4,130,000 was taken.

                                      F-29

<PAGE>

                           J. CREW OPERATING CORP. AND
                                  SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000

(4)   Other Current Liabilities

      Other current liabilities consist of:

<TABLE>
<CAPTION>
                                                             February 2,           February 3,
                                                                2002                  2001
                                                                ----                  ----
         <S>                                                 <C>                     <C>
         Customer liabilities                                $11,381,000             $12,251,000
         Accrued catalog and marketing costs                   3,655,000               4,515,000
         Taxes, other than income taxes                        2,930,000               3,686,000
         Accrued interest                                      4,690,000               4,746,000
         Accrued occupancy                                     1,036,000               2,339,000
         Reserve for sales returns                             6,475,000               6,530,000
         Accrued compensation                                  1,697,000              11,051,000
         Other                                                29,924,000              30,050,000
                                                             -----------             -----------
                                                             $61,788,000             $75,168,000
                                                             -----------             -----------
</TABLE>


(5)   Long-Term Debt

      Long term debt consists of $150,000,000 principal amount of senior
      subordinated notes. The senior subordinated notes are unsecured general
      obligations of J. Crew Operating Corp., and are subordinated in right of
      payment to all senior debt. Interest on the notes accrues at the rate of
      10-3/8% per annum and is payable semi-annually in arrears on April 15 and
      October 15. The notes mature on October 15, 2007 and may be redeemed at
      the option of the issuer, subsequent to October 15, 2002 at prices ranging
      from 105.188% of principal in 2002 to 100% in 2005 and thereafter.

      There are no maturities of long-term debt required during the next five
      years.

(6)   Lines of Credit

      On October 17, 1997, the Company entered into a syndicated revolving
      credit agreement (the "Revolving Credit Agreement") with a group of banks.
      This agreement was amended on March 18, 1998, November 23, 1998, April 20,
      1999 and April 17, 2002. Borrowings may be utilized to fund the working
      capital requirements of the Company including issuance of stand-by and
      trade letters of credit and bankers' acceptances. The maximum amount
      available under this agreement is $175.0 million.

      Borrowings are secured by a perfected first priority security interest in
      all assets of the Company's subsidiaries and bear interest, at the
      Company's option, at a base rate equal to the Administrative Agent's
      Eurodollar rate plus an applicable margin or an alternate base rate equal
      to the highest of the Administrative Agent's prime rate, a certificate of
      deposit rate plus 1% or the Federal Funds effective rate plus one-half of
      1% plus, in each case, an applicable margin. The Revolving Credit
      Agreement matures on October 17, 2003.

      Maximum borrowings under revolving credit agreements were $95,000,000,
      $34,000,000 and $58,000,000 during fiscal years 2001, 2000 and 1999 and
      average borrowings were $ 43,100,000, $9,800,000 and $30,800,000. There
      were no borrowings outstanding at February 2, 2002 and January 29, 2000.

      Outstanding letters of credit established to facilitate international
      merchandise purchases at February 2, 2002 and February 3, 2001 amounted to
      $46,300,00 and $50,948,000.

                                      F-30

<PAGE>

                           J. CREW OPERATING CORP. AND
                                  SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000

         The provisions of the Revolving Credit Agreement, as amended, require
         that the Company maintain certain levels of (i) leverage ratio, (ii)
         interest coverage ratio and (iii) inventory coverage ratio; provide for
         limitations on capital expenditures, sale and leaseback transactions,
         liens, investments, sales of assets and indebtedness; and prohibit the
         payment of cash dividends on shares of common stock.

 (7)     Commitments and Contingencies

         (a)  Operating Leases

              As of February 2, 2002, the Company was obligated under various
              long-term operating leases for retail and outlet stores,
              warehouses, office space and equipment requiring minimum annual
              rentals. These operating leases expire on varying dates through
              2012. At February 2, 2002 aggregate minimum rentals in future
              periods are, as follows:

               Fiscal year                                      Amount
               -----------                                      ------
                  2002                                          46,354,000
                  2003                                          45,979,000
                  2004                                          42,585,000
                  2005                                          40,015,000
                  2006                                          36,785,000
                  Thereafter                                   139,305,000


              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 2001, 2000, and 1999 was $46,573,000,
              $45,138,000 and $ 39,474,000, including contingent rent based on
              store sales of $1,023,000, $1,974,000 and $2,600,000.

