J. Crew Group, Inc.
Annual Report 2016

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 Form 10-K (Mark One)☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended January 28, 2017or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934 CommissionFile Number Registrant, State of IncorporationAddress and Telephone Number I.R.S. EmployerIdentification No.333-175075 22-2894486 J.CREW GROUP, INC.(Incorporated in Delaware) 770 BroadwayNew York, New York 10003Telephone: (212) 209 2500Securities Registered Pursuant to Section 12(b) and 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☒ No ☐Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 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 90days. Yes ☐ No ☒Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submittedand posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post suchfiles). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not becontained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10-K. ☒Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ (Do not check if a smaller reporting company) Smaller reporting company ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒As of July 30, 2016, the last business day of the registrant’s most recently completed second fiscal quarter, there was no established public trading market for the commonstock of the registrant and therefore, an aggregate market value of the registrant’s common stock is not determinable.There were 1,000 shares of the Company’s $0.01 par value common stock outstanding on March 17, 2017.  DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTSThis report contains “forward-looking statements,” which include information concerning our plans, objectives, goals, strategies, future events, futurerevenues or performance, capital expenditures, financing needs and other information that is not historical information. Many of these statements appearunder the headings “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” particularly under the sub-heading “Outlook.” When used in this report, the words “estimate,” “expect,” “anticipate,” “project,” “plan,” “intend,” “believe” and variations of suchwords or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, ourexamination of operating trends, are based upon our current expectations and various assumptions. We believe there is a reasonable basis for our expectationsand beliefs, but there can be no assurance that we will realize our expectations or that our beliefs will prove correct.There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained inthis report. Important factors that could cause our actual results to differ include, but are not limited to, our substantial indebtedness and the indebtedness ofour indirect parent, the retirement, repurchase or exchange of our indebtedness or the indebtedness of our indirect parent, our substantial lease obligations,our ability to anticipate and timely respond to changes in trends and customer preferences, the strength of the global economy, declines in consumerspending or changes in seasonal consumer spending patterns, competitive market conditions, our ability to attract and retain key personnel, our ability tosuccessfully develop, launch and grow our newer concepts and execute on strategic initiatives, product offerings, sales channels and businesses, our ability toimplement our growth strategy, material disruption to our information systems, our ability to implement our real estate strategy, adverse or unseasonableweather interruptions in our foreign sourcing operations, and other factors which are set forth under the heading “Risk Factors.” There may be other factors ofwhich we are currently unaware or deem immaterial that may cause our actual results to differ materially from the forward-looking statements.All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date they are made and are expressly qualified intheir entirety by the cautionary statements included in this report. Except as may be required by law, we undertake no obligation to publicly update or reviseany forward-looking statement to reflect events or circumstances occurring after the date they were made or to reflect the occurrence of unanticipated events. 2 PART I ITEM 1.BUSINESS.“J.Crew,” the “Company,” “we,” “us” and “our” refer to J.Crew Group, Inc. (“Group”) and its wholly owned subsidiaries. “Parent” refers toGroup’s ultimate parent, Chinos Holdings, Inc.OverviewJ.Crew is an internationally recognized multi-brand apparel and accessories retailer that differentiates itself through high standards of quality, style,design and fabrics. We are a vertically-integrated omni-channel specialty retailer that operates stores and websites both domestically and internationally. Wedesign, market and sell our products, including those under the J.Crew® and Madewell® brands, offering complete assortments of women’s, men’s andchildren’s apparel and accessories. We believe our customer base consists primarily of college-educated, professional and fashion-conscious women andmen. We sell our J.Crew and Madewell merchandise primarily through our retail and factory stores, our websites and our catalogs. As of January 28, 2017,we operated 281 J.Crew retail stores, 181 J.Crew factory stores (including 39 J.Crew Mercantile® stores), and 113 Madewell stores throughout the UnitedStates, Canada, the United Kingdom, Hong Kong and France; compared to 287 J.Crew retail stores, 161 J.Crew factory stores (including 10 J.Crew Mercantilestores), and 103 Madewell stores as of January 30, 2016.Our fiscal year ends on the Saturday closest to January 31, typically resulting in a 52-week year, but occasionally includes an additional week,resulting in a 53-week year. All references to fiscal 2016 reflect the results of the 52-week period ended January 28, 2017; all references to fiscal 2015 reflectthe results of the 52-week period ended January 30, 2016; and all references to fiscal 2014 reflect the results of the 52-week period ended January 31, 2015.In addition, all references to fiscal 2017 reflect the 53-week period ending February 3, 2018.We were incorporated in the State of New York in 1988 and reincorporated in the State of Delaware in October 2005. Our principal executive officesare located at 770 Broadway, New York, NY 10003, and our telephone number is (212) 209-2500.On March 7, 2011, J.Crew Group, Inc. was acquired by affiliates of TPG Capital, L.P. (together with such affiliates, “TPG”) and Leonard Green &Partners, L.P. (“LGP” and together with TPG, the “Sponsors”) in a transaction, referred to as the “Acquisition.” As a result of the Acquisition, our stock is nolonger publicly traded. Currently, the issued and outstanding shares of J.Crew Group, Inc. are indirectly owned by affiliates of the Sponsors, certain co-investors and members of management.Brands and MerchandiseWe project our brand image through consistent creative messaging in our store environments, websites and catalogs and with our high-qualitycustomer service. We maintain our brand image by exercising substantial control over the design, production, presentation and pricing of our merchandiseand by selling our products primarily ourselves. Senior management is extensively involved in all phases of our business including product design andsourcing, assortment planning, store selection and design, website experience and the selection of photography used in our brand imaging.J.Crew. Introduced in 1983, J.Crew offers a complete assortment of women’s and men’s apparel and accessories, including outerwear, suiting, casualattire, swimwear, shoes, handbags, belts, socks, jewelry and more. J.Crew offers products ranging from casual t-shirts and denim to limited edition“collection” items, such as hand-embellished sweaters and coats, Italian cashmere, limited edition prints and patterns, and vintage inspired details. We alsooffer a curated selection of other brands that we have partnered with offering unique, hard-to-find items consistent with our brand philosophy. J.Crewproducts are sold primarily through our J.Crew retail and factory stores and our J.Crew and factory websites. Our J.Crew catalog provides a branding vehiclethat supports all channels of distribution.Introduced in 2006, crewcuts reflects the same high standard of quality, style and design that we offer under the J.Crew brand. Crewcuts offers aproduct assortment of apparel and accessories for the children’s market. Crewcuts products are sold through stand-alone retail and factory stores, shop-in-shops in our J.Crew retail and factory stores and our J.Crew and factory websites.In fiscal 2015, we launched J.Crew Mercantile, which features a collection of value-driven merchandise with classic J.Crew style for women, men andchildren. The collection, previously only available in our J.Crew factory stores and online, is now available at J.Crew Mercantile stores. Located in retailcenters, J.Crew Mercantile stores make our factory assortment more accessible to customers.3 Madewell. Introduced in 2006, Madewell is a modern women’s denim brand with workwear roots. Denim is at the core of everything Madewell does:from jeans that fit perfectly to the pieces—tees, ankle boots, leather jackets—that women want to wear with them. We describe our brand as effortless, cool,artful, and unexpected. The products are sold primarily at Madewell stores and online.A summary of our revenues by brand is as follows: (in millions, except percentages) Fiscal 2016 Fiscal 2015 Fiscal 2014 Amount Percent ofTotal Amount Percent ofTotal Amount Percent ofTotal J.Crew $2,018.1 83.2% $2,146.7 85.7% $2,295.1 89.0% Madewell 341.6 14.1 301.0 12.0 245.3 9.5 Other(a) 65.8 2.7 58.1 2.3 39.3 1.5 Total $2,425.5 100.0% $2,505.8 100.0% $2,579.7 100.0% (a)Consists primarily of shipping and handling fees and revenues from third-party resellers.StoresJ.Crew Retail. Our J.Crew retail stores are located in upscale regional malls, lifestyle centers and street locations. Our retail stores are designed andfixtured with the goal of creating a distinctive, sophisticated and inviting atmosphere, with displays and information about product quality. We believesituating our stores in desirable locations is critical to the success of our business, and we determine store locations, as well as individual store sizes, based ongeographic location, demographic information, presence of anchor tenants in mall locations and proximity to other high-end specialty retail stores. As ofJanuary 28, 2017, we operated 281 J.Crew retail stores (including eight crewcuts stores) throughout the United States, Canada, the United Kingdom, HongKong, and France.Our J.Crew retail stores averaged approximately 6,200 square feet as of January 28, 2017, but are “sized to the market,” which means that we adjust thesize of a particular retail store based on the projected revenues from that store. Our retail stores range in size from a 21,000 square foot store in New York Cityto small crewcuts and men’s shops of approximately 900 square feet.J.Crew Factory. Our J.Crew factory stores are located primarily in large outlet malls and are designed with simple, volume driving visuals to maximizethe sale of key items. In fiscal 2015, we launched our J.Crew Mercantile store concept, which are located in traditionally full price retail malls and hybridcenters, and therefore make our factory assortment more accessible to customers. We design and develop a dedicated line of value-driven merchandise for ourJ.Crew factory stores, J.Crew Mercantile stores and jcrewfactory.com, inspired by classic J.Crew style. As of January 28, 2017, we operated 181 J.Crew factorystores (including three crewcuts factory stores and 39 J.Crew Mercantile stores) throughout the United States and Canada.Our J.Crew factory stores averaged approximately 5,700 square feet as of January 28, 2017, and are also “sized to the market.” Our factory stores rangein size from a 10,300 square foot store in New York to a 1,500 square foot store in Florida.Madewell. Our Madewell stores are located in upscale regional malls, lifestyle centers and street locations. Each Madewell store is thoughtfullydesigned with the aesthetic of a downtown boutique in mind, while also reflecting high quality and sophistication. As of January 28, 2017, we operated 113Madewell stores throughout the United States.Our Madewell stores averaged approximately 3,500 square feet as of January 28, 2017. Our Madewell stores range in size from a 9,600 square footstore in Washington, D.C. to a 2,500 square foot store in Brooklyn.4 A summary of the number of stores that we opened or closed over the past three fiscal years is as follows: J.Crew Retail Factory Mercantile Total Madewell Total Fiscal 2014: Beginning of year 265 121 — 386 65 451 New 17 18 — 35 20 55 Closed (2) — — (2) — (2)End of year 280 139 — 419 85 504 Fiscal 2015: Beginning of year 280 139 — 419 85 504 New 11 12 10 33 18 51 Closed (4) — — (4) — (4)End of year 287 151 10 448 103 551 Fiscal 2016: Beginning of year 287 151 10 448 103 551 New 3 2 19 24 10 34 Converted to J.Crew Mercantile (1) (9) 10 — — — Closed (8) (2) — (10) — (10)End of year 281 142 39 462 113 575E-commerceWe also serve customers through our e-commerce business, which includes websites for the J.Crew, factory and Madewell brands. Our websites allowcustomers to purchase our merchandise over the Internet and include jcrew.com, jcrewfactory.com and madewell.com, and in responsive formats available onmobile phones and tablets. We also use our websites to sell exclusive styles not available in stores, introduce and test new product offerings, offer extendedsizes and colors on various products, and drive targeted marketing campaigns. Additionally, we utilize a third party to accept and fulfill online orders fromcustomers in over 100 countries outside of the United States.Financial Information about SegmentsWe have determined our operating segments on the same basis that we use to internally evaluate performance and allocate resources. Our operatingsegments align with our brands, J.Crew and Madewell, which have been aggregated into one reportable segment because they have similar class ofconsumers, economic characteristics, nature of products, nature of production and distribution methods.Shared Resources That Support Our BrandsDesign and MerchandisingOn the basis of data collected from customers through our e-commerce business, we believe our customer base consists primarily of college-educated,professional and fashion-conscious women and men. We seek to appeal to our customers by creating high quality products that reflect our customers’aspirational and active lifestyles across a broad range of price points.We believe one of our key strengths is our design team, which designs merchandise that reinforces our constantly evolving brands. Our collections aredesigned to reflect a clean and fashionable aesthetic that incorporates high quality fabrics and construction as well as consistent fits and detailing.Our products are developed in four seasonal collections and are rolled-out for monthly product introductions in our stores, on our websites and in ourcatalogs. The design process begins with our designers developing seasonal collections eight to 12 months in advance. Our designers travel domestically andinternationally to develop color and design ideas. Once the design team has developed a season’s color palette and design concepts, they order a sampleassortment in order to evaluate the details of the collection, such as how color takes to a particular fabric. The design team then presents the collection tosenior management. The presentation reflects the design team’s vision, from color direction and flow, to styling and silhouette evolution.5 Our teams work closely with each other in order to leverage market data, ensure the quality of our products and remain true to our unified brandaesthetic and voice. Our technical design team develops construction and fit specifications for every product, to enable quality workmanship and consistencyacross product lines.Because our product offerings originate from a single concept assortment, we believe that we are able to efficiently offer an assortment of styles withineach season’s line while still maintaining a unified vision. As a final step that is intended to ensure image consistency, our senior management reviews thefull line of products for each season before they are manufactured.Marketing and AdvertisingAs part of our omni-strategy, we communicate a consistent brand message across our stores, our websites, our direct mail, email marketing, onlineadvertising, and our social media presence. Our core marketing objectives are structured to drive awareness and differentiation of our brands, increase newcustomer acquisition, maintain and build customer retention and loyalty, and enhance brand awareness globally.Digital marketing and social media have played an important part of our strategy and are among our most effective marketing tools. Additionally, wehave redesigned and upgraded our mobile responsive site, which features a more intuitive and user-friendly experience for shoppable content. This redesignsupports our ongoing initiative to serve our customers with an integrated omni-channel shopping experience.We offer a private-label credit card in our J.Crew brand which is issued and serviced by a third-party provider. In fiscal 2016, sales on the J.Crew creditcard made up approximately 15% of our net sales. We believe that our credit card program encourages frequent store and website visits and promotesmultiple-item purchases, thereby cultivating customer loyalty to the J.Crew brand and increasing sales. The J.Crew credit card offers rewards based oncustomer spend.SourcingWe source our merchandise in two ways: (i) through the use of buying agents, and (ii) by purchasing merchandise directly from trading companies andmanufacturers. We have no long-term merchandise supply contracts, and we typically transact business on an order-by-order basis. In fiscal 2016, we workedwith 9 buying agents, who supported our relationships with vendors that supplied approximately 62% of our merchandise, with one of these buying agentssupporting our relationships with vendors that supplied approximately 48% of our merchandise. In exchange for a commission, our buying agents identifysuitable vendors and coordinate our purchasing requirements with the vendors by placing orders for merchandise on our behalf, ensuring the timely deliveryof goods to us, obtaining samples of merchandise produced in the factories, inspecting finished merchandise and carrying out other administrativecommunications on our behalf. In fiscal 2016, we worked with a number of trading companies, through which we purchased approximately 21% of ourmerchandise. Trading companies control factories that manufacture merchandise and also handle certain other shipping and customs matters related toimporting the merchandise into the United States. We sourced the remaining 17% of our merchandise directly from manufacturers within the United Statesand overseas, the majority of whom we have long-term, and in our opinion, stable relationships.Our sourcing base currently consists of 200 vendors who operate 339 factories in 25 countries. Our top 10 vendors supply 40% of our merchandise.Each of our top 10 vendors uses multiple factories to produce its merchandise, which we believe gives us a high degree of flexibility in placing production ofour merchandise. We believe we have developed strong relationships with our vendors, some of which rely upon us for a significant portion of their business.In fiscal 2016, approximately 86% of our merchandise was sourced in Asia (with 58% of our products sourced from China and Hong Kong), 11% wassourced in Europe and other regions, and 3% was sourced in the United States. Substantially all of our foreign purchases are negotiated and paid for in U.S.dollars.DistributionWe own a 282,000 square foot facility in Asheville, North Carolina that houses our distribution operations for our stores. This facility employedapproximately 320 full and part-time associates as of January 28, 2017. Merchandise is transported from this distribution center to our stores by independenttrucking companies, with a transit time of approximately two to five days.6 We also own two facilities in Lynchburg, Virginia with a combined total square footage of 488,700 square feet. These facilities contain a customer callcenter and order fulfillment operations for our e-commerce business. The Lynchburg facilities employed approximately 1,170 full and part-time associates asof January 28, 2017. These facilities employ approximately 170 additional associates during our peak season. Merchandise sold through