Ahead of the Bell: Analyst eyes J. Crew inventory

NEW YORK (AP) — J. Crew Group Inc. will likely keep working on reducing excess inventory as shoppers continue to pull back on spending during the recession, but the retailer probably won't reach a more manageable level until the end of the second quarter, an analyst said Monday.

Christine Chen of Needham&Co. said the excess inventory will likely hurt J. Crew's gross margin.

J. Crew, like many retailers, has had to contend with a sharp tightening of consumer spending as shoppers worry about the economy and their jobs.

Last month, the company said it would cut 95 jobs and suspend its 401(k) plan through the rest of the year to help cut costs in a slumping economy. J. Crew said at the time that the cost-cutting program would help bring about $40 million in savings each year.

Chen reduced her 2009 earnings per share forecast to 50 cents from 64 cents and trimmed quarterly estimates as well. She reaffirmed a "Hold" rating.