         (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 the ultimate resolution of these
              matters will have a material adverse effect on the Company's
              financial condition or results of operations.

(8)      Employee Benefit Plan

         The Company has a thrift/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 thrift/savings plan
         were $1,334,000, $1,241,000 and $1,320,000 for fiscal 2001, 2000 and
         1999.

                                      F-31

<PAGE>

                           J. CREW OPERATING CORP. AND
                                  SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000

(9)      License Agreement

         The Company has a licensing agreement through January 2003 with Itochu
         Corporation, a Japanese trading company. The agreement permits Itochu
         to distribute J. Crew merchandise in Japan. 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 2001,
         2000, and 1999 was $2,560,000, $3,020,000, and $2,505,000.

(10)     Interest Expense - Net

         Interest expense, net consists of the following:


                                   2001              2000            1999
                                   ----              ----            ----

 Interest expense               $19,415,000     $20,780,000      $24,914,000
 Amortization of deferred         1,770,000       2,548,000        1,950,000
 financing costs
 Interest income                   (295,000)       (541,000)        (238,000)
                                -----------     -----------      -----------
 Interest expense, net          $20,890,000     $22,787,000      $26,626,000
                                -----------     -----------      -----------


         Interest expense in fiscal 1999 includes $1,029,000 incurred in
         connection with the settlement of a sales and use tax assessment.

(11)     Other Revenues

         Other revenue consists of the following:

                                     2001             2000          1999
                                     ----             ----          ----

  Shipping and handling fees       $34,100,000      $35,297,000    $34,072,000
  Royalties                          2,560,000        3,020,000      2,505,000
                                   -----------      -----------    -----------
                                   $36,660,000      $38,317,000    $36,577,000
                                   ===========      ============   ============

(12)     Financial Instruments

         The following disclosure about the fair value of financial instruments
         is made in accordance with the requirements of SFAS No. 107,
         "Disclosures About Fair Value of Financial Instruments." The fair value
         of the Company's long-term debt is estimated to be approximately
         $119,754,000 and $132,504,000 at February 2, 2002 and February 3, 2001,
         and is based on dealer quotes or quoted market prices of the same or
         similar instruments The carrying amounts of long-term debt were
         $150,000,000 at February 2, 2002 and February 3, 2001. The carrying
         amounts reported in the consolidated balance sheets for cash and cash
         equivalents, notes payable-bank, 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.

(13)     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.

                                       F-32

<PAGE>

                           J. CREW OPERATING CORP. AND
                                  SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000

         The income tax provision/(benefit) consists of:
<TABLE>
<CAPTION>
                                                                                   2001              2000            1999
                                                                                   ----              ----            ----
         <S>                                                                    <C>            <C>               <C>
         Current:
         Foreign                                                                $  260,000     $    300,000      $   250,000
         Federal                                                                (2,400,000)       6,253,000        3,100,000
         State and local                                                           100,000          920,000        1,440,000
                                                                                -----------    ------------      -----------
                                                                                (2,040,000)       7,473,000        4,790,000
                                                                                -----------    ------------      -----------
         Deferred - Federal, state and local                                     1,873,000        4,707,000       (2,497,000)
                                                                                -----------    ------------      -----------
                 Total                                                          $ (167,000)    $ 12,180,000      $ 2,293,000
                                                                                ===========    ============      ===========
</TABLE>

A reconciliation between the provision/(benefit) for income taxes based on the
U.S. Federal statutory rate and the Company's effective rate is as follows.
<TABLE>
<CAPTION>
                                                                                    2001            2000           1999
                                                                                    ----            ----           ----
              <S>                                                                   <C>             <C>            <C>
              Federal income tax rate                                                (35.0)%        35.0%          35.0%
              State and local income taxes, net
                 of federal benefit                                                  134.6           3.2           14.4
              Nondeductible expenses and other                                      (172.8)         (2.3)           5.4
                                                                                   --------        ------          -----
              Effective tax rate                                                     (73.2)%        35.9%          54.7%
                                                                                   ========        ======          =====
</TABLE>