our e-commercebusiness is sent directly to domestic customers from this distribution center or our stores via the United States Postal Service, or UPS. We utilize a third partyto accept and fulfill online orders from customers in over 100 countries outside of the United States.In fiscal 2016, we commenced discussions regarding sale-lease back transactions of our distribution facilities.We lease a 45,800 square foot customer call center in San Antonio, Texas. This facility employed approximately 330 full and part-time associates as ofJanuary 28, 2017. This facility employs approximately 80 additional associates during our peak season.Management Information SystemsOur management information systems are designed to provide comprehensive order processing, production, accounting and management informationfor the marketing, manufacturing, importing, distribution, financial reporting, and analytical functions of our business. Our in-store point-of-sale systems, e-commerce platforms and support systems provide the omni-channel capability to enable us to track inventory from store receipt to final sale on a real-timebasis. We have an agreement with a third party to provide hosting services and administrative support for portions of our infrastructure, and utilize cloudbased systems in addition to those hosted on premise.We believe our merchandising and financial systems, coupled with our point-of-sale and e-commerce systems, allow for item-level stockreplenishment, merchandise planning and real-time inventory accounting capabilities. Our telephone and call center systems, warehouse package sortingsystems, automated warehouse locator, order management systems and inventory tracking systems use current technology, and are designed with our highest-volume periods in mind, which results in substantial flexibility and ample capacity in our lower-volume periods. We also subject our systems to stress andvolume testing during off-peak periods to be better positioned for optimal performance during our peak season. We are investing in expanding andupgrading our information systems including our omni-channel capabilities, networks and infrastructure to provide cost effective scalability and reliabilityto support future growth.PricingWe offer our customers a mix of select designer-quality products and more casual items at various price points, consistent with our signature stylingstrategy of pairing luxury items with more casual items. We offer limited edition “collection” items such as hand-embellished sweaters and coats, Italiancashmere, limited edition prints and patterns and vintage inspired details, which we believe elevates the overall perception of our brand. We believe offeringa broad range of price points maintains a more accessible, less intimidating atmosphere.Cyclicality and SeasonalityOur industry is cyclical and our revenues are affected by general economic conditions. Purchases of apparel and accessories are sensitive to a numberof factors that influence the levels of consumer spending, including economic conditions and the level of disposable consumer income, consumer debt,interest rates, foreign currency exchange rates and consumer confidence.Our business is seasonal and as a result, our revenues fluctuate from quarter to quarter. We have four distinct selling seasons that align with our fourfiscal quarters. Revenues are usually higher in our fourth fiscal quarter, particularly December when customers make holiday purchases. In fiscal 2016, werealized approximately 29% of our revenues in the fourth fiscal quarter.CompetitionThe specialty retail industry is highly competitive. We compete primarily with specialty retailers, department stores, catalog retailers and e-commercebusinesses that engage in the sale of women’s, men’s and children’s apparel, accessories, shoes and similar merchandise. We compete on quality, design,customer service and price. We believe that our primary competitive advantages are consumer recognition of our brands, as well as our omni-channel strategywhich focuses on a seamless approach to the customer experience through all available sales channels. We believe that we also differentiate ourselves fromcompetitors on the basis of our signature product design, our ability to offer both designer-quality products at higher price points and more casual items atlower price points, our focus on the quality of our product offerings and our customer-service oriented culture. We believe our success depends in substantialpart on our ability to originate, define and communicate product and fashion trends as well as to timely anticipate, predict and react to changing consumerdemands.7 AssociatesAs of January 28, 2017, we had approximately 14,500 associates, of whom approximately 5,400 were full-time associates and 9,100 were part-timeassociates. Approximately 1,170 of these associates are employed in our customer call center and order fulfillment operations facilities in Lynchburg,Virginia; approximately 320 of these associates work in our store distribution center in Asheville, North Carolina; and approximately 330 of these associateswork in our call center in San Antonio, Texas. In addition, approximately 3,400 associates are hired on a seasonal basis in these facilities and our stores tomeet demand during the peak season. None of our associates are represented by a union. We have had no labor-related work stoppages and we believe ourrelationship with our associates is good.Trademarks and LicensingThe J.Crew and Madewell trademarks and variations thereon, such as crewcuts and J.Crew Mercantile, are registered or are subject to pendingtrademark applications with the United States Patent and Trademark Office and with the registries of many foreign countries. We believe our trademarks havesignificant value and we intend to continue to vigorously protect them against infringement.Government RegulationWe are subject to customs, truth-in-advertising, consumer protection, employment, data privacy, product safety and other laws, including zoning andoccupancy ordinances that regulate retailers and/or govern the promotion and sale of merchandise and the operation of retail stores and warehouse facilities.We monitor changes in these laws and believe that we are in material compliance with applicable laws.A substantial portion of our products are manufactured outside the United States. These products are imported and are subject to U.S. customs laws,which impose tariffs as well as import quota restrictions for textiles and apparel. Some of our imported products are eligible for duty-advantaged programs.While importation of goods from foreign countries from which we buy our products may be subject to embargo by U.S. Customs authorities if shipmentsexceed quota limits, we closely monitor import quotas and believe we have the sourcing network to efficiently shift production to factories located incountries with available quotas. The existence of import quotas has, therefore, not had a material adverse effect on our business.Available InformationWe make available free of charge on our website, www.jcrew.com, copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, currentreports on Form 8-K and all amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, asamended (the “Exchange Act”), as soon as reasonably practicable after filing such material electronically with, or otherwise furnishing it to, the Securitiesand Exchange Commission (the “SEC”). The reference to our website address does not constitute incorporation by reference of the information contained onthe website, and the information contained on the website is not part of this document.Copies of the reports and other information we file with the SEC may also be examined by the public without charge at 100 F Street, N.E., Room 1580,Washington, D.C. 20549, or at http://www.sec.gov. Copies of all or a portion of such materials can be obtained from the SEC upon payment of prescribedfees. Please call the SEC at 1-800-SEC-0330 for further information.8 ITEM 1A.RISK FACTORS.We face a variety of risks that are substantial and inherent in our business. The following are some of the more important risk factors that could affectour business.Risks Related to Our Business and Our IndustryIf we are unable to predict fashion trends or react to changing consumer preferences in a timely manner, our sales will decrease.We believe our success depends in substantial part on our ability to: •originate and define product and fashion trends, •anticipate, predict and react to changing consumer demands in a timely manner, and •translate market trends into desirable, saleable products far in advance of their offerings in our stores, on our websites, and in our catalogs.Because we enter into agreements for the manufacture and purchase of merchandise well in advance of the season in which merchandise will be sold,we are vulnerable to changes in consumer demand, pricing shifts and suboptimal merchandise selection and timing of merchandise purchases. We attempt tomitigate the risks of changing fashion trends and product acceptance in part by devoting a portion of our product line to classic styles that are notsignificantly modified from year to year. Nevertheless, if we misjudge the market for our products or overall level of consumer demand, we may be faced withsignificant excess inventories for some products and missed opportunities for others. Our brands’ images may also suffer if customers believe we are nolonger able to offer the latest fashions or if we fail to address and respond to customer feedback or complaints. The occurrence of these events, among others,could hurt our financial results and liquidity by decreasing sales. We may respond by increasing markdowns or initiating marketing promotions to reduceexcess inventory, which would further decrease our gross profits and net income.Unfavorable economic conditions could materially adversely affect our financial condition and results of operations.Economic conditions around the world can impact our customers and affect the general business environment in which we operate and compete. Ourresults can be impacted by a number of macroeconomic factors, including, but not limited to, consumer confidence and spending levels, employment rates,consumer credit availability, fuel and energy costs, raw materials costs, global factory production, commercial real estate market conditions, credit marketconditions, foreign currency exchange rates, interest rates, taxation, the level of customer traffic in malls and shopping centers and changing demographicpatterns.Demand for our merchandise is significantly impacted by negative trends in consumer confidence and other economic factors affecting consumerspending behavior. Because apparel and accessories generally are discretionary purchases, consumer purchases of our products may decline duringrecessionary periods or when disposable income is lower. As a result, our sales, growth and profitability may be adversely affected by unfavorable economicconditions at a regional, national or international level. In addition, unfavorable economic conditions abroad may impact our ability to meet quality andproduction goals.Periods of economic uncertainty or volatility make it difficult to plan, budget and forecast our business. Incorrect assumptions concerning economictrends, customer requirements, distribution models, demand forecasts, interest rate trends and availability of resources may result in our failure to accuratelyforecast results and to achieve forecasted results or budget targets.We believe that our current cash balance, cash flow from operations and availability under our senior secured credit facilities, provide us withsufficient liquidity. However, a decrease in liquidity of our customers and suppliers could have a material adverse effect on our cash flows, results ofoperations and liquidity.The specialty retail industry is cyclical, and a decline in consumer spending on apparel and accessories could reduce our sales and profitability.The industry in which we operate is cyclical. Purchases of apparel and accessories are sensitive to a number of factors that influence the levels ofconsumer spending, including general economic conditions and the level of disposable consumer income, the availability of consumer credit, interest rates,foreign exchange rates, taxation, consumer confidence in future economic conditions and demographic patterns. Because apparel and accessories generallyare discretionary purchases, declines in consumer spending patterns may impact us more negatively as a specialty retailer. Therefore, we may not be able togrow revenues or increase profitability if there is a decline in consumer spending patterns or we decide to slow or alter our growth plans in anticipation of orin response to a decline in consumer spending.9 We operate in the highly competitive specialty retail industry, and the size and resources of some of our competitors may allow them to compete moreeffectively than we can, which could result in loss of our market share.We face intense competition in the specialty retail industry. We compete primarily with specialty retailers, department stores, catalog retailers and e-commerce businesses that engage in the sale of women’s, men’s and children’s apparel, accessories, and similar merchandise. We compete on quality, design,customer service and price. We are not in the “fast fashion” business but it appears that an increasing number of customers are attracted to the aggressivepricing strategies of those retailers. Many of our competitors are, and many of our potential competitors may be, larger and have greater financial, marketingand other resources, devote greater resources to the marketing and sale of their products, generate greater international brand recognition or adopt moreaggressive pricing policies than we can. A number of our competitors are continuing to operate a more promotional business than in the past, both in-storeand online. This promotional environment has negatively impacted our revenues and gross profit and may continue to do so in the future. In addition,consumers are increasingly seeking retail experiences which emphasize value, personalization and an omni-channel environment where the store, mobile andonline shopping experience is tightly integrated. While we are working to meet these evolving customer expectations, there can be no assurance that we willdo so effectively or without incurring substantial expense, which could impact our results of operations and liquidity.We rely on the experience and skills of key personnel, the loss of whom could have a material adverse effect on our business.We believe we have benefited substantially from the leadership and strategic guidance of our chief executive officer and other key executives, who areprimarily responsible for executing our strategy. The loss, for any reason, of the services of any of these individuals and any negative market or industryperception arising from such loss could have a material adverse effect on our business. Our key executives have substantial experience and expertise in thespecialty retail industry and have made significant contributions to our growth and success. The unexpected loss of one or more of these individuals coulddelay the development and introduction of, and harm our ability to sell, our merchandise. In addition, products we develop without the guidance anddirection of these key personnel may not receive the same level of acceptance.Our success depends in part on our ability to attract and retain key personnel. Competition for this experienced talent is intense, and we may not beable to attract and retain a sufficient number of qualified personnel in the future.Our expanded product offerings, new sales channels, new brands and concepts and international expansion may not be successful, and implementation ofthese strategies may divert our operational, managerial, financial and administrative resources, which could impact our competitive position.We have grown our business in recent years by expanding our product offerings and sales channels, including by marketing our Madewell brand ofwomen’s apparel and accessories and launching J.Crew Mercantile. We have opened stores in Canada, the United Kingdom, Hong Kong and France andexpanded our international e-commerce business. In fiscal 2015, we launched our J.Crew Mercantile store concept, which are located in traditionally fullprice retail malls and hybrid centers, and therefore make our factory assortment more accessible to customers. These strategies to expand new brands andconcepts and to expand internationally involve various risks discussed elsewhere in these risk factors, including: •implementation may be delayed or may not be successful, •if our expanded product offerings and sales channels or our international growth efforts fail to maintain and enhance the distinctiveidentity of our brands, our brands’ images may be diminished and our sales may decrease, •if customers do not respond to these brands and concepts, product offerings and sales channels as anticipated, these strategies may not beprofitable on a larger scale, and •implementation of these plans may divert management’s attention from other aspects of our business, increase costs and place a strain onour management, operational and financial resources, as well as our information systems.In addition, our new product offerings, new brands and concepts, new sales channels and international expansion may be affected by, among otherthings, economic, demographic and competitive conditions, changes in consumer spending patterns and changes in consumer preferences and style trends.Further rollout of these strategies could be delayed or abandoned, could cost more than anticipated and could divert resources from other areas of ourbusiness, any of which could impact our competitive position and reduce our revenue and profitability.10 Our growth strategy depends on the successful execution of our efforts to grow our brands, develop our omni-channel shopping experience and expandinternationally.Our customers are seeking an omni-channel shopping experience through the integration of store and digital shopping channels. We haveimplemented systems to manage our inventory efficiently across all channels and to ship merchandise from stores to customers. We have enhanced ourmobile experience and we continue to explore additional capabilities to broaden our omni-channel experience, including order online and pick up in thestore, and various capacity and efficiency enhancements. However, these initiatives involve significant investments in information technology systems andsignificant operational changes, and the rapid pace of technological change may require us to incur costs to implement new systems and platforms to providea desirable shopping experience for our customers. We may not be successful in developing or acquiring technology that is competitive and responsive tothe needs of our customers and might lack sufficient resources to make the necessary investments in technology to compete with our competitors. In addition,our competitors are also investing in omni-channel capabilities, some of which may be more successful than our initiatives. If we do not implement andexpand our omni-channel initiatives successfully or we do not realize our anticipated return on these investments, then our operating results could benegatively impacted and we could fail to meet our strategic and financial goals.Our growth strategy also includes international expansion of our brands. We have stores in Canada, the United Kingdom, Hong Kong and France andexpanded our online presence to over 100 countries. We may open stores in additional countries in the future where brand recognition may be limited. We donot have experience operating in these regions and we will face established competition in most of these markets. Many of these countries have differentoperational and legal requirements, including, but not limited to, employment and labor, transportation, logistics, real estate, product labelling, productsafety, consumer protection, data privacy and local reporting requirements. Consumer tastes, sizes and trends may differ from country to country and theremay be seasonal differences, which, if we do not anticipate, may result in lower sales and/or margins for our products. Our success internationally could alsobe adversely impacted by the global economy, fluctuations in foreign currency exchange rates, changes in diplomatic or trade relationships, politicalinstability and foreign government regulation.In addition, as we continue to expand our overseas operations, we are subject to certain U.S. laws, including the Foreign Corrupt Practices Act, inaddition to the laws of the foreign countries in which we operate. We must use all commercially reasonable efforts to ensure our associates and agents complywith these laws. If any of our associates or agents violate such laws we could become subject to sanctions or other penalties that could negatively affect ourreputation, business and operating results.As we execute our growth strategies, we may not adequately manage the related organizational changes needed for successful execution. In addition,we may distract key resources related to our core business as a result of the focus on growth strategies.Any material disruption of our information systems, or failure to maintain and develop our information systems, could disrupt our business and reduce oursales.We are increasingly dependent on information systems to operate our websites, process transactions, respond to customer inquiries, manage inventory,purchase, sell and ship goods on a timely basis and maintain cost-efficient operations. Previously, we have experienced system interruptions whichtemporarily impaired our ability to capture, process and ship customer orders, and transfer product between channels. We may experience operationalproblems with our information systems as a result of system failures, viruses, computer “hackers” or other causes. Any material disruption or slowdown of oursystems, including a disruption or slowdown caused by our failure to successfully upgrade our systems, could cause information, including data related tocustomer orders, to be lost or delayed which could—especially if the disruption or slowdown occurred during the holiday season—result in delays in thedelivery of merchandise to our stores and customers or lost sales, which could reduce demand for our merchandise and cause our sales to decline. In addition,if changes in technology cause our information systems to become obsolete, or if our information systems are inadequate to handle our growth, we could losecustomers. We are also subject to risks and uncertainties associated with the Internet, including changes in required technology interfaces, website downtimeand other technical failures. Our failure to successfully respond to these risks and uncertainties could reduce sales, increase costs and damage the reputationof our brands.Management uses information systems to support decision making and to monitor business performance. We may fail to generate accurate andcomplete financial and operational reports essential for making decisions at various levels of management, which could lead to decisions being made thathave adverse results. Failure to adopt systematic procedures to initiate change requests, test changes, document changes, and authorize changes to systemsand processes prior to deployment may result in unsuccessful changes and could disrupt our business and reduce sales. In addition, if we do not maintainadequate controls such as reconciliations, segregation of duties and verification to prevent errors or incomplete information, our ability to operate ourbusiness could be limited.11 Compromises of our data security could cause us to incur unexpected expenses and loss of revenues and may materially harm our reputation and business.In the ordinary course of our business, we collect and store certain personal information from individuals, such as our customers and employees, andwe process customer payment card and check information. We rely on commercially available systems, software, tools and monitoring to provide security forprocessing, transmission and storage of confidential information. There can be no assurance that we will not suffer a data compromise, that unauthorizedparties will not gain access to personal information, or that any such data compromise or access will be discovered in a timely way. Further, the systemscurrently used for transmission and approval of payment card transactions, and the technology utilized in payment cards themselves, all of which can putpayment card data at risk, are determined and controlled by the payment card industry, not by us. Computer hackers may attempt to penetrate our computersystem and, if successful, misappropriate personal information, payment card or check information or confidential business information of our Company. Inaddition, there may be non-technical issues, such as our employees, contractors or third parties with whom we do business or to whom we outsource businessoperations may attempt to circumvent our security measures in order to misappropriate such information, and may purposefully or inadvertently cause abreach involving such information. Advances in computer and software capabilities, new tools and other developments may increase the risk of such abreach. Data privacy and information security is regulated at the international, federal and state levels, and compliance with any changes in the laws andregulations enacted by these governments will likely increase the cost of doing business.Compromise of our data security or of third parties with whom we do business, failure to prevent or mitigate the loss of personal or businessinformation and delays in detecting or providing prompt notice of any such compromise or loss could disrupt our operations, damage our reputation andcustomers’ willingness to shop in our stores, violate applicable laws, regulations, orders and agreements, and subject us to litigation and additional costs andliabilities which could be material.If we fail to maintain the value of our brands and protect our trademarks, our sales are likely to decline.Our success depends on the value of the J.Crew and Madewell brands and our corporate reputation. The J.Crew and Madewell names are integral to ourbusiness as well as to the implementation of our strategies for expanding our business. Maintaining, promoting and positioning our brands will dependlargely on the success of our marketing and merchandising efforts and our ability to provide a consistent, high quality customer experience. Our brands couldbe adversely affected if we fail to achieve these objectives or if our public image or reputation were to be tarnished by negative publicity through traditionalor social media platforms. Any of these events could result in decreases in sales.The J.Crew and Madewell trademarks and variations thereon, such as crewcuts and J.Crew Mercantile, are valuable assets that are critical to oursuccess. We intend to continue to vigorously protect our trademarks against infringement, but we may not be successful in doing so. The unauthorizedreproduction or other misappropriation of our trademarks would diminish the value of our brands, which could reduce demand for our products or the pricesat which we can sell our products.Our real estate strategy may not be successful, and store locations may fail to produce desired results, which could impact our competitive position andprofitability.We expanded our store base by 24 net new stores in fiscal 2016. We regularly evaluate our existing store base and seek to identify opportunities,where available, to renegotiate the terms of those leases. The success of our business depends, in part, on our ability to open new stores and renew ourexisting store leases on terms that meet our financial targets. Our ability to open new stores on schedule or at all, to renew our existing store leases onfavorable terms or to operate them on a profitable basis will depend on various factors, including our ability to: •identify suitable markets for new stores and available store locations, •anticipate the impact of changing economic and demographic conditions for new and existing store locations, •negotiate acceptable lease terms for new locations or renewal terms for existing locations, •hire and train qualified sales associates, •develop new merchandise and manage inventory effectively to meet the needs of new and existing stores on a timely basis, •foster current relationships and develop new relationships with vendors that are capable of supplying the required volume of merchandise,and •avoid construction delays and cost overruns in connection with the build-out of new stores.12 New stores and stores with renewed lease terms may not produce anticipated levels of revenue even though they increase our costs. As a result, ourexpenses as a percentage of sales would increase and our profitability would be adversely affected.Reductions in the volume of mall traffic or closing of shopping malls as a result of unfavorable economic conditions or changing demographic patternscould significantly reduce our sales and leave us with excess inventory.Most of our stores are located in shopping malls or outlet centers. Sales at these stores are derived, in part, from the volume of traffic in those locations.Our stores benefit from the ability of the malls’ “anchor” tenants, generally large department stores and other area attractions, to generate consumer traffic inthe vicinity of our stores. Unfavorable economic conditions and changes in consumer behavior, particularly in certain regions, have adversely affected malltraffic and resulted in the closing of certain anchor stores and has threatened the viability of certain commercial real estate firms which operate majorshopping malls. A continuation of this trend, including failure of a large commercial landlord or continued declines in the popularity of mall shoppinggenerally among our customers, would reduce our sales and leave us with excess inventory. We may respond by increasing markdowns or initiatingmarketing promotions to reduce excess inventory, which would further decrease our gross profits and net income.Our inability to maintain or increase comparable company sales could cause our earnings to decline.If our future comparable company sales fail to meet expectations, our earnings could decline. In addition, our results have significantly fluctuated inthe past and can be expected to continue to fluctuate in the future. For example, in the previous three fiscal years, our quarterly comparable company saleschanges have ranged from an increase of 4.4% to a decrease of 11.4%. A variety of factors affect comparable company sales, including fashion trends,competition, current economic conditions, pricing, inflation, the timing of the release of new merchandise and promotional events, changes in ourmerchandise mix, the success of marketing programs, timing and level of markdowns and weather conditions.In addition, the softening apparel demand in recent years has led to a more promotional environment across the specialty retail industry, which hasimpacted our promotional posture and our gross margins. In addition, this promotional pricing may have a negative effect on our brands’ images, which maybe difficult to counteract even as the economy improves.Various regions of the country experience extreme weather patterns. Significant amounts of snow, wind, ice, flooding and other weather elementshave caused and may continue to cause a greater number of store closures or lost revenue than we have historically experienced.All of these factors may cause our comparable company sales to be materially lower than previous periods and our expectations, which could impactour ability to leverage fixed expenses, such as store rent and store asset depreciation, which may adversely affect our financial condition or results ofoperations.Interruption in our foreign sourcing operations could disrupt production, shipment or receipt of our merchandise, which would result in lost sales andcould increase our costs.We do not own or operate any manufacturing facilities and therefore depend upon independent third party vendors for the manufacture of all of ourproducts. Our products are manufactured to our specifications primarily by factories outside of the United States. We cannot control all of the various factors,which include inclement weather, natural disasters, political and financial instability, strikes, health concerns regarding infectious diseases, and acts ofterrorism that might affect a manufacturer’s ability to ship orders of our products in a timely manner or to meet our quality standards. Inadequate laborconditions, health or safety issues in the factories where goods are produced can negatively impact our brands reputations. Late delivery of products ordelivery of products that do not meet our quality standards could cause us to miss the delivery date requirements of our customers or delay timely delivery ofmerchandise to our stores for those items. These events could cause us to fail to meet customer expectations, cause our customers to cancel orders or cause usto be unable to deliver merchandise in sufficient quantities or of sufficient quality to our stores, which could result in lost sales.In fiscal 2016, approximately 97% of our merchandise was sourced from foreign factories. In particular, approximately 58% of our merchandise wassourced from China and Hong Kong. Any event causing a sudden disruption of manufacturing or imports from Asia or elsewhere, including the imposition ofadditional import restrictions, could materially harm our operations. We have no long-term merchandise supply contracts, and many of our imports aresubject to existing or potential duties, tariffs or quotas that may limit the quantity of certain types of goods that may be imported into the United States fromcountries in Asia or elsewhere. We compete with other companies for production facilities and import quota capacity. While substantially all of our foreignpurchases of our products are negotiated and paid for in U.S. dollars, the cost of our products may be affected by fluctuations in the value of relevant foreigncurrencies. Our business is also subject to a variety of other risks generally associated with doing business abroad, such as political instability, economicconditions, disruption of imports by labor disputes and local business practices.13 In addition, to the manufacturing in China, we are also engaging in growing the amount of production in other developing countries. These othercountries may present greater risks than China with regards to infrastructure to support manufacturing, labor and employee relations, political and economicstability, corruption, environmental, health and safety compliance. While we endeavor to monitor and audit facilities where our production is done, anysignificant events with factories we use can adversely impact our reputation, brand, and product delivery.Increases in the demand for, or the price of, raw materials used to manufacture our products or other fluctuations in sourcing or distribution costs couldincrease our costs and hurt our profitability.The raw materials used to manufacture our products are subject to availability constraints and price volatility caused by high demand for fabrics,weather, supply conditions, government regulations, economic climate and other unpredictable factors. In addition, our sourcing costs may also fluctuate dueto labor conditions, transportation or freight costs, energy prices, currency fluctuations or other unpredictable factors. Further, the cost of labor at many of ourthird party manufacturers and the cost of transportation have been increasing and it is unlikely that such cost pressures will abate.Most of our products are shipped from our vendors by ocean. If a disruption occurs in the operation of ports through which our products are imported,we may incur increased costs related to air freight or to alternative ports. Shipping by air is significantly more expensive than shipping by ocean and ourmargins and profitability could be reduced. Shipping to alternative ports could also lead to delays in receipt of our products.We believe that we have strong vendor relationships and we are working with our suppliers to manage cost increases. Our overall profitabilitydepends, in part, on the success of our ability to mitigate rising costs or shortages of raw materials used to manufacture our products.Any significant interruption in the operations of our customer call, order fulfillment and distribution facilities could disrupt our ability to processcustomer orders and to deliver our merchandise in a timely manner.A substantial portion of our e-commerce order fulfillment operations are housed in a single facility along with one of our customer call centers, whiledistribution operations for our stores are housed in another single facility. Although we maintain back-up systems for these facilities, we may not be able toprevent a significant interruption in our operations if one or both of these facilities were impacted by a natural disaster, accident, failure of the inventorylocator or automated packing and shipping systems we use or other events. We have experienced interruptions in the past in connection with our websitesystems and while we have stabilized these systems, there can be no assurance that future interruptions will not occur. Any significant interruption in theoperation of these facilities, including an interruption caused by our failure to successfully expand or upgrade our systems or manage our transition toutilizing the expansions or upgrades, could reduce our ability to receive and process orders and provide products and services to our stores and customers,which could result in lost sales, cancelled sales and a loss of loyalty to our brand.Third party failure to deliver merchandise to our distribution centers, stores and customers or a disruption or adverse condition affecting our distributioncenters could result in lost sales or reduced demand for our merchandise.Our success depends on the timely receipt of merchandise from our vendors to our distribution centers, and timely delivery of merchandise from ourdistribution facilities to stores and customers. Independent third party transportation companies deliver our merchandise to our distribution centers, storesand customers. Some of these third parties employ personnel represented by labor unions. Disruptions in the delivery of merchandise or work stoppages byemployees of these third parties could delay the timely receipt of merchandise, which could result in cancelled sales, a loss of loyalty to our brands, increasedlogistics costs and excess inventory.We currently operate two of our own distribution centers in North Carolina and Virginia. Timely receipt of merchandise by our distribution centers,stores and customers may also be affected by factors such as inclement weather, natural disasters, accidents, system failures and acts of terrorism. We mayrespond by increasing markdowns or initiating marketing promotions, which would decrease our gross profits and net income. Inability to recover from abusiness interruption and return to normal operations within a reasonable period of time could have a material adverse impact on our results of operations anddamage our brand reputation.14 Our ability to source our merchandise profitably or at all could be hurt if new trade restrictions are imposed, existing trade restrictions become moreburdensome or disruption occur at our suppliers or at the ports.Trade restrictions, including increased tariffs, safeguards or quotas, on apparel and accessories could increase the cost or reduce the supply ofmerchandise available to us. We source our merchandise through buying agents and by purchasing directly from trading companies and manufacturers,predominately in Asia. There are quotas and trade restrictions on certain categories of goods and apparel from China and countries that are not subject to theWorld Trade Organization Agreement, which could have a significant impact on our sourcing patterns in the future. In addition, during, and following, therecent presidential election in the United States, there was discussion and commentary regarding potential significant changes to United States trade policies,treaties and tariffs, including trade policies and tariffs regarding China where a 45 percent tariff on Chinese imports was specifically discussed as well as adisallowance of tax deductions for imported merchandise or the imposition of unilateral tariffs on imported products. The results of the presidential electionhave created significant uncertainty about the future relationship between the United States and countries in Asia. These developments, or the perception thatany of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and maysignificantly reduce global trade and, in particular, trade between these nations and the United States. Any of these factors could depress economic activity,restrict our sourcing from suppliers and have a material adverse effect on our business, financial condition and results of operations and affect our strategy inthe Asia and elsewhere around the world. We cannot predict