The tax effect of temporary differences which give rise to deferred tax assets
and liabilities are:
<TABLE>
<CAPTION>
                                                                                  February 2,        February 3,
                                                                                     2002               2001
                                                                                     ----               ----
         <S>                                                                    <C>                 <C>
         Deferred tax assets:

              Reserve for sales returns                                         $   2,603,000       $  2,625,000
              State and local net operating loss carryforwards                      1,900,000          1,900,000
              Other                                                                 6,637,000          5,727,000
                                                                                --------------      -------------
                                                                                   11,140,000         10,252,000
                                                                                --------------      -------------

              Prepaid catalog and other prepaid expenses                           (8,841,000)        (8,026,000)
              Difference in book and tax basis
                  for property and equipment                                       (7,903,000)        (5,957,000)
                                                                                --------------      -------------
                                                                                  (16,744,000)       (13,983,000)
                                                                                --------------      -------------
                Net deferred income taxes                                       $  (5,604,000)      $ (3,731,000)
                                                                                ==============      =============
</TABLE>

         Management believes that it is more likely than not that the results of
         future operations will generate sufficient taxable income to realize
         the deferred tax assets. The Company has state and local income tax net
         operating loss carryforwards of varying amounts.

                                       F-33

<PAGE>

                           J. CREW OPERATING CORP. AND
                                  SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000

(14)     Stockholder's Equity

         The Company has authorized 100 shares of common stock par value $1 per
         share, all of which was issued and outstanding at February 2, 2002 and
         February 3, 2001. A reconciliation of stockholder's equity is as
         follows:

<TABLE>
<CAPTION>
                                                                          Year Ended
                                                          February 2, 2002          February 3, 2001
                                                          ----------------          ----------------
                  <S>                                       <C>                      <C>
                  Balance, beginning of year                 $ 19,208,000             $ (2,545,000)
                  Net income/(loss) for year                      (61,000)              21,753,000
                                                             -------------            --------------
                  Balance, end of year                       $ 19,147,000             $ 19,208,000
                                                             =============            ==============
</TABLE>


(15)     Segment Information

         The Company operates in one business segment. The Company designs,
         contracts to manufacture and markets men's, women's, and children's
         apparel, shoes and accessories primarily under the J.Crew brand name.
         The brand is marketed through various channels of distribution
         including retail and factory outlet stores, catalogs, the Internet and
         licensing arrangements with third parties. During 1998 the Company
         decided to discontinue the operations of its C&W brand. Fiscal 1999 and
         2000 include charges of $4,000,000 and $4,130,000 primarily to write
         down inventories to net realizable value. (See note 3 to the
         consolidated financial statements).

         All of the Company's identifiable assets are located in the United
         States. Export sales are not significant.

         Corporate and other expenses include expenses incurred by the corporate
         office and certain non-recurring expenses that are not allocated to
         specific business units. Corporate and other expenses in fiscal 1999
         include the write off of impaired software development costs.

         Segment assets represent the assets used directly in the operations of
         each business unit such as inventories and property and equipment.
         Corporate assets consist principally of investments, deferred financing
         costs and certain capitalized software.

                                       F-34

<PAGE>

                           J. CREW OPERATING CORP. AND
                                  SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Years ended February 2, 2002, February 3, 2001 and January 29, 2000

The accounting policies used for segment reporting are consistent with those
described in the summary of significant accounting policies.

<TABLE>
<CAPTION>
                                                    [$ in thousands]
Revenues                                   2001            2000          1999
                                           ----            ----          ----
<S>                                      <C>             <C>          <C>
J. Crew                                  $777,940        $825,975     $ 750,696
                                         =========       ========     =========

Income from operations

J. Crew                                    20,650           61094        41,052
Clifford & Wills                               --          (4,130)       (4,000)
Corporate and other expenses                   --            (244)       (7,869)
                                         ---------       ---------    ----------
Income from operations                     20,650          56,720        29,819

Interest expense, net                     (20,890)        (22,787)      (26,626)
Gain on sale of PCP                           ---              --         1,000
                                         ---------       ---------    ----------
Income/(loss) before income taxes        $   (240)       $ 33,933     $   4,193
                                         =========       =========    ==========

Depreciation and amortization
J. Crew                                  $ 31,568        $ 22,448     $  19,051
Corporate                                     150             152           190
                                         ---------       ---------    ----------
                                         $ 31,718        $ 22,600     $  19,241
                                         =========       =========    ==========

Identifiable assets
J. Crew                                  $360,882        $342,541     $ 305,552
Clifford & Wills                              --               --         8,927
Corporate                                  20,846          31,211        49,127
                                         ---------       ---------    -----------
                                         $381,728        $373,752     $ 363,606
                                         =========       =========    ==========

Capital expenditures
J. Crew                                  $ 59,846        $ 55,394     $  39,435
Corporate                                   2,016             300         9,249
                                         ---------       ---------    ----------
                                         $ 61,862        $ 55,694     $  48,684
                                         =========       =========    ==========
</TABLE>

                                       F-35

<PAGE>

(16)     Quarterly Financial Information (Unaudited)
         -------------------------------

<TABLE>
<CAPTION>
                                                           ($ in millions)

                            13 weeks         13 weeks          13 weeks         13 weeks          52 weeks
                               ended            ended             ended            ended             ended
                              5/5/01           8/4/01           11/3/01           2/2/02            2/2/02
                              ------           ------           -------           ------            ------
<S>                           <C>              <C>               <C>              <C>               <C>
Net sales                    $ 158.9           $160.5            $187.1           $234.8            $741.3
Gross profit                    68.2             60.5              82.8            104.1             315.6
Net income (loss)            $  (7.1)          $ (6.1)           $  2.7           $ 10.4            $  (.1)

                            13 weeks         13 weeks          13 weeks         14 weeks          53 weeks
                               ended            ended             ended            ended             ended
                             4/29/00          7/29/00          10/28/00        2/3/01(a)            2/3/01
                             -------          -------          --------        ---------            ------

Net sales                    $ 158.0           $162.2            $194.0           $273.5            $787.7
Gross profit                    72.8             71.0              90.2            128.1             362.1
Net income (loss)            $  (3.1)          $ (2.9)           $  6.7           $ 21.1            $ 21.8
</TABLE>

(a)      includes $4.1 million writedown of net assets of C&W.


SCHEDULE II       VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>

                                             beginning     charged to cost   charged to other                 ending
                                              balance       and expenses         accounts       deductions    balance

                                                                             ($ in thousands)
Inventory reserve
-----------------
 (deducted from inventories)
<S>                                         <C>           <C>              <C>                  <C>           <C>
fiscal year ended:

February 2, 2002                             $ 7,360       $ 1,007(a)       $      --            $      --     $ 8,367

February 3, 2001                               4,447         2,913(a)              --                   --       7,360

January 29, 2000                               6,122       (1,675)(a)             ---                   --       4,447

Allowance for sales returns
---------------------------
 (included in other current liabilities)

fiscal year ended:

February 2, 2002                             $ 6,530       $  (55)(a)       $      --            $      --     $ 6,475

February 3, 2001                               5,011         1,519(a)              --                   --       6,530

January 29, 2000                               3,473         1,538(a)            ----                            5,011
</TABLE>

(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-36

<PAGE>

                                  EXHIBIT INDEX

  Exhibit
    No.                                  Description
    --                                   -----------

  3.1          Restated Certificate of Incorporation of J. Crew Group, Inc.
               (incorporated by reference to Exhibit 3.1 to the Registrant's
               Registration Statement on Form S-4, File No. 333-42427, filed
               December 16, 1997 (the "Registration Statement")).

  3.2          By-laws of J. Crew Group, Inc., as amended (incorporated by
               reference to Exhibit 3.2 to the Registrant's Annual Report on
               Form 10-K for the fiscal year ended February 3, 2001 (the "2000
               Form 10-K")).

  4.1          Indenture, dated as of October 17, 1997, between J. Crew Group,
               Inc., as issuer, and State Street Bank and Trust Company, as
               trustee, relating to the Debentures (incorporated by reference to
               Exhibit 4.3 to the Registration Statement).

  4.2(a)       Credit Agreement, dated as of October 17, 1997 ("Credit
               Agreement"), among J. Crew Group, Inc., J. Crew Operating Corp.,
               the Lenders Party thereto, the Chase Manhattan Bank, as
               Administrative Agent, and Donaldson, Lufkin & Jenrette Securities
               Corporation, as Syndication Agent (incorporated by reference to
               Exhibit 4.5 to Amendment No. 1 to the Registration Statement,
               filed February 6, 1998).

  4.2(b)       Amendment, dated as of November 23, 1998, to the Credit Agreement
               (incorporated by reference to Exhibit 4.2(b) to the Registrant's
               Annual Report on Form 10-K for the fiscal year ended January 30,
               1999 (the "1998 Form 10-K")).

  4.2(c)       Amendment, dated as of March 18, 1998, to the Credit Agreement
               (incorporated by reference to Exhibit 4.2(c) of the 1998 Form
               10-K).

  4.2(d)       Amendment and Restatement Agreement, dated as of April 20, 1999,
               relating to the Credit Agreement (incorporated by reference to
               Exhibit 4.2(d) of the 1998 Form 10-K).

  4.2(e)*      Amendment, dated as of April 17, 2002, to the Credit Agreement.

  4.3          Guarantee Agreement, dated as of October 17, 1997, among J. Crew
               Group, Inc., the subsidiary guarantors of J. Crew Operating Corp.
               that are signatories thereto and The Chase Manhattan Bank
               (incorporated by reference to Exhibit 4.6 to the Registration
               Statement).

  4.4          Indemnity, Subrogation and Contribution Agreement, dated as of
               October 17, 1997, among J. Crew Operating Corp., the subsidiary
               guarantors of J. Crew Operating Corp. that are signatories
               thereto and The Chase Manhattan Bank (incorporated by reference
               to Exhibit 4.7 to the Registration Statement).

  4.5          Pledge Agreement, dated as of October 17, 1997, among J. Crew
               Operating Corp., J. Crew Group, Inc., the subsidiary guarantors
               of J. Crew Operating Corp. that are signatories thereto and The
               Chase Manhattan Bank (incorporated by reference to Exhibit 4.8 to
               the Registration Statement).

  4.6          Security Agreement, dated as of October 17, 1997, among J. Crew
               Operating Corp., J. Crew Group, Inc., the subsidiary guarantors
               of J. Crew Operating Corp. that are signatories thereto and The
               Chase Manhattan Bank (incorporated by reference to Exhibit 4.9 to
               the Registration Statement).

                                        1

<PAGE>

  Exhibit
    No.                               Description
    --                                -----------

  4.7          Registration Rights Agreement, dated as of October 17, 1997, by
               and among J. Crew Group, Inc., Donaldson, Lufkin & Jenrette
               Securities Corporation and Chase Securities Inc. (incorporated by
               reference to Exhibit 4.10 to the Registration Statement).

               NOTE:Pursuant to the provisions of paragraph (b)(4)(iii) of Item
               601 of Regulation S-K, the Registrant hereby undertakes to
               furnish to the Commission upon request copies of the instruments
               pursuant to which various entities hold long-term debt of the
               Company or its parent or subsidiaries, none of which instruments
               govern indebtedness exceeding 10 percent of the total assets of
               the Company and its subsidiaries on a consolidated basis.

  10.1(a)+     Employment Agreement, dated October 17, 1997, among J. Crew
               Group, Inc., J. Crew Operating Corp., TPG Partners II, L.P. (only
               with respect to Section 2(c) therein) and Emily Woods (the "Woods
               Employment Agreement") (incorporated by reference to Exhibit 10.1
               to the Registration Statement).

  10.1(b)+     Letter Agreement, dated February 4, 2000, between J. Crew Group,
               Inc. and Emily Woods (incorporated by reference to Exhibit 10.1
               (b) to the Registrant's Annual Report on Form 10-K for the fiscal
               year ended January 29, 2000 (the "1999 Form 10-K")).

  10.2+        J. Crew Operating Corp. Senior Executive Bonus Plan (included as
               Exhibit A to the Woods Employment Agreement filed as Exhibit
               10.1(a) above).

  10.3+        Stock Option Grant Agreement, made as of October 17, 1997,
               between J. Crew Group, Inc. and Emily Woods (time based)
               (incorporated by reference to Exhibit 10.3 to the Registration
               Statement).

  10.4+        Stock Option Grant Agreement, made as of October 17, 1997,
               between J. Crew Group, Inc. and Emily Woods (performance based)
               (incorporated by reference to Exhibit 10.4 to the Registration
               Statement).

  10.5(a)+     Employment Agreement, dated May 3, 1999, between J.Crew Group,
               Inc. and Mark Sarvary (incorporated by reference to Exhibit 10.1
               to the Registrant's Quarterly Report on Form 10-Q for the period
               ended May 1, 1999).

  10.5(b)+     Letter Agreement, dated August 9, 1999, between Mark Sarvary and
               J. Crew Operating Corp. (incorporated by reference to Exhibit
               10.5(b) to the 1999 Form 10-K).

  10.5(c)+*    Letter Agreement, dated January 15, 2002, between Mark Sarvary
               and J. Crew Operating Corp.

  10.6+        Agreement, dated September 30, 1999, between J. Crew Operating
               Corp. and Carol Sharpe (incorporated by reference to Exhibit 10.6
               to the 1999 Form 10-K).

  10.7(a)+     Employment Agreement, dated February 18, 2000, between J. Crew
               Operating Corp. and Trudy Sullivan (incorporated by reference to
               Exhibit 10.7 to the 2000 Form 10-K).

  10.7(b)+*    Letter Agreement, dated July 12, 2001, between Trudy Sullivan and
               J. Crew Operating Corp.

  10.8+        Letter Agreement, dated January 29, 2001, between J. Crew Group,
               Inc. and Richard Anders (incorporated by reference to Exhibit
               10.8(b) of the 2000 Form 10-K).

  10.9         Stockholders' Agreement, dated as of October 17, 1997, among J.
               Crew Group, Inc. and the Stockholder signatories thereto
               (incorporated by reference to Exhibit 4.1 to the Registration
               Statement).


                                        2

<PAGE>

  Exhibit
    No.                               Description
    --                                ------------

  10.10        Stockholders' Agreement, dated as of October 17, 1997, among J.
               Crew Group, Inc., TPG Partners II, L.P. and Emily Woods (included
               as Exhibit B to the Woods Employment Agreement filed as Exhibit
               10.1 to the Registration Statement).

  10.11(a)+    J. Crew Group, Inc. 1997 Stock Option Plan (the "1997 Plan")
               (incorporated by reference to Exhibit 10.13 to the Registration
               Statement).

  10.11(b)+    Amendment to the 1997 Plan, dated July 24, 2000 (incorporated by
               reference to Exhibit 10.11(b) to the 2000 Form 10-K).

  10.11(c)+    Amendment to the 1997 Plan, dated February 2, 2001 (incorporated
               by reference to Exhibit 10.11(c) to the 2000 Form 10-K).

  10.12+*      Employment Agreement, dated May 17, 2001, between J. Crew
               Operating Corp. and Michael Scandiffio.

  10.13+*      Employment Agreement, dated December 12, 2001, between J. Crew
               Operating Corp. and Blair Gordon.

  10.14+*      Form of Executive Severance Agreement between J. Crew Operating
               Corp. and certain executives thereof.

  10.15+*      Letter agreement, dated March 14, 2000, between J. Crew Operating
               Corp. and Scott Formby.

  21.1*        Subsidiaries of J. Crew Group, Inc.

  23.1*        Consent of KPMG LLP, Independent Auditors.

___________
+ Management contract or compensatory plan or arrangement

* Filed herewith

                                        3