whether any of the countries in which our merchandise is currently manufactured or may bemanufactured in the future will be subject to additional trade restrictions imposed by the U.S. and foreign governments, nor can we predict the likelihood,type or effect of any such restrictions. Trade restrictions, including increased tariffs or quotas, embargoes, safeguards and customs restrictions against apparelitems could increase the cost, delay shipping or reduce the supply of apparel available to us or may require us to modify our current business practices, any ofwhich could hurt our profitability.We rely on our suppliers to manufacture and ship the products they produce for us in a timely manner. We also rely on the free flow of goods throughopen and operational ports worldwide. Labor disputes at various ports or at our suppliers could increase costs for us and delay our receipt of merchandise,particularly if these disputes result in work slowdowns, lockouts, strikes or other disruptions.If our independent manufacturers do not use ethical business practices or comply with applicable laws and regulations, our brands could be harmed due tonegative publicity.While our internal and vendor operating guidelines, as outlined in our Vendor Code of Conduct, promote ethical business practices and we, alongwith third parties that we retain for this purpose, monitor compliance with those guidelines, we do not control our independent manufacturers. Accordingly,we cannot guarantee their compliance with our guidelines. Our Vendor Code of Conduct is designed to ensure that each of our suppliers’ operations isconducted in a legal, ethical, and responsible manner. Our Vendor Code of Conduct requires that each of our suppliers operates in compliance withapplicable wage benefit, working hours and other local laws, and forbids the use of practices such as child labor or forced labor.Violation of labor or other laws by our independent manufacturers, or the divergence of an independent manufacturer’s practices from those generallyaccepted as ethical in the United States could diminish the value of the J.Crew and Madewell brands and reduce demand for our merchandise if, as a result ofsuch violation, we were to attract negative publicity.We are subject to customs, advertising, consumer protection, data privacy, product safety, zoning and occupancy and labor and employment laws thatcould require us to modify our current business practices, incur increased costs or harm our reputation if we do not comply.We are subject to numerous laws and regulations, including customs, truth-in-advertising, consumer protection, general data privacy, healthinformation privacy, identity theft, online privacy, product safety, unsolicited commercial communication and zoning and occupancy laws and ordinancesthat regulate retailers generally and/or govern the importation, promotion and sale of merchandise and the operation of retail stores and warehouse facilities.If these regulations were to change or were violated by our management, associates, suppliers, buying agents or trading companies, the costs of certain goodscould increase, or we could experience delays in shipments of our goods, be subject to fines or penalties, or suffer reputational harm, which could reducedemand for our merchandise and hurt our business and results of operations. Failure to protect personally identifiable information of our customers orassociates could subject us to considerable reputational harm as well as significant fines, penalties and sanctions. In addition, changes in federal and stateminimum wage laws and other laws relating to employee benefits could cause us to incur additional wage and benefits costs, which could hurt ourprofitability.15 Legal requirements frequently change and are subject to interpretation, and we are unable to predict the ultimate cost of compliance with theserequirements or their effect on our operations. Failure to define clear roles and responsibilities or to regularly communicate with and train our associates mayresult in noncompliance with applicable laws and regulations. We may be required to make significant expenditures or modify our business practices tocomply with existing or future laws and regulations, which may increase our costs and materially limit our ability to operate our business. We expect thecosts of compliance and risks to our business in this area to increase as we expand our international and e-commerce business.Our financial results could be adversely impacted by currency exchange rate fluctuations.Our international revenues are a small percentage of our business that may increase as we expand internationally. As a result, our future revenues andresults of operations could be impacted by changes in foreign currency exchange rates. Revenues and certain expenses in markets outside the United Statesare recognized in local foreign currencies, and we are exposed to potential gains or losses from the translation of those amounts into U.S. dollars forconsolidation into our financial statements. In addition, our international subsidiaries transact in currencies other than their functional currency, primarily inrespect of inventory purchases denominated in U.S. dollars, which could result in foreign currency transaction gains or losses. Finally, our vendors andsuppliers may also be impacted by currency exchange rate fluctuations with respect to the purchase of fabric and other raw materials.Fluctuations in our results of operations for the fourth fiscal quarter would have a disproportionate effect on our overall financial condition and results ofoperations.Our revenues are generally lower during the first and second fiscal quarters. In addition, any factors that harm our fourth fiscal quarter operatingresults, including adverse weather or unfavorable economic conditions, could have a disproportionate effect on our results of operations for the entire fiscalyear.In order to prepare for our peak shopping season, we must order and keep in stock significantly more merchandise than we would carry at other timesof the year. Any unanticipated decrease in demand for our products during our peak shopping season could require us to sell excess inventory at a substantialmarkdown, which could reduce our net sales and gross profit. Additional unplanned decreases in demand for our products could produce further reductions toour net sales and gross profit.Our quarterly results of operations may also fluctuate significantly as a result of a variety of other factors, including the timing of new store openingsand of catalog mailings and the revenues contributed by new stores, merchandise mix and the timing and level of inventory markdowns. As a result, historicalperiod-to-period comparisons of our revenues and operating results are not necessarily indicative of future period-to-period results.We have recognized substantial goodwill and intangible asset impairment losses in the past and may be required to recognize additional non-cashimpairment losses in the future.Certain factors, including consumer spending levels, industry and macroeconomic conditions, and the future profitability of our businesses, mighthave a negative impact on the carrying value of our goodwill, intangible assets and fixed assets. We could experience material impairment losses in thefuture. For example, during fiscal 2015, we recorded non-cash impairment charges of $1,382 million related to goodwill allocated to our J.Crew reportingunit, the intangible asset for our J.Crew trade name and certain long-lived assets. Although an impairment charge would be a non-cash expense, anyimpairment charges could materially increase our expenses and reduce our profitability. The process of testing goodwill and intangible assets for impairmentinvolves numerous judgments, assumptions and estimates made by management including expected future profitability, cash flows and the fair values ofassets and liabilities, which inherently reflect a high degree of uncertainty and may be affected by significant variability. If the business climate deteriorates,then actual results may not be consistent with these judgments, assumptions and estimates, and our goodwill and intangible assets may become impaired infuture periods. This would in turn have an adverse impact on our financial position and results of operations.16 We may be a party to legal proceedings in the future that could adversely affect our business.From time to time, like others in the retail industry, we are a party to legal proceedings, including matters involving personnel and employment issues,personal injury, intellectual property, consumer protection, consumer accessibility and other proceedings arising in the ordinary course of business. Inaddition, there are an increasing number of cases being filed in the retail industry, including those that we have been subject to or may be subject to in thefuture, that contain class and representative action allegations, such as those relating to data privacy and wage and hour laws. We evaluate our exposure tothese legal proceedings and establish reserves for the estimated liabilities in accordance with generally accepted accounting principles. Assessing andpredicting the outcome of these matters involves substantial uncertainties. Although not currently anticipated by management, unexpected outcomes inthese legal proceedings, or changes in management’s evaluations or predictions and accompanying changes in established reserves, could have a materialadverse impact on our financial results.We could be subject to changes in our tax rates and the adoption of new U.S. or international tax legislation or exposed to additional tax liabilities inconnection with our international operations, which could negatively impact our financial results.We are subject to taxes in the U.S. and in foreign jurisdictions where our international subsidiaries are organized. Due to economic and politicalconditions, tax rates in various jurisdictions may be subject to significant change. Our future effective tax rates could be affected by changes in the mix ofearnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, or changes in tax laws or theirinterpretation, including in the U.S.We are also subject to the examination of our tax returns and other tax matters by the Internal Revenue Service and other tax authorities andgovernmental bodies. We regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of ourprovision for taxes. There can be no assurance as to the outcome of these examinations. If our effective tax rates were to increase, particularly in the U.S., or ifthe ultimate determination of our taxes owed is for an amount in excess of amounts previously accrued, then our operating results, cash flows, and financialcondition could be adversely affected.Risks Related to Our Indebtedness and Certain Other ObligationsOur substantial indebtedness and lease obligations could adversely affect our ability to raise additional capital to fund our operations and make strategicinvestments, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk to the extent of our variable rate debt andprevent us from meeting our obligations under our indebtedness.We are highly leveraged. The total indebtedness of J.Crew and its subsidiaries at January 28, 2017 was $1,528 million, consisting of borrowings underour term loan credit facility, as amended and restated on March 5, 2014 (the “Term Loan Facility”). We can also borrow up to $350 million under our seniorsecured asset-based revolving line of credit, dated as of March 7, 2011 (as amended through and including November 17, 2016, the “ABL Facility”, andtogether with our Term Loan Facility, the “Senior Credit Facilities”), subject to a borrowing base limitation. As of January 28, 2017, our Senior CreditFacilities also allowed uncommitted incremental facilities in an aggregate amount of $300 million consisting of $200 million available as incremental termloan facilities and $100 million available as increased commitments under our ABL Facility. Additional incremental term loan facilities are permitted subjectto our meeting certain conditions, including a pro forma total senior secured leverage ratio of less than or equal to 3.75 to 1.00.On November 4, 2013, Chinos Intermediate Holdings A, Inc. (the “Issuer”), an indirect parent holding company of Group, issued $500 millionaggregate principal of 7.75/8.50% Senior PIK Toggle Notes due May 1, 2019 (the “PIK Notes”). The PIK Notes are (i) senior unsecured obligations of theIssuer, (ii) structurally subordinated to all of the liabilities of the Issuer’s subsidiaries, and (iii) not guaranteed by any of the Issuer’s subsidiaries, and thereforeare not recorded in our financial statements.During fiscal 2016, the Issuer made interest payments on the PIK Notes by paying in kind at the PIK interest rate of 8.50% instead of paying in cash.On October 28, 2016, the Issuer also delivered notice to U.S. Bank N.A., as trustee, under the indenture governing the PIK Notes, that with respect to theinterest that will be due on such notes on the May 1, 2017 interest payment date, the Issuer will make such interest payment by paying in kind at the PIKinterest rate of 8.50% instead of paying in cash. The PIK election will increase the outstanding principal balance of the PIK Notes by $23.1 million to $566.5million. Therefore, we will not pay a dividend to the Issuer in the second quarter of fiscal 2017 to fund a semi-annual interest payment. Pursuant to the termsof the indenture governing the PIK Notes, the Issuer intends to evaluate this option prior to the beginning of each interest period based on relevant factors atthat time.17 We and our subsidiaries, affiliates, Parent, Sponsors or affiliates of our Sponsors may from time to time seek to retire or purchase, directly or indirectly,our outstanding indebtedness, including the PIK Notes, through cash purchases and/or exchanges, in open market purchases, privately negotiatedtransactions, by tender offer or otherwise. Such purchases and/or exchanges, if any, will depend on prevailing market conditions, liquidity requirements,contractual restrictions and other factors. The amounts involved may be material, which could impact our capital structure, the market for our debt securities,the price of the indebtedness being purchased and/or exchanged and affect our liquidity.We also have, and will continue to have, significant lease obligations. As of January 28, 2017, our minimum annual rental obligations under long-term operating leases for fiscal 2017 and fiscal 2018 are $190 million and $171 million, respectively.Our high degree of leverage and significant lease obligations could have important consequences for our creditors. For example, they could: •limit our ability to obtain additional financing for working capital (including vendor payment terms), capital expenditures, debt servicerequirements, acquisitions and general corporate or other purposes; •restrict us from making strategic investments or cause us to make non-strategic divestitures; •limit our ability to adjust to changing market conditions and place us at a competitive disadvantage compared to our competitors who arenot as highly leveraged; •increase our vulnerability to general economic and industry conditions; •require a substantial portion of our cash flow to be dedicated to the payment of principal and interest on our indebtedness (including anydividends to the Issuer to fund interest payments), thereby reducing our ability to use our cash flow to fund our operations, capitalexpenditures and future strategic initiatives.We expect to pay interest of approximately $80 million in fiscal 2017, excluding any payments of dividends, if any, to the Issuer to fund debt serviceobligations.Our debt agreements contain restrictions that limit our flexibility in operating our business.The Senior Credit Facilities contain various covenants that limit the ability of J.Crew and our other subsidiaries to engage in specified types oftransactions. These covenants limit our ability and the ability of J.Crew, Chinos Intermediate Holdings B, Inc. (“Intermediate Holdings B”) and our restrictedsubsidiaries to, among other things: •incur or guarantee additional debt; •pay dividends, including those paid to the Issuer to fund debt service obligations, or distributions on our capital stock or redeem,repurchase or retire our capital stock or indebtedness; •issue stock of subsidiaries; •make certain investments, loans, advances and acquisitions; •create liens on our assets to secure debt; •enter into transactions with affiliates; •merge or consolidate with another company; and •sell or otherwise transfer assets.In addition, under our Senior Credit Facilities, we are required to meet specified financial ratios in order to undertake certain actions, and under theABL Facility in certain circumstances, we may be required to maintain certain levels of excess availability or meet a specified fixed charge coverage ratio.Our ability to meet those tests can be affected by events beyond our control, and we cannot assure you that we will meet them. A breach of any of thesecovenants in any Senior Credit Facility could result in a default under such Senior Credit Facility and, in some cases, the other Senior Credit Facility. Uponthe occurrence of an event of default under any Senior Credit Facility, the lenders could elect to declare all amounts outstanding under such Senior CreditFacility to be immediately due and payable and terminate all commitments to extend further credit. If we were unable to repay those amounts, the lendersunder the applicable Senior Credit Facilities could proceed against the collateral granted to them to secure such indebtedness. Intermediate Holdings B,J.Crew and certain of J.Crew’s subsidiaries have pledged substantially all of their assets, including, in the case of Intermediate Holdings B, a pledge of thecapital stock of J.Crew, as collateral under the Senior Credit Facilities. If the lenders under any Senior Secured Credit Facility accelerate the repayment ofborrowings, we may not have sufficient assets to repay that Senior Credit Facility, as well as our other secured and unsecured indebtedness.18 To service our indebtedness, we will require a significant amount of cash and our ability to generate cash depends on many factors beyond our control.Our ability to make cash payments on and to refinance our indebtedness and to fund working capital and planned capital expenditures will depend onour ability to generate sufficient operating cash flow in the future. This ability is, to a significant extent, subject to general economic, financial, competitive,legislative, regulatory and other factors that are beyond our control.Our business may not generate sufficient cash flow from operations, and future borrowings may not be available under our Senior Credit Facilities, inan amount sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs. In any such circumstance, we may need to refinance all or aportion of our indebtedness. We may not be able to refinance any of our indebtedness, including our Senior Credit Facilities, on commercially reasonableterms or at all. If we cannot service our indebtedness, we may have to take actions such as selling assets, seeking additional equity or reducing or delayingcapital expenditures, strategic acquisitions and investments. Any such action, if necessary, may not be effected on commercially reasonable terms or at all.The credit agreements governing our Senior Credit Facilities contain restrictions on our ability to sell certain assets and limit the use of the proceeds fromsuch sales.If we are unable to generate sufficient cash flow or are otherwise unable to obtain funds necessary to meet required payments of principal, premium, ifany, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants in the instruments governing our indebtedness (includingcovenants in our Senior Credit Facilities), we could be in default under the terms of the agreements governing such indebtedness. In the event of such default,the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest,the lenders under our Senior Credit Facilities could elect to terminate their commitments thereunder, cease making further loans and institute foreclosureproceedings against our assets, and we could be forced into bankruptcy or liquidation. If we breach our covenants under the credit agreements governing ourSenior Credit Facilities and are required to seek a waiver, we may not be able to obtain a waiver from the required lenders on acceptable terms, or at all. If thisoccurs, we would be in default under our Senior Credit Facilities, the lenders could exercise their rights, as described above, and we could be forced intobankruptcy or liquidation.Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.Borrowings pursuant to our Term Loan Facility bear interest at floating rates based on LIBOR, but in no event less than the floor rate of 1.00%, plusthe applicable margin. Accordingly, fluctuations in market interest rates may increase or decrease our interest expense which will in turn, increase or decreaseour net income and cash flow. We hedge a portion of our interest rate risk related to floating rate indebtedness by entering into interest rate swaps. Whilelimiting exposure to interest rate increases, these instruments may not fully mitigate our risk or may not be effective. For more information on our interest rateswaps, see note 8 in the consolidated financial statements.Actions we are taking to decrease our substantial leverage and strengthen our financial position may not be successful.On December 5, 2016, we designated certain newly formed subsidiaries as “Unrestricted Subsidiaries” and transferred certain domestic intellectualproperty assets to these Unrestricted Subsidiaries for the purpose of providing us flexibility in connection with evaluating our capital structure. We areexploring various possible transactions that could involve such transferred intellectual property assets. While we and the Issuer have entered into discussionswith certain holders of the PIK Notes and their advisors to explore potential transactions, there is no guarantee that we will be able to reach any agreementwith any holders that will reduce the principal amount or extend the maturity date of the PIK Notes outstanding or that we will decide to proceed with thistransaction, a different transaction or any transaction at all. For example, an ad hoc group of lenders under the Term Loan Facility has been formed and hastaken action to appoint a successor agent under the Term Loan Facility. While we have filed a complaint asserting that any attempt by the successor agent orthe ad hoc group of lenders under the Term Loan Facility to challenge our actions is improper, and seeking a declaration that our actions with respect to thetransfer of the intellectual property assets are in full compliance with the terms of our Term Loan Facility, there is no guarantee that we will be successful. Ourfailure to enter into a refinancing or liability management transaction involving the PIK Notes may have a material adverse effect on the Issuer’s ability topay the PIK Notes on the maturity date and therefore on our business, financial condition and results of operations. For more information on the pendinglitigation, see Item 3 “Legal Proceedings.” ITEM 1B.UNRESOLVED STAFF COMMENTS.None.19 ITEM 2.PROPERTIES.Our J.Crew brand is headquartered in New York, NY, where our corporate office is leased under a lease agreement expiring in 2022, with an option torenew thereafter. Our Madewell brand is headquartered in Long Island City, NY, where our corporate office is leased under a lease agreement expiring in2027, with an option to renew thereafter. We own three facilities: (i) a 425,000 square foot customer call center, order fulfillment and distribution center inLynchburg, Virginia, (ii) a 282,000 square foot distribution center in Asheville, North Carolina and (iii) a 63,700 square foot facility in Lynchburg, Virginia.In fiscal 2016, we commenced discussions regarding sale-lease back transactions of our distribution facilities. We also lease a 45,800 square foot customercall center in San Antonio, Texas under a lease agreement expiring in October 2021. We also lease small corporate office spaces in the United States andinternationally.As of January 28, 2017, we operated 281 J.Crew retail stores, 181 J.Crew factory stores (including 39 J.Crew Mercantile stores), and 113 Madewellstores in 44 states, the District of Columbia, Canada, the United Kingdom, Hong Kong, and France. All of our stores are leased from third parties with terms, inmost cases, of 5 to 10 years. A portion of our leases have options to renew for a period of 5 years. Generally, the leases contain standard provisions concerningthe 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 acontingent rent payment based on the store’s sales in excess of a specified threshold. Some of the leases also contain early termination options, which can beexercised by us or the landlord under certain conditions. The leases also generally require us to pay real estate taxes, insurance and certain common areacosts. We renegotiate with landlords to obtain more favorable terms as opportunities arise. We consider these properties to be in good condition and believethat our facilities are adequate for operations and provide sufficient capacity to meet our anticipated future requirements.20 A summary of the number of J.Crew and Madewell stores in the United States, Canada, the United Kingdom, Hong Kong, and France as of January 28,2017 is as follows: J.Crew Retail Factory(a) Total Madewell TotalAlabama 1 2 3 1 4Arizona 4 4 8 2 10Arkansas 1 1 2 1 3California 32 12 44 19 63Colorado 4 5 9 3 12Connecticut 10 3 13 3 16Delaware 1 1 2 — 2Florida 16 13 29 4 33Georgia 10 6 16 4 20Hawaii 1 — 1 — 1Idaho 1 — 1 — 1Illinois 9 4 13 3 16Indiana 2 3 5 1 6Iowa 1 1 2 — 2Kansas 1 2 3 1 4Kentucky 2 2 4 1 5Louisiana 3 3 6 1 7Maine 1 2 3 — 3Maryland 5 5 10 3 13Massachusetts 14 6 20 6 26Michigan 5 4 9 2 11Minnesota 4 2 6 2 8Mississippi 1 3 4 — 4Missouri 3 3 6 2 8Nebraska 1 1 2 — 2Nevada — 1 1 — 1New Hampshire 2 3 5 — 5New Jersey 14 8 22 4 26New Mexico 1 — 1 — 1New York 27 9 36 10 46North Carolina 6 9 15 3 18Ohio 6 6 12 4 16Oklahoma 2 1 3 2 5Oregon 3 3 6 2 8Pennsylvania 10 11 21 4 25Rhode Island 3 — 3 1 4South Carolina 3 6 9 1 10Tennessee 6 3 9 2 11Texas 15 14 29 8 37Utah 3 2 5 2 7Vermont — 1 1 — 1Virginia 9 5 14 5 19Washington 6 2 8 3 11Wisconsin 3 3 6 1 7District of Columbia 4 — 4 2 6Canada 12 6 18 — 18United Kingdom 7 — 7 — 7Hong Kong 4 — 4 — 4France 2 — 2 — 2Total 281 181 462 113 575 (a)Includes 39 J.Crew Mercantile stores. 21 ITEM 3.LEGAL PROCEEDINGS.We are subject to various legal proceedings and claims arising in the ordinary course of business. Management does not expect that the results of anyof these legal proceedings, either individually or in the aggregate, would have a material effect on our financial position, results of operations or cashflows. As of January 28, 2017, we have recorded a reserve for certain legal contingencies in connection with ongoing claims and litigation. The reserve is notmaterial to our results of operations. In addition, there are certain other claims and legal proceedings pending against us for which accruals have not beenestablished.On February 1, 2017, we filed a complaint in the New York State Supreme Court, Commercial Division, against Wilmington Savings Fund Society,FSB, as successor agent under the Term Loan Facility seeking a declaration from the court that our actions with respect to certain intellectual property assetsare in full compliance with the terms of our Term Loan Facility. We assert that any attempt by the successor agent or the ad hoc group of lenders under ourTerm Loan Facility to challenge our actions is invalid and intend to vigorously assert our rights under our Term Loan Facility.ITEM 4.MINE SAFETY DISCLOSURE.Not applicable. 22 PART II ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.Prior to the Acquisition, our Common Stock was traded on the New York Stock Exchange under the symbol “JCG.” Subsequent to the Acquisition, ouroutstanding Common Stock is privately held and therefore there is no established public trading market.Record HoldersAs of March 17, 2017, Intermediate Holdings B (our direct owner and an indirect, wholly owned subsidiary of our Parent) was the only holder ofrecord of our Common Stock.DividendsOn December 21, 2012, the Company paid, from cash on hand, a dividend of $197.5 million to stockholders of record of the Parent on December 17,2012.On November 4, 2013 the Issuer, our indirect parent holding company, issued $500 million aggregate principal of the PIK Notes. The net proceeds of$490 million from this offering were used by the Issuer to fund a cash dividend of $484 million to equity holders. The PIK Notes are: (i) senior unsecuredobligations of the Issuer, (ii) structurally subordinated to all of the liabilities of the Issuers’ subsidiaries, and (iii) not guaranteed by any of the Issuers’subsidiaries, and therefore are not recorded in our financial statements.In fiscal 2014 and fiscal 2015, we paid dividends of $28 million and $38 million, respectively, to the Issuer to fund the semi-annual interest payments.During fiscal 2016, the Issuer made interest payments on the PIK Notes by paying in kind at the PIK interest rate of 8.50% instead of paying in cash. OnOctober 28, 2016, the Issuer also delivered notice to U.S. Bank N.A., as trustee, under the indenture governing the PIK Notes, that with respect to the interestthat will be due on such notes on the May 1, 2017 interest payment date, the Issuer will make such interest payment by paying in kind at the PIK interest rateof 8.50% instead of paying in cash. The PIK election will increase the outstanding principal balance of the PIK Notes by $23.1 million to $566.5 million.Therefore, we will not pay a dividend to the Issuer in the second quarter of fiscal 2017 to fund a semi-annual interest payment. Pursuant to the terms of theindenture governing the PIK Notes, the Issuer intends to evaluate this option prior to the beginning of each interest period based on relevant factors at thattime.ITEM 6.SELECTED CONSOLIDATED FINANCIAL DATA.The selected historical consolidated financial data for the fiscal year ended January 28, 2017, January 30, 2016, and January 31, 2015 and as ofJanuary 28, 2017 and January 30, 2016 have been derived from our audited consolidated financial statements included elsewhere in this annual report onForm 10-K. The selected historical consolidated financial data for the fiscal year ended February 1, 2014 and February 2, 2013 and as of January 31, 2015,February 1, 2014 and February 2, 2013 have been derived from our audited consolidated financial statements which are not included in this annual report onForm 10-K.23 The historical results presented below are not necessarily indicative of the results to be expected for any future period. The information should be readin conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the relatednotes included herein. Year Ended (in thousands, unless otherwise indicated)January 28,2017 January 30,2016 January 31,2015 February 1,2014 February 2,2013(a) Income Statement Data: Total revenues$2,425,462 $2,505,827 $2,579,695 $2,428,257 $2,227,717 Cost of goods sold, including buying and occupancy costs 1,550,185 1,610,256 1,608,777 1,422,143 1,240,989 Gross profit 875,277 895,571 970,918 1,006,114 986,728 Selling, general and administrative expenses 818,546 834,137 845,953 754,345 732,439 Impairment losses 7,752 1,381,642 709,985 1,874 631 Income (loss) from operations 48,979 (1,320,208) (585,020) 249,895 253,658 Interest expense, net 79,359 69,801 74,352 104,221 101,684 Loss on refinancings 435 — 58,960 — — Provision (benefit) for income taxes (7,301) (147,333) (60,559) 57,550 55,887 Net income (loss)$(23,514) $(1,242,676) $(657,773) $88,124 $96,087 Operating Data: Revenues: J.Crew$2,018,052 $2,146,710 $2,295,109 $2,212,684 $2,066,216 Madewell 341,570 300,982 245,340 181,401 131,883 Other 65,840 58,135 39,246 34,172 29,618 Total revenues$2,425,462 $2,505,827 $2,579,695 $2,428,257 $2,227,717 Increase (decrease) in comparable company sales (6.7)% (8.2)% (0.7)% 3.1% 12.6%J.Crew: Sales per gross square foot$493 $540 $618 $663 $681 Stores open at end of period 462 448 419 386 353 Millions of catalogs circulated 28.5 26.6 25.4 30.6 39.6 Billions of pages circulated 3.0 2.8 2.7 3.7 4.2 Madewell: Sales per gross square foot$756 $746 $747 $709 $698 Stores open at end of period 113 103 85 65 48 Capital expenditures: J.Crew new stores$23,180 $32,389 $43,388 $39,875 $38,743 Madewell new stores 9,016 14,286 14,938 14,760 13,125 Other 47,944 56,982 69,548 76,805 80,142 Total capital expenditures$80,140 $103,657 $127,874 $131,440 $132,010 Depreciation of property and equipment$109,503 $103,966 $93,458 $77,520 $71,840 Amortization of intangible assets$10,540 $15,559 $15,944 $17,886 $23,631 (a)Consists of 53 weeks24 As of January 28,2017 January 30,2016(a) January 31,2015(a)(b) February 1,2014(a)(b) February 2,2013(a)(b) Balance Sheet Data: Cash and cash equivalents$132,226 $87,812 $111,097 $156,649 $68,399 Working capital$105,715 $91,685 $115,348 $147,961 $71,078 Total assets$1,432,710 $1,499,976 $2,912,824 $3,632,209 $3,424,903 Total debt, net$1,510,160 $1,517,587 $1,528,930 $1,528,820 $1,531,875 Stockholders' equity (deficit)$(786,211) $(768,987) $516,024 $1,190,420 $1,091,491 (a)In fiscal 2016, we adopted an accounting standard that requires certain deferred financing costs related to a recognized debt liability to be presented inthe balance sheet as a reduction of the carrying amount of that debt liability. Certain prior year amounts have been reclassified to conform to the currentyear’s presentation; specifically, long-term assets were reduced by $16,301, $19,509, $38,180 and $47,125, respectively, which resulted incorresponding reductions to long-term liabilities on our consolidated balance sheets as of the dates indicated.(b)In fiscal 2015, we adopted an accounting standard that requires deferred taxes be presented as noncurrent on the balance sheet. Certain prior yearamounts have been reclassified to conform to the current year’s presentation; specifically, current assets were reduced by $19,280, $11,831, and$14,686, respectively, which resulted in corresponding reductions to long-term liabilities on our consolidated balance sheets as of the dates indicated. ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.This discussion summarizes our consolidated operating results, financial condition and liquidity during each of the years in a three-year period endedJanuary 28, 2017. Our fiscal year ends on the Saturday closest to January 31. Fiscal years 2016, 2015 and 2014 ended on January 28, 2017, January 30, 2016and January 31, 2015, respectively. Each fiscal year consisted of 52 weeks. The following discussion and analysis should be read in conjunction with ourconsolidated financial statements and the related notes included elsewhere in this annual report on Form 10-K.Executive OverviewJ.Crew is an internationally recognized multi-brand apparel and accessories retailer that differentiates itself through high standards of quality, style,design and fabrics. We are a vertically-integrated, omni-channel specialty retailer that operates stores and websites both domestically and internationally. Wedesign, market and sell our products, including those under the J.Crew® and Madewell® brands, offering complete assortments of women’s, men’s andchildren’s apparel and accessories.A summary of our revenues by brand is as follows: (in millions, except percentages) Fiscal 2016 Fiscal 2015 Fiscal 2014 Amount Percent ofTotal Amount Percent ofTotal Amount Percent ofTotal J.Crew $2,018.1 83.2% $2,146.7 85.7% $2,295.1 89.0% Madewell 341.6 14.1 301.0 12.0 245.3 9.5 Other(a) 65.8 2.7 58.1 2.3 39.3 1.5 Total $2,425.5 100.0% $2,505.8 100.0% $2,579.7 100.0% (a)Consists primarily of shipping and handling fees and revenues from third-party resellers.As of January 28, 2017, we operated 281 J.Crew retail stores, 181 J.Crew factory stores (including 39 J.Crew Mercantile stores), and 113 Madewellstores throughout the United States, Canada, the United Kingdom, Hong Kong, and France; compared to 287 J.Crew retail stores, 161 J.Crew factory stores(including 10 J.Crew Mercantile stores), and 103 Madewell stores as of January 30, 2016.25 A summary of highlights for fiscal 2016 is as follows: •Revenues decreased 3.2% to $2,425.5 million, with comparable company sales down 6.7%. •J.Crew revenues decreased 6.0% to $2,018.1 million, with J.Crew comparable sales down 8.2%. •Madewell revenues increased 13.5% to $341.6 million, with Madewell comparable sales up 4.6%. •Income from operations increased to $49.0 million. •We opened three J.Crew retail stores, 21 J.Crew factory stores (including 19 J.Crew Mercantile stores), and 10 Madewell stores. We closed eightJ.Crew retail stores and two factory stores.How We Assess the Performance of Our BusinessIn assessing the performance of our business, we consider a variety of performance and financial measures. A key measure used in evaluating ourbusiness is comparable company sales. We also consider gross profit and selling, general and administrative expenses in assessing the performance of ourbusiness.Net SalesNet sales reflect our revenues from the sale of our merchandise less returns and discounts. We aggregate our merchandise into four sales categories:(i) women’s apparel, (ii) men’s apparel, (iii) children’s apparel, and (iv) accessories, which include shoes, socks, jewelry, handbags, belts and hair accessories.The approximate percentage of our sales by these four categories is as follows: Fiscal2016 Fiscal2015 Fiscal2014 Apparel Women’s 54% 53% 54% Men’s 24 24 23 Children’s 7 7 7 Accessories 15 16 16 100% 100% 100% Comparable Company SalesComparable company sales reflect: (i) net sales at stores that have been open for at least 12 months, (ii) e-commerce net sales, and (iii) shipping andhandling fees, which are recorded as other revenues on our statements of operations. Comparable company sales exclude net sales from: (i) new stores thathave not been open for 12 months, (ii) the 53rd week, if applicable, (iii) stores that experience a square footage change of at least 15 percent, (iv) stores thathave been temporarily closed for at least 30 consecutive days, (v) permanently closed stores, (vi) temporary “pop up” stores and (vii) revenue from third partyresellers.Measuring the change in year-over-year comparable company sales allows us to evaluate the performance of our business. Various factors affectcomparable company sales, including: •consumer preferences, fashion trends, buying trends and overall economic trends, •competition, •changes in our merchandise mix, •pricing, •the timing of our releases of new merchandise and promotional events, •the level of customer service that we provide, •our ability to source and distribute products efficiently, and •the number of stores we open, close (including on a temporary basis for renovations) and expand in any period.26 Cyclicality and SeasonalityOur industry is cyclical and our revenues are affected by general economic conditions. Purchases of apparel and accessories are sensitive to a numberof factors that influence the levels of consumer spending, including economic conditions and the level of disposable consumer income, consumer debt,interest rates, foreign currency exchange rates and consumer confidence.Our business is seasonal and as a result, our revenues fluctuate from quarter to quarter. We have four distinct selling seasons that align with our fourfiscal quarters. Revenues are usually higher in our fourth fiscal quarter, particularly in December when customers make holiday purchases. In fiscal 2016, werealized approximately 29% of our revenues in the fourth fiscal quarter.Gross ProfitGross profit is determined by subtracting our cost of goods sold from our revenues. Cost of goods sold includes the direct cost of purchasedmerchandise, freight, design, buying and production costs, occupancy costs related to store operations (such as rent and utilities) and all shipping costsassociated with our e-commerce business. Cost of goods sold varies directly with revenues, and therefore, is usually higher in our fourth fiscal quarter. Cost ofgoods sold also changes as we expand or contract our store base and incur higher or lower store occupancy costs. The primary drivers of the costs ofindividual goods are the costs of raw materials and labor in the countries where we source our merchandise. Gross margin measures gross profit as apercentage of our revenues.Our gross profit may not be comparable to other specialty retailers, as some companies include all of the costs related to their distribution network incost of goods sold while others, like us, exclude all or a portion of them from cost of goods sold and include them in selling, general and administrativeexpenses.Selling, General and Administrative ExpensesSelling, general and administrative expenses include all operating expenses not included in cost of goods sold, primarily catalog production andmailing costs, certain warehousing expenses, administrative payroll, store expenses other than occupancy costs, depreciation and amortization, and creditcard fees. These expenses do not necessarily vary proportionally with net sales.Results of OperationsThe following table presents our operating results as a percentage of revenues as well as selected store data: Fiscal2016 Fiscal2015 Fiscal2014 Revenues 100.0% 100.0% 100.0% Cost of goods sold, including buying and occupancy costs(1) 63.9 64.3 62.4 Gross profit(1) 36.1 35.7 37.6 Selling, general and administrative expenses(1) 33.7 33.3 32.8 Impairment losses 0.3 55.1 27.5 Income (loss) from operations 2.0 (52.7) (22.7) Interest expense, net 3.3 2.8 2.9 Loss on refinancings — — 2.3 Loss before income taxes (1.3) (55.5) (27.8) Benefit for income taxes (0.3) (5.9) (2.3) Net loss (1.0)% (49.6)% (25.5)% Selected company data: Fiscal2016 Fiscal2015 Fiscal2014 J.Crew: Number of stores open at end of period 462 448 419 Store sales per gross square foot $493 $540 $618 Decrease in J.Crew comparable sales (8.2)% (9.9)% (1.9)% Madewell: Number of stores open at end of period 113 103 85 Store sales per gross square foot $756 $746 $747 Increase in Madewell comparable sales 4.6% 7.8% 14.1% (1)We exclude a portion of our distribution network costs from cost of goods sold and include them in selling, general and administrative expenses. Ourgross profit therefore may not be directly comparable to that of some of our competitors. 27 Results of Operations—Fiscal 2016 compared to Fiscal 2015 Fiscal 2016 Fiscal 2015 VarianceIncrease / (Decrease) (Dollars in millions) Amount Percent ofRevenues Amount Percent ofRevenues Dollars Percentage Revenues $2,425.5 100.0% $2,505.8 100.0% $(80.3) (3.2)% Gross profit 875.3 36.1 895.6 35.7 (20.3) (2.3) Selling, general and administrative expenses 818.5 33.7 834.1 33.3 (15.6) (1.9) Impairment losses 7.8 0.3 1,381.6 55.1 (1,373.8) (99.4) Income (loss) from operations 49.0 2.0 (1,320.2) (52.7) 1,369.2 NM Interest expense, net 79.4 3.3 69.8 2.8 9.6 13.7 Loss on refinancing 0.4 — — — 0.4 NM Benefit for income taxes (7.3) (0.3) (147.3) (5.9) 140.0 95.0 Net loss $(23.5) (1.0)% $(1,242.7) (49.6)% $1,219.2 98.1% RevenuesTotal revenues decreased $80.3 million, or 3.2%, to $2,425.5 million from $2,505.8 million last year, driven primarily by a decrease in sales of (i)women’s apparel, specifically knits, shorts and dresses and (ii) accessories, specifically jewelry. Comparable company sales decreased 6.7% following adecrease of 8.2% last year.J.Crew sales decreased $128.6 million, or 6.0%, to $2,018.1 million from $2,146.7 million last year. J.Crew comparable sales decreased 8.2%following a decrease of 9.9% last year.Madewell sales increased $40.6 million, or 13.5%, to $341.6 million from $301.0 million last year. Madewell comparable sales increased 4.6%following an increase of 7.8% last year.Other revenues increased $7.7 million, or 13.3%, to $65.8 million in fiscal 2016 from $58.1 million last year, primarily a result of revenue from thirdparty resellers.Gross ProfitGross profit decreased $20.3 million to $875.3 million in fiscal 2016 from $895.6 million last year. This decrease resulted from the following factors: (Dollars in millions) Increase/(decrease) Decrease in revenues $(39.2) Increase in merchandise margin 27.9 Increase in buying and occupancy costs (9.0) Decrease in gross profit $(20.3) Gross margin increased to 36.1% in fiscal 2016 from 35.7% last year. The increase in gross margin was driven by: (i) a 120 basis point increase inmerchandise margin driven by the favorable impact of our sourcing initiative offset by increased markdowns, reduced by (ii) an 80 basis point increase inbuying and occupancy costs as a percentage of revenues, primarily driven by 24 net new stores.28 Selling, General and Administrative ExpensesSelling, general and administrative expenses decreased $15.6 million, or 1.9%, to $818.5 million in fiscal 2016 from $834.1 million last year. Thisdecrease primarily resulted from the following: (Dollars in millions) Increase/(decrease) Decrease in advertising and catalog costs $(14.9) Corporate occupancy actions (12.4) Decrease in operating and corporate expenses (8.1)Charges related to a workforce reduction last year (4.8) Foreign currency transaction gains (3.6) Increase in severance costs 2.3 Decrease in insurance recoveries and settlements 3.5 Increase in legal expense and settlement costs 5.3 Increase in share-based and incentive compensation 8.0 Increase in consulting fees 9.1 Total decrease in selling, general and administrative expenses $(15.6) As a percentage of revenues, selling, general and administrative expenses increased to 33.7% in fiscal 2016 from 33.3% last year.Impairment LossesImpairment losses were $7.8 million in fiscal 2016 compared to $1,381.6 million last year. The impairment losses were the result of the write-down ofthe following assets: (Dollars in millions)Fiscal 2016 Fiscal 2015 Goodwill allocated to the J.Crew reporting unit$— $1,016.8 Intangible asset related to the J.Crew trade name — 360.3 Long-lived assets 7.8 4.5 Impairment losses$7.8 $1,381.6 Interest Expense, NetInterest expense, net of interest income, increased $9.6 million to $79.4 million in fiscal 2016 from $69.8 million last year. A summary of interestexpense is as follows: (Dollars in millions) Fiscal 2016 Fiscal 2015 Term Loan Facility $62.0 $62.7 Realized hedging losses 10.5 0.2 Amortization of deferred financing costs and debt discount 5.0 5.0 Other, net of interest income 1.9 1.9 Interest expense, net $79.4 $69.8 Benefit for Income TaxesThe effective tax rate for fiscal 2016 was 24%. Items driving differences between the U.S. federal statutory rate of 35% and the effective rate include(i) the recognition of certain valuation allowances, (ii) lower rates in certain foreign jurisdictions, (iii) reserves for uncertain tax positions and (iv) state andlocal income taxes.In fiscal 2016, we recorded a charge of $8.2 million for a valuation allowance related to our net deferred tax assets. We will continue to assess thelikelihood that the deferred tax assets will be realizable at the end of each reporting period and the valuation allowance will be adjusted accordingly. 29 The effective tax rate for fiscal 2015 was 11%. The difference between the U.S. federal statutory rate of 35% and the effective rate was drivenprimarily by the non-cash impairment charge related to the write off of goodwill, which is not tax deductible, and therefore has no tax benefit. Other itemsimpacting the effective rate include state and local income taxes, benefits of lower rates in foreign jurisdictions, offset by the recognition of certain foreignvaluation allowances.Net LossNet loss decreased $1,219.2 million to $23.5 million in fiscal 2016 from $1,242.7 million last year. This decrease was due to: (i) lower impairmentlosses of $1,373.8 million and (ii) a decrease in selling, general and administrative expenses of $15.6 million, offset by (iii) a decrease in the benefit forincome taxes of $140.0 million, (iv) a decrease in gross profit of $20.3 million, (v) an increase in interest expense of $9.6 million and (vi) a loss onrefinancing of $0.4 million.Results of Operations—Fiscal 2015 compared to Fiscal 2014 Fiscal 2015 Fiscal 2014 VarianceIncrease / (Decrease) (Dollars in millions) Amount Percent ofRevenues Amount Percent ofRevenues Dollars Percentage Revenues $2,505.8 100.0% $2,579.7 100.0% $(73.9) (2.9)% Gross profit 895.6 35.7 970.9 37.6 (75.3) (7.8) Selling, general and administrative expenses 834.1 33.3 846.0 32.8 (11.9) (1.4) Impairment losses 1,381.6 55.1 710.0 27.5 671.6 94.6 Loss from operations (1,320.2) (52.7) (585.0) (22.7) (735.2) NM Interest expense, net 69.8 2.8 74.4 2.9 (4.6) (6.1) Loss on refinancings — — 59.0 2.3 (59.0) (100.0) Benefit for income taxes (147.3) (5.9) (60.6) (2.3) (86.7) NM Net loss $(1,242.7) (49.6)% $(657.8) (25.5)% $(584.9) (88.9)% RevenuesTotal revenues decreased $73.9 million, or 2.9%, to $2,505.8 million in fiscal 2015 from $2,579.7 million in fiscal 2014, driven primarily by adecrease in sales of J.Crew women’s apparel, specifically knits, sweaters, and shorts. Comparable company sales decreased 8.2% in fiscal 2015 following adecrease of 0.7% in fiscal 2014.J.Crew sales decreased $148.4 million, or 6.5%, to $2,146.7 million in fiscal 2015 from $2,295.1 million in fiscal 2014. J.Crew comparable salesdecreased 9.9% in fiscal 2015 following a decrease of 1.9% in fiscal 2014.Madewell sales increased $55.7 million, or 22.7%, to $301.0 million in fiscal 2015 from $245.3 million in fiscal 2014. Madewell comparable salesincreased 7.8% in fiscal 2015 following an increase of 14.1% in fiscal 2014.Other revenues increased $18.8 million, or 48.1%, to $58.1 million in fiscal 2015 from $39.3 million in fiscal 2014, primarily a result of revenue fromthird party resellers.Gross ProfitGross profit decreased $75.3 million to $895.6 million in fiscal 2015 from $970.9 million in fiscal 2014. This decrease resulted from the followingfactors: (Dollars in millions) Increase/(decrease) Decrease in revenues $(36.9) Decrease in merchandise margin (29.0) Increase in buying and occupancy costs (9.4) Decrease in gross profit $(75.3) Gross margin decreased to 35.7% in fiscal 2015 from 37.6% in fiscal 2014. The decrease in gross margin was driven by: (i) a 110 basis pointdeterioration in merchandise margin due to increased markdowns and (ii) an 80 basis point increase in buying and occupancy costs as a percentage ofrevenues, primarily driven by 47 net new stores.30 Selling, General and Administrative ExpensesSelling, general and administrative expenses decreased $11.9 million, or 1.4%, to $834.1 million in fiscal 2015 from $846.0 million in fiscal 2014.This decrease primarily resulted from the following: (Dollars in millions) Increase/(decrease) Decrease in operating and corporate expenses $(22.1) Insurance recoveries and settlements (5.7) Decrease in share-based and incentive compensation (5.4)Decrease in foreign currency transaction losses (3.6) Increase in depreciation 11.0 Increase in advertising and catalog costs 9.1 Charges related to workforce reduction 4.8 Total decrease in selling, general and administrative expenses $(11.9) As a percentage of revenues, selling, general and administrative expenses increased to 33.3% in fiscal 2015 from 32.8% in fiscal 2014.Impairment LossesThe impairment losses recorded in fiscal 2015 and fiscal 2014 were the result of the write-down of the following assets: (Dollars in millions)Fiscal 2015 Fiscal 2014 Goodwill allocated to the J.Crew reporting unit$1,016.8 $562.2 Intangible asset related to the J.Crew trade name 360.3 145.0 Long-lived assets 4.5 2.8 Impairment losses$1,381.6 $710.0 Interest Expense, NetInterest expense, net of interest income, decreased $4.6 million to $69.8 million in fiscal 2015 from $74.4 million in fiscal 2014 driven primarily bythe redemption of our 8.125% senior notes due 2019 (the “Senior Notes”), which occurred in the first quarter of fiscal 2014. A summary of interest expense isas follows: (Dollars in millions) Fiscal 2015 Fiscal 2014 Term Loan $62.7 $61.9 Amortization of deferred financing costs and debt discount 5.0 5.7 Realized hedging losses 0.2 0.8 Senior Notes — 5.3 Other, net of interest income 1.9 0.7 Interest expense, net $69.8 $74.4 Benefit for Income TaxesThe effective tax rate was 11% and 8% for fiscal 2015 and fiscal 2014, respectively. The difference between the U.S. federal statutory rate of 35% andthe effective rate in each fiscal year was driven primarily by the non-cash impairment charges related to the write off of goodwill, which is not tax deductible,and therefore has no tax benefit. Other items impacting the effective rates include state and local income taxes, benefits of lower rates in foreign jurisdictions,offset by the recognition of certain foreign valuation allowances.Net LossNet loss increased $584.9 million to $1,242.7 million in fiscal 2015 from $657.8 million in fiscal 2014. This increase was due to: (i) an increase inimpairment losses of $671.6 million, (ii) a decrease in gross profit of $75.3 million, offset by (iii) an increase in the benefit for income taxes of $86.7 million,(iv) a loss on refinancing in the prior year of $59.0 million, (v) a decrease in selling, general and administrative expenses of $11.9 million and (vi) a decreasein interest expense of $4.6 million.31 Liquidity and Capital ResourcesOur primary sources of liquidity are our current balances of cash and cash equivalents, cash flows from operations and borrowings available under theABL Facility. Our primary cash needs are (i) capital expenditures in connection with opening new stores and remodeling our existing stores, investments inour distribution network, making information technology system enhancements, (ii) meeting debt service requirements (including paying dividends to anindirect parent company, when required, for the purposes of servicing debt – see note 7 to the consolidated financial statements) and (iii) funding workingcapital requirements. The most significant components of our working capital are cash and cash equivalents, merchandise inventories, accounts payable andother current liabilities. See “—Outlook” below.Operating Activities For the Year Ended (Dollars in millions) January 28,2017 January 30,2016 January 31,2015 Net loss $(23.5) $(1,242.7) $(657.8) Adjustments to reconcile to cash flows from operating activities: Depreciation of property and equipment 109.5 104.0 93.5 Amortization of intangible assets 10.5 15.6 15.9 Reclassification of hedging losses to earnings 10.5 0.1 — Impairment losses 7.8 1,381.6 710.0 Amortization of deferred financing costs and debt discount 5.0 5.0 5.7 Share-based compensation 1.0 2.6 6.0 Loss on refinancings 0.4 — 59.0 Foreign currency transaction (gains) losses (1.5) 2.0 5.5 Deferred income taxes (5.1) (151.2) (75.0) Changes in merchandise inventories 57.8 (5.4) (15.1) Changes in accounts payable and other liabilities (63.0) 16.9 4.9 Changes in other operating assets and liabilities 28.4 7.1 5.5 Net cash provided by operating activities $137.8 $135.6 $158.1 Cash provided by operating activities of $137.8 million in fiscal 2016 resulted from: (i) non-cash adjustments of $138.1 million and (ii) changes inoperating assets and liabilities of $23.2 million due to working capital fluctuations, partially offset by (iii) net loss of $23.5 million.Cash provided by operating activities of $135.6 million in fiscal 2015 resulted from: (i) non-cash adjustments of $1,359.7 million and (ii) changes inoperating assets and liabilities of $18.6 million due to working capital fluctuations, partially offset by (iii) net loss of $1,242.7 million.Cash provided by operating activities of $158.1 million in fiscal 2014 resulted from: (i) non-cash adjustments, including impairment losses and theloss on refinancings of $820.6 million, partially offset by (ii) net loss of $657.8 million and (iii) changes in operating assets and liabilities of $4.7 million dueprimarily to working capital fluctuations, primarily increased merchandise inventories and reduced accrued interest as a result of the redemption of our SeniorNotes in March 2014.32 Investing Activities For the Year Ended (Dollars in millions) January 28, 2017 January 30, 2016 January 31, 2015 Capital expenditures: New stores $32.2 $46.7 $58.3 Information technology 29.7 40.1 46.5 Other(1) 18.2 16.9 23.1 Other investing activities — — 4.8 Net cash used in investing activities $80.1 $103.7 $132.7 (1)Includes capital expenditures for warehouse improvements, store renovations and general corporate purposes.Capital expenditures are planned at approximately $50 to $60 million for fiscal 2017, including $30 to $35 million for information technologyenhancements, $10 to $15 million for new stores and the remainder for warehouse improvements, store renovations and general corporate purposes.Financing Activities For the Year Ended (Dollars in millions) January 28,2017 January 30,2016 January 31,2015 Principal repayments of Term Loan Facility $ (11.8) $ (15.7) $ (11.8) Costs paid in connection with refinancings of debt (1.1) (0.1) (22.2) Dividend and contribution to Parent — (38.2) (27.7) Proceeds from Term Loan Facility, net of discount — — 1,559.2 Repayments of former term loan — — (1,167.0) Redemption of Senior Notes — — (400.0) Net cash used in financing activities $(12.9) $(54.0) $(69.5) Cash used in financing activities was $12.9 million in fiscal 2016 resulting from: (i) principal repayments of the Term Loan Facility and (ii) costs paidin connection with the refinancing of debt.Cash used in financing activities was $54.0 million in fiscal 2015 resulting from: (i) the payment of dividends to an indirect parent company to funddebt service obligations and (ii) principal repayments of the Term Loan Facility.Cash used in financing activities was $69.5 million in fiscal 2014 resulting from: (i) costs paid in connection with the refinancings of debt, (ii) thepayment of dividends to an indirect parent company to fund debt service obligations, and (iii) principal repayments of the Term Loan Facility.Financing ArrangementsABL FacilityWe have an ABL Facility, which is governed by a credit agreement with Bank of America, N.A., as administrative agent and the other agents andlenders, which provides for a $350 million senior secured asset-based revolving line of credit (which may be increased by up to $100 million in certaincircumstances), subject to a borrowing base limitation. The borrowing base under the ABL Facility equals the sum of: 90% of the eligible credit cardreceivables; plus, 85% of eligible accounts; plus, 90% (or 92.5% for the period of August 1 through December 31 of any fiscal year) of the net recoverypercentage of eligible inventory multiplied by the cost of eligible inventory; plus 85% of the net recovery percentage of eligible letters of credit inventory,multiplied by the cost of eligible letter of credit inventory; plus, 85% of the net recovery percentage of eligible in-transit inventory, multiplied by the cost ofeligible in-transit inventory; plus, 100% of qualified cash; minus, all availability and inventory reserves. The ABL Facility includes borrowing capacity inthe form of letters of credit up to $200 million, and up to $25 million in U.S. dollars for loans on same-day notice, referred to as swingline loans, and isavailable in U.S. dollars, Canadian dollars and Euros. Any amounts outstanding under the ABL Facility are due and payable in full on the maturity date. OnNovember 17, 2016, the ABL Facility was amended to extend the scheduled maturity date from December 10, 2019 to November 17, 2021.33 On January 28, 2017, standby letters of credit were $22.8 million, excess availability, as defined, was $327.2 million, and there were no borrowingsoutstanding. Average short-term borrowings under the ABL Facility were $10.2 million and $17.5 million in fiscal 2016 and fiscal 2015, respectively.See note 7 to the consolidated financial statements for a further description of the terms of the ABL Facility.As of the date of this report, there were no outstanding borrowings under the ABL Facility with excess availability of approximately $330 million.Demand Letter of Credit FacilitiesWe have unsecured, demand letter of credit facilities with HSBC and Bank of America which provide for the issuance of up to $50 million and $20million, respectively, of documentary letters of credit on a no fee basis. On January 28, 2017, outstanding documentary letters of credit were $8.4 million andaggregate availability under these facilities was $61.6 million.Term LoanOn March 5, 2014, we refinanced our Term Loan Facility, the proceeds of which were used to (i) refinance amounts outstanding under the former termloan facility of $1,167 million and (ii) together with cash on hand, redeem in full the outstanding Senior Notes of $400 million, and to pay fees, callpremiums and accrued interest to the date of redemption, pursuant to the indenture governing the Senior Notes. The maturity date of the Term Loan Facilityis March 5, 2021.On December 30, 2016, Bank of America, N.A. (“BAML”) resigned as administrative agent under our Term Loan Facility. Effective as of January 29,2017, Wilmington Savings Fund Society, FSB was appointed to replace BAML as administrative agent under our Term Loan Facility.On February 1, 2017, we filed a complaint in the New York State Supreme Court, Commercial Division, against Wilmington Savings Fund Society,FSB, as successor agent under the Term Loan Facility seeking a declaration from the court that our actions with respect to certain intellectual property assetsare in full compliance with the terms of our Term Loan Facility. We assert that any attempt by the successor agent or the ad hoc group of lenders under ourTerm Loan Facility to challenge our actions is invalid and intend to vigorously assert our rights under our Term Loan Facility.We are required to make principal repayments equal to 0.25% of the original principal amount of the Term Loan Facility, or $3.9 million, on the lastbusiness day of January, April, July, and October, which commenced in July 2014. We are also required to repay the term loan based on annual excess cashflow, as defined in the agreement beginning in fiscal 2014.The interest rate on the borrowings outstanding under the Term Loan Facility was 4.00% on January 28, 2017.See note 7 to the consolidated financial statements for a further description of the terms of the Term Loan Facility.PIK NotesOn November 4, 2013, Chinos Intermediate Holdings A, Inc. (the “Issuer”), an indirect parent holding company of Group, issued $500 millionaggregate principal of 7.75/8.50% Senior PIK Toggle Notes due May 1, 2019 (the “PIK Notes”). The PIK Notes are (i) senior unsecured obligations of theIssuer, (ii) structurally subordinated to all of the liabilities of the Issuer’s subsidiaries, and (iii) not guaranteed by any of the Issuer’s subsidiaries, and thereforeare not recorded in our financial statements.During fiscal 2016, the Issuer made interest payments on the PIK notes by paying in kind at the PIK interest rate of 8.50% instead of paying in cash.On October 28, 2016, the Issuer also delivered notice to U.S. Bank N.A., as trustee, under the indenture governing the PIK Notes, that with respect to theinterest that will be due on such notes on the May 1, 2017 interest payment date, the Issuer will make such interest payment by paying in kind at the PIKinterest rate of 8.50% instead of paying in cash. The PIK election will increase the outstanding principal balance of the PIK Notes by $23.1 million to $566.5million. Therefore, we will not pay a dividend to the Issuer in the second quarter of fiscal 2017 to fund a semi-annual interest payment. Pursuant to the termsof the indenture governing the PIK Notes, the Issuer intends to evaluate this option prior to the beginning of each interest period based on relevant factors atthat time.34 Formation of Unrestricted SubsidiariesOn October 12, 2016, we designated certain newly formed Delaware entities that are indirect, wholly-owned subsidiaries of Group as unrestrictedsubsidiaries under our Senior Credit Facilities and the indenture governing the PIK Notes (the “Unrestricted Subsidiaries”). Having been so designated, theUnrestricted Subsidiaries do not guarantee this debt nor are they bound by the covenants contained in the Senior Credit Facilities. On December 5, 2016, J. Crew International, Inc., a Delaware corporation and an indirect subsidiary of J. Crew (“J. Crew International”), transferred a72.04% undivided interest in certain domestic intellectual property assets (the “Transferred IP”) to one of the Unrestricted Subsidiaries, J. Crew DomesticBrand, LLC, a newly formed Delaware limited liability company (“J. Crew Domestic Brand”), for the purpose of providing us flexibility in connection withevaluating opportunities to enhance our capital structure. The Transferred IP consists of J. Crew trademarks and service marks relating to the J.Crew brandwith a fair market value of approximately $250 million.On December 6, 2016, J. Crew Domestic Brand and J. Crew International entered into an intellectual property license agreement (the “Transferred IPLicense Agreement”) pursuant to which we and our subsidiaries will continue to have exclusive rights to use the Transferred IP. Future payments under theTransferred IP License Agreement will be fixed in the future and on terms no less favorable than could be obtained in an arm’s length transaction with anunaffiliated third party. These payments will have no impact on our consolidated results of operations, but any such payments will be made to an UnrestrictedSubsidiary that is not subject to the covenants under our credit facilities or the PIK Notes.Below is consolidating balance sheet information reflecting the elimination of the accounts of our Unrestricted Subsidiaries from our consolidatedbalance sheet as of January 28, 2017. 35 As of January 28, 2017 (unaudited) Consolidatedbalance sheet Eliminations ofunrestrictedsubsidiaries Consolidatedbalance sheet ofrestrictedsubsidiaries ASSETS Current assets: Cash and cash equivalents $132,226 $— $132,226 Merchandise inventories 314,492 — 314,492 Prepaid expenses and other current assets 59,494 — 59,494 Total current assets 506,212 — 506,212 Property and equipment, at cost 642,339 — 642,339 Less accumulated depreciation (280,152) — (280,152)Property and equipment, net 362,187 — 362,187 Intangible assets, net 450,204 (250,000) 200,204 Investment in subsidiary — 250,000 250,000 Goodwill 107,900 — 107,900 Other assets 6,207 — 6,207 Total assets $1,432,710 $— $1,432,710 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable $194,494 $— $194,494 Other current liabilities 157,141 — 157,141 Interest payable 7,977 — 7,977 Income taxes payable to Parent 25,215 — 25,215 Current portion of long-term debt 15,670 — 15,670 Total current liabilities 400,497 — 400,497 Long-term debt, net 1,494,490 — 1,494,490 Lease-related deferred credits, net 132,566 — 132,566 Deferred income taxes, net 148,200 — 148,200 Other liabilities 43,168 — 43,168 Total liabilities 2,218,921 — 2,218,921 Stockholders’ deficit: Common stock $0.01 par value; 1,000 shares authorized, issued and outstanding — — — Additional paid-in capital 980,368 — 980,368 Accumulated other comprehensive loss (11,536) — (11,536)Accumulated deficit (1,755,043) — (1,755,043)Total stockholders’ deficit (786,211) — (786,211)Total liabilities and stockholders’ deficit $1,432,710 $— $1,432,710Because the Transferred IP License Agreement was entered into on December 6, 2016 and the payment terms have not yet been fixed, we determinedthat the impact of the exclusion of income of our Unrestricted Subsidiaries from our consolidated results during the year ended January 28, 2017 was notmaterial.36 OutlookShort-term and long-term liquidity needs of J.Crew Group, Inc. arise primarily from (i) capital expenditures, (ii) debt service requirements, includingrequired (a) quarterly principal repayments, (b) repayments, if any, based on annual excess cash flows, if any, as defined and (c) dividends to the Issuer, whenrequired, for the purposes of servicing debt, and (iii) working capital. Management anticipates that capital expenditures in fiscal 2017 will be approximately$50 to $60 million, including $30 to $35 million for information technology enhancements, $10 to $15 million for new stores and the remainder forwarehouse improvements, store renovations and general corporate purposes. Management expects to pay interest of approximately $80 million in fiscal 2017to fund debt service obligations, excluding payments of dividends, if any, to the Issuer. Management believes that our current balances of cash and cashequivalents, projected cash flow from operations and amounts available under the ABL Facility will be adequate to fund primary short-term and long-termliquidity needs of J.Crew Group, Inc., subject to considerations described further below. Our ability to satisfy these obligations and to remain in compliancewith the financial covenants under our financing arrangements depends on our future operating performance, which in turn, may be impacted by prevailingeconomic conditions and other financial and business factors, some of which are beyond our control. See Item 1A. “Risk Factors” in part I of this report.To address any potential liquidity issue of the Issuer arising as a result of the PIK Notes maturity in 2019, we are currently working to refinance thePIK notes or enter into a liability management transaction involving the PIK Notes. As such, we or the Issuer may seek to retire or purchase, directly orindirectly, our outstanding indebtedness, and/or the PIK Notes, through cash purchases and/or exchanges, in open market purchases, privately negotiatedtransactions, by tender offer or otherwise. Such transactions, if any, will depend on prevailing market conditions, liquidity requirements, contractualrestrictions and other factors. The amounts involved may be material, which could impact our or the Issuer’s capital structure, the market for our or the Issuer’sdebt securities, the price of the indebtedness being purchased and/or exchanged and affect our or the Issuer’s liquidity. For example, we have entered intodiscussions with certain holders of the PIK Notes and their advisors to explore potential transactions, but there is no guarantee that we will reach anyagreement with any holders that will reduce the principal amount or extend the maturity date of the PIK Notes outstanding or that we will decide to proceedwith this transaction, a different transaction or any transaction at all. See Item 1A. “Risk Factors” in part I of this report.Off Balance Sheet ArrangementsWe enter into documentary letters of credit to facilitate a portion of our international purchase of merchandise. We also enter into standby letters ofcredit to secure reimbursement obligations under certain insurance and import programs and lease obligations. As of January 28, 2017, we had the followingobligations under letters of credit in future periods. Letters of Credit Total Within1 Year 2-3Years 4-5Years After 5Years (in millions) Standby $22.8 $21.9 $0.9 $— $— Documentary 8.4 8.4 — — — $31.2 $30.3 $0.9 $— $— 37 Contractual ObligationsThe following table summarizes our contractual obligations as of January 28, 2017 and the effect such obligations are expected to have on ourliquidity and cash flows in future periods: Total Within1 Year 2-3Years 4-5Years After 5Years (in millions) Operating lease obligations(1) $1,025.9 $190.4 $318.9 $254.6 $262.0 Liabilities associated with uncertain tax positions(2) Purchase obligations: Inventory commitments 524.6 524.6 — — — Employment agreements 2.1 2.1 — — — Total purchase obligations 526.7 526.7 — — — Senior Credit Facilities(3)(4) 1,527.8 15.7 31.4 1,480.7 — Dividends to Parent(5) Total $3,080.4 $732.8 $350.3 $1,735.3 $262.0 (1)Operating lease obligations represent obligations under various long-term operating leases entered in the normal course of business for retail andfactory stores, office space and equipment requiring minimum annual rentals. Operating lease expense is a significant component of our operatingexpenses. The lease terms range for various periods of time in various rental markets and are entered into at different times, which mitigates exposureto market changes that could have a material effect on our results of operations within any given year. Operating lease obligations do not includecommon area maintenance, insurance, taxes and other occupancy costs, which aggregate to approximately 47% of the minimum lease obligations.(2)As of January 28, 2017, we have recorded $24.6 million in liabilities associated with uncertain tax positions, which are included in other liabilities onthe consolidated balance sheet. While these tax liabilities may result in future cash outflows, management cannot make reliable estimates of the cashflows by period due to the inherent uncertainty surrounding the effective settlement of these positions.(3)Our Senior Credit Facilities are comprised of a $1,528 million Term Loan Facility and a $350 million ABL Facility. The amount reflected does nottake into account any amounts that may be required to be prepaid from time to time based on our excess cash flow.(4)Amounts shown do not include interest.(5)On November 4, 2013, the Issuer, an indirect parent holding company of Group, issued $500 million aggregate principal of 7.75/8.50% Senior PIKToggle Notes due May 1, 2019. The PIK Notes are: (i) senior unsecured obligations of the Issuer, (ii) structurally subordinated to all of the liabilities ofthe Issuers’ subsidiaries, and (iii) not guaranteed by any of the Issuers’ subsidiaries, and therefore are not recorded in our financial statements. OnOctober 28, 2016, the Issuer delivered notice to U.S. Bank N.A., as trustee, under the indenture governing the PIK Notes, that with respect to theinterest that will be due on such notes on the May 1, 2017 interest payment date, the Issuer will make such interest payment by paying in kind at thePIK interest rate of 8.50% instead of paying in cash. The PIK election will increase the outstanding principal balance of the PIK Notes by $23.1million to $566.5 million. Therefore, we will not pay a dividend to the Issuer in the second quarter of fiscal 2017 to fund a semi-annual interestpayment. Pursuant to the terms of the indenture governing the PIK Notes, the Issuer intends to evaluate this option prior to the beginning of eachinterest period based on relevant factors at that time.Impact of InflationOur results of operations and financial condition are presented based on historical cost. While it is difficult to accurately measure the impact ofinflation due to the imprecise nature of the estimates required, we believe the effects of inflation, if any, on our results of operations and financial conditionhave not been significant.Recent Accounting PronouncementsIn May 2014, a pronouncement was issued that clarified the principles of revenue recognition, which standardizes a comprehensive model forrecognizing revenue arising from contracts with customers. The pronouncement is effective for fiscal years beginning after December 15, 2017. We arecurrently evaluating the impact of the new pronouncement on our consolidated financial statements.38 In July 2015, a pronouncement was issued that more closely aligns the measurement of inventory in U.S. GAAP with International Financial ReportingStandards by requiring companies using the first-in, first-out and average costs methods to measure inventory using the lower of cost and net realizable value.The pronouncement is effective for fiscal years beginning after December 15, 2016. The adoption of the new pronouncement is not expected to have asignificant impact on our consolidated financial statements.In February 2016, a pronouncement was issued that requires lessees to recognize assets and liabilities on the balance sheet for leases with accountinglease terms of more than 12 months. The pronouncement is effective for fiscal years beginning after December 15, 2018. We are currently evaluating theimpact of the new pronouncement on our consolidated financial statements. However, the adoption is expected to have a significant impact because most ofour leases will be subject to these new requirements.In August 2016, a pronouncement was issued which aims to reduce the diversity in presentation and classification of the following specific cash flowissues: debt prepayment, settlement of zero-coupon bonds, contingent consideration, insurance proceeds, distributions received from equity methodinvestees, beneficial interest in securitization transactions and separately identifiable cash flows. The pronouncement is effective for fiscal years beginningafter December 15, 2017. We are currently evaluating the impact of the new pronouncement on our consolidated financial statements.In January 2017, a pronouncement was issued that simplifies the measurement of goodwill impairment by no longer requiring an entity to perform ahypothetical purchase price allocation. Instead, impairment will be measured using the difference between the carrying amount and the fair value of thereporting unit. The pronouncement is effective for annual and interim periods in fiscal years beginning after December 15, 2019. We are currently evaluatingthe impact of the new pronouncement on our consolidated financial statements.Critical Accounting PoliciesManagement’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, whichhave been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financialstatements requires estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and expenses. Management bases estimates onhistorical experience and other assumptions it believes to be reasonable under the circumstances and evaluates these estimates on an on-going basis. Actualresults may differ from these estimates under different assumptions or conditions.The following critical accounting policies reflect the significant estimates and judgments used in the preparation of our consolidated financialstatements. With respect to critical accounting policies, even a relatively minor variance between actual and expected experience can potentially have amaterially favorable or unfavorable impact on subsequent consolidated results of operations. For more information on our accounting policies, please refer tothe Notes to Consolidated Financial Statements in this annual report on Form 10-K.Revenue Recognition •We recognize sales made in our stores at the point of sale, and sales through our e-commerce business at an estimated date of receipt by thecustomer. Amounts billed to customers for shipping and handling sales are classified as other revenues. We make estimates of future salesreturns related to current period sales. Management analyzes historical returns, current economic trends and changes in customer acceptance ofour products when evaluating the adequacy of the reserve for sales returns. •Employee discounts are classified as a reduction of revenue. •We account for gift cards by recognizing a liability at the time a gift card is sold and recognizing revenue at the time the gift card is redeemedfor merchandise. We review our gift card liability on an ongoing basis and recognize income from unredeemed gift card liability on a ratablebasis over the estimated period of redemption. We defer revenue and recognize a liability for gift cards issued in connection with our customerloyalty program. Any unredeemed loyalty gift cards are recognized as income in the period in which they expire.39 Inventory ValuationMerchandise inventories are carried at the lower of average cost or market value. We capitalize certain design, purchasing and warehousing costs ininventory. We evaluate all of our inventories to determine excess inventories based on estimated future sales. Excess inventories may be disposed of throughour e-commerce business, factory stores and other liquidation methods. Based on historical results experienced through various methods of disposition, wewrite down the carrying value of inventories that are not expected to be sold at or above cost. Additionally, we reduce the cost of inventories based on anestimate of lost or stolen items each period.Deferred Catalog CostsThe costs associated with direct response advertising, which consist primarily of catalog production and mailing costs, are capitalized and amortizedover the expected future revenue stream of the catalog mailings, which we currently estimate to be two months. The expected future revenue stream isdetermined based on historical revenue trends developed over an extended period of time. If the current revenue streams were to diverge from the expectedtrend, our amortization of deferred catalog costs would be adjusted accordingly.Goodwill and Intangible AssetsIndefinite-lived intangible assets, such as the J.Crew trade name and goodwill, are not subject to amortization. The Company assesses therecoverability of indefinite-lived intangibles whenever there are indicators of impairment, or at least annually in the fourth quarter. If the recorded carryingvalue of an intangible asset exceeds its estimated fair value, the Company records a charge to write the intangible asset down to its fair value. Definite-livedintangibles, such as the Madewell trade name and favorable lease commitments, are amortized on a straight line basis over their useful life or remaining leaseterm.We assess the recoverability of goodwill at the reporting unit level, which consists of our operating segments, J.Crew and Madewell, of which onlyMadewell has goodwill. In this assessment, we first compare the estimated enterprise fair value of the Madewell reporting unit to its recorded carrying value.We estimate the enterprise fair value based on a combination of an income approach, specifically the discounted cash flow, a market approach, and atransaction approach. If the recorded carrying value of the Madewell reporting unit exceeds its estimated enterprise fair value in the first step, a second step isperformed in which we allocate the enterprise fair value to the fair value of Madewell’s net assets. The second step of the impairment testing process requires,among other things, estimates of fair values of substantially all of our tangible and intangible assets. Any enterprise fair value in excess of amounts allocatedto such net assets represents the implied fair value of goodwill for Madewell. If the recorded goodwill balance for Madewell exceeds the implied fair value ofgoodwill, an impairment charge is recorded to write goodwill down to its fair value.Fixed Asset ImpairmentWe are exposed to potential impairment if the book value of our assets exceeds their expected undiscounted future cash flows. The major componentsof our long-lived assets are store fixtures, equipment and leasehold improvements. We test for impairment at the store level and the net book value is reducedto fair value if it is determined that the sum of expected discounted future net cash flows is less than net book value.In fiscal 2016, we recorded non-cash impairment charges of $7.8 million related to certain long-lived assets.Income TaxesAn asset and liability method is used to account for income taxes. Deferred tax assets and deferred tax liabilities are recognized based on the differencebetween the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred taxes are measured using currentenacted tax rates in effect in the years in which those temporary differences are expected to reverse. Inherent in the measurement of deferred taxes are certainjudgments and interpretations of enacted tax law and published guidance.We maintain valuation allowances where it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in thevaluation allowances are included in our tax provision in the period of change. In determining whether a valuation allowance is warranted, we evaluatefactors such as prior earnings history, expected future earnings, carry-back and carry-forward periods and tax strategies that could potentially enhance thelikelihood of the realization of a deferred tax asset.40 With respect to uncertain tax positions that we have taken or expect to take on a tax return, we recognize in our financial statements the impact of taxpositions that meet a “more likely than not” threshold, based on the technical merits of the position. The tax benefits recognized from uncertain positions aremeasured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon effective settlement.It is our intention to permanently reinvest undistributed earnings and profits from our foreign operations that have been generated through January 28,2017. Future plans do not demonstrate a need to repatriate the foreign amounts to fund U.S. operations. Cumulative undistributed earnings of internationalsubsidiaries were $69.8 million at January 28, 2017. No deferred federal income taxes were provided for the undistributed earnings as they are permanentlyreinvested in our international operations. Cash held by our foreign subsidiaries was $21.4 million, valued in U.S. dollars, at January 28, 2017.Share-Based CompensationThe fair value of employee share-based awards is recognized as compensation expense in the statement of operations. Determining the fair value ofoptions at the grant date requires judgment, including estimating the expected term that stock options will be outstanding prior to exercise, the associatedvolatility and the expected dividend yield. Upon grant of awards, we also estimate an amount of forfeitures that will occur prior to vesting. If actualforfeitures differ significantly from the estimates, share-based compensation expense could be materially impacted.Foreign Currency TranslationThe financial statements of our foreign operations are translated into U.S. dollars. Assets and liabilities are translated at current exchange rates as ofthe balance sheet date, equity accounts at historical exchange rates, while revenue and expense accounts are translated at the average rates in effect duringthe year. Translation adjustments are not included in determining net income, but are included in accumulated other comprehensive loss within stockholders’equity (deficit).Derivative Financial InstrumentsWe entered into interest rate swap and cap agreements to manage a portion of our interest rate risk related to floating rate indebtedness. As cash flowhedges, unrealized gains are recognized as assets while unrealized losses are recognized as liabilities. The interest rate swap agreements are highly correlatedto the changes in interest rates to which we are exposed. Unrealized gains and losses on this instrument are designated as effective or ineffective. Theeffective portion of such gains or losses is recorded as a component of accumulated other comprehensive loss, while the ineffective portion of such gains orlosses is recorded as a component of interest expense. Realized gains and losses in connection with each required interest payment are reclassified fromaccumulated other comprehensive loss to interest expense. ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.Interest RatesWe are exposed to interest rate risk arising from changes in interest rates on the floating rate indebtedness under our Senior CreditFacilities. Borrowings pursuant to our Term Loan Facility bear interest at floating rates based on LIBOR, but in no event less than the floor rate of 1.00%,plus the applicable margin. Borrowings pursuant to our ABL Facility bear interest at floating rates based on LIBOR and the prime rate, plus the applicablemargin. Accordingly, fluctuations in market interest rates may increase or decrease our interest expense which will in turn, increase or decrease our netincome and cash flow.We manage a portion of our interest rate risk related to floating rate indebtedness by entering into interest rate swaps whereby we receive floating ratepayments based on the greater of LIBOR and the floor rate and make payments based on a fixed rate. Our interest rate swap agreements cover a notionalamount of $800 million from March 2016 to March 2019. Under the terms of these agreements, our effective fixed interest rate on the notional amount ofindebtedness is 2.56% plus the applicable margin.As a result of the floor rate described above, we estimate that a 1% increase in LIBOR would increase our annual interest expense by $7 million.41 Foreign CurrencyForeign currency exposures arise from transactions denominated in a currency other than the entity’s functional currency. Although our inventory isprimarily purchased from foreign vendors, such purchases are denominated in U.S. dollars; and are therefore not subject to foreign currency exchange risk.However, we operate in foreign countries, which exposes the Company to market risk associated with exchange rate fluctuations. The Company is exposed toforeign currency exchange risk resulting from its foreign operating subsidiaries’ U.S. dollar denominated transactions. ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.See “Index to Financial Statements”, which is located on page F-1 of this report. ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.None. ITEM 9A.CONTROLS AND PROCEDURES.Disclosure Controls and ProceduresOur management, with the participation of our Chief Executive Officer and our Chief Financial Officer, carried out an evaluation of the effectivenessof the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end ofthe period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controlsand procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in the reports that we file orsubmit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.Management’s Report on Internal Control over Financial ReportingThe Company’s management is responsible for establishing and maintaining adequate internal controls over financial reporting. The Company’sinternal control system was designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fairpresentation of published financial statements. Management evaluated the effectiveness of the Company’s internal control over financial reporting using thecriteria set forth by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission in Internal Control-Integrated Framework (2013).Management, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, assessed theeffectiveness of the Company’s internal control over financial reporting as of January 28, 2017 and concluded that it is effective.Changes in Internal Control over Financial ReportingThere were no changes in internal control over financial reporting that occurred during the fourth fiscal quarter that have materially affected, or arereasonably likely to materially affect, the Company’s internal control over financial reporting. ITEM 9B.OTHER INFORMATION.None. 42 PART III ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE OF THE REGISTRANT.DIRECTORSOur current Board consists of eight members, who have been elected pursuant to a stockholders’ agreement between our Sponsors and Mr. Drexler.Four of the directors (Mr. Coulter, Mr. Danhakl, Mr. Sokoloff, and Ms. Wheeler) are employees of our Sponsors and are therefore deemed to be affiliates. Mr.Drexler, as chief executive officer, is an employee of the Company. Mr. Feintuch, Mr. Leat and Mr. Squeri are not employees of, or service providers to (otherthan in their capacity of directors), either the Company or our Sponsors. The names of our current directors, along with their present positions andqualifications, their principal occupations and directorships held with public corporations during the past five years, their ages and the year first elected as adirector are set forth below. Name Age Year First Elected Director James Coulter 57 1997 John Danhakl 60 2011 Millard Drexler 72 2003 Richard Feintuch 64 2017 Chad Leat 61 2017 Jonathan Sokoloff 59 2011 Stephen Squeri 58 2010 Carrie Wheeler 45 2011 James Coulter (57). Mr. Coulter has been a director since 1997. Mr. Coulter is a TPG Founding Partner. Mr. Coulter serves as a member on numerouscorporate and charitable boards including Chobani, Creative Artists Agency and the Vincraft Group. He previously served on the boards of The NeimanMarcus Group, Inc., Alltel Corporation, IMS Health Inc., Lenovo Group Limited, and Zhone Technologies, Inc. We believe Mr. Coulter’s qualifications to siton our Board include his experience in finance and extensive and diverse experience in domestic and international business.John Danhakl (60). Mr. Danhakl has been a director since 2011. Mr. Danhakl has been a Managing Partner of Leonard Green & Partners, L.P. since1995. He also serves on the board of directors of Advantage Solutions, Inc., CCC Information Services, Inc., IMS Health, Inc., Leslie’s Poolmart, Inc., LifetimeFitness, Inc., Mister Car Wash Holdings, Inc., Packers Sanitation Services, Inc., and Savers, Inc. He previously served on the boards of Air Lease Corp., AnimalHealth, Inc., Arden Group, Inc., AsianMedia Group LLC, Big 5 Sporting Goods Corporation, Communications and Power Industries, Inc., Diamond TriumphAuto Glass, Inc., HITS, Inc., Liberty Group Publishing, Inc., MEMC Electronic Materials, Inc., The Neiman Marcus Group, Inc., Petco Animal Supplies, Inc.,Phoenix Scientific, Inc., Rite Aid Corporation, Sagittarius Brands, The Tire Rack, Inc and VCA Antech, Inc. We believe Mr. Danhakl’s qualifications to sit onour Board include his experience as a private equity investor and his experience as a director of numerous privately-held and publicly-held companies.Millard Drexler (72). Mr. Drexler has been our Chief Executive Officer, Chairman of the Board and a director since 2003. Before joining J.Crew,Mr. Drexler was Chief Executive Officer of The Gap, Inc. from 1995 until 2002, and was President of The Gap, Inc. from 1987 to 1995. Mr. Drexler served onthe board of directors and compensation and nominating and corporate governance committees of Apple, Inc. until March 2015. We believe Mr. Drexler’squalifications to sit on our Board include his extensive experience as a CEO in the retail industry, his executive leadership and management experience, andhis experience as a board member of a leading consumer products company.Richard Feintuch (64). Mr. Feintuch was appointed to the J.Crew board in January 2017. Mr. Feintuch was a partner in the law firm of Wachtell,Lipton, Rosen & Katz from 1984 until his retirement in 2004, specializing in mergers and acquisitions, corporate finance and the representation of creditorsand debtors in large restructurings. Since 2006 he has been a member of the Board of Directors and audit committee of PGT Innovations, Inc., a NYSE tradedcompany. He also serves on the PGT governance committee and previously served on its compensation committee from 2006 to 2015.We believe that Mr.Feintuch’s qualifications to sit on our Board include significant knowledge and extensive experience as a partner in a leading international law firm and hislong-term experience as a Board member of a leading manufacturer of consumer products.Chad Leat (61). Mr. Leat was appointed to the J.Crew board in January 2017. From 2009-2013, he served as Managing Director and Vice Chairman atthe Global Banking Division of Citigroup, Inc. From 2006-2008, he served as co-head of Global Credit Markets of Citigroup, Inc. From 1998-2005, heserved as Global Head of Loans and Leveraged Finance at Citigroup, Inc. From 1997-1998, Mr. Leat served as a partner in the High Yield Capital Markets atSalomon Brothers. From 1985 -1997, Mr. Leat was employed by Chase Manhattan Group Corp., where he became Heard of Syndications, Structured Salesand Loan Trading. He is a43 member of the Supervisory Board of Directors of BAWAG P.S.K., the fourth largest Australian bank, where he is Chairman of the Risk Committee and was, forthree years, Chairman of the Audit Committee. He is also a member of the board of directors of MidCap Financial, a middle market direct commercial lendingbusiness affiliated with Apollo Global Management, and Paceline Holdings, a special purpose acquisition company traded on NASDAQ that is affiliated withTPG Capital. He is also a member of the board of directors and Chair of the Audit Committee of Norwegian Cruise Lines, a NYSE traded company. Mr. Leatpreviously served on the Board of Directors of Global Indemnity PLC, a NYSE listed property and casualty insurer from 2009-2013. We believe that Mr.Leat’s qualifications to sit on our Board include his strong banking and financial expertise, plus his experience as a board member of other public andprivately held companies.Jonathan Sokoloff (59). Mr. Sokoloff has been a director since 2011. Mr. Sokoloff is a Managing Partner of Leonard Green & Partners, L.P., which hejoined in 1990. Mr. Sokoloff serves on the boards of directors of Advantage Solutions, Inc., BJ’s Wholesale Club Inc., the Container Store Group, Inc., JetroCash & Carry Inc., Jo-Ann Stores Inc., the Pure Group, Shake Shack, Inc., Topshop/Top Man Limited, Union Square Hospitality Group, and Whole FoodsMarket, Inc. and served on the boards of numerous companies, including The Brickman Group, Ltd., The Sports Authority, Inc., and Tire Rack Inc. Webelieve Mr. Sokoloff’s qualifications to sit on our Board include his experience as a private equity investor and his experience as a director of other retailcompanies.Stephen Squeri (58). Mr. Squeri was a director of J.Crew Group, Inc. from September 2010 until March 2011 and he rejoined the Company’s board ofdirectors in June 2012. Mr. Squeri has been Vice Chairman of American Express Company since July 2015 and has led the Business-to-Business Group sinceOctober 2015. Previously, he had been Group President, Global Corporate Services since November 2011. Prior to that, he was Group President, GlobalServices since 2009. In addition, from July 2008 to September 2010, he was the head of Corporate Development, overseeing mergers and acquisitions forAmerican Express. Mr. Squeri joined American Express in 1985. Prior to joining American Express, Mr. Squeri was a management consultant at ArthurAndersen and Company from 1982 to 1985.Carrie Wheeler (45). Ms. Wheeler has been a director since 2011. Ms. Wheeler is a TPG Partner, which she joined in 1996. Prior to TPG, she was withGoldman, Sachs & Co. from 1993 to 1996. Ms. Wheeler also serves on the board of directors of Arden Group, Inc. She previously served on the board of TheNeiman Marcus Group, Inc. and Petco Animal Supplies, Inc. We believe Ms. Wheeler’s qualifications to sit on our Board include her financial expertise aswell as her experience as a director of two other retail companies.See “Item 13. Certain Relationships and Related Party Transactions, and Director Independence” below for a discussion of certain arrangements andunderstandings regarding the nomination and selection of certain of our directors.EXECUTIVE OFFICERSThe names and ages of our executive officers as of January 28, 2017, along with their positions and qualifications, are set forth below. Name Age PositionMillard Drexler 72 Chairman and Chief Executive OfficerMichael Nicholson 50 President, Chief Operating Officer & Chief Financial OfficerJenna Lyons 48 President, Executive Creative DirectorLynda Markoe 50 Executive Vice President, Human ResourcesLibby Wadle 44 President—J.Crew BrandMillard Drexler. Mr. Drexler has been our Chief Executive Officer, Chairman of the Board and a director since 2003. Before joining J.Crew,Mr. Drexler was Chief Executive Officer of The Gap, Inc. from 1995 until 2002, and was President of The Gap, Inc. from 1987 to 1995. Mr. Drexler served onthe board of directors and compensation and nominating and corporate governance committees of Apple, Inc. until March 10, 2015.Michael Nicholson. Mr. Nicholson has been the Company’s President, Chief Operating Officer and Chief Financial Officer since he joined theCompany on January 11, 2016. Before joining J.Crew, he was Executive Vice President, Chief Operating Officer, Chief Financial Officer and Treasurer ofANN, Inc. from December 2012 until August 2015. Previously, from 2007 to 2012, he served as Executive Vice President, Chief Financial Officer andTreasurer of ANN, Inc. Prior to that, he spent seven years at Limited Brands, Inc. holding various executive positions including Executive Vice President,Chief Operating Officer and Chief Financial Officer for Victoria’s Secret Beauty Company. Earlier in his career, Mr. Nicholson held senior positions atColgate Palmolive and Altria Group, Inc.44 Jenna Lyons. Ms. Lyons has been the Company’s President, Executive Creative Director since July 2010, and before that served as Executive CreativeDirector since April 2010. Prior to that, she was Creative Director since 2007 and, before that, was Senior Vice President of Women’s Design since 2005.Ms. Lyons joined J.Crew in 1990 as an Assistant Designer and has held a variety of positions within the Company, including Designer from 1994 to 1995,Design Director from 1996 to 1998, Senior Design Director in 1999, and Vice President of Women’s Design from 1999 to 2005. Ms. Lyons serves on theboard of directors and is a member of the compensation and nominating and governance committees of Shake Shack, Inc.Lynda Markoe. Ms. Markoe has been the Company’s Executive Vice President, Human Resources since 2007 and was previously Vice President andthen Senior Vice President, Human Resources since 2003. Before joining J.Crew, Ms. Markoe worked at The Gap, Inc. where she held a variety of positionsover 15 years.Libby Wadle. Ms. Wadle has been the Company’s President – J.Crew Brand since April 2013. Before that, she was the Executive Vice President—J.Crew from 2011 to 2013, and Executive Vice President—Retail and Factory from 2010 to 2011, and was Executive Vice President—Factory and Madewellfrom 2007 to 2010. Before that Ms. Wadle served as Vice President and then Senior Vice President of J.Crew Factory since 2004. Prior to joining J.Crew,Ms. Wadle was Division Vice President of Women’s Merchandising at Coach, Inc. from 2003 to 2004 and held various merchandising positions at The Gap,Inc. from 1995 to 2003.CORPORATE GOVERNANCEElection of Members to the Board of DirectorsAs a private company, members of the Board of Directors are nominated and elected in accordance with the provisions of the Company’s Amendedand Restated Certificate of Incorporation, as filed with the Delaware Secretary of State, the Company’s Amended and Restated Bylaws and the stockholdersagreement with the Sponsors.Code of Ethics and Business PracticesThe Company has a Code of Ethics and Business Practices that applies to all Company associates, including its Chief Executive Officer, ChiefFinancial Officer, principal accounting officer and controller, as well as members of the Board. The Code of Ethics and Business Practices is available free ofcharge on the investor relations section of our website at www.jcrew.com or upon written request to the Secretary of the Company, J.Crew Group, Inc., 770Broadway, New York, New York 10003. Any updates or amendments to the Code of Ethics and Business Practices, and any waiver that applies to the ChiefExecutive Officer, Chief Financial Officer, principal accounting officer or controller will also be posted on the website.Board CommitteesOur Board has established an audit committee and a compensation committee. Ms. Wheeler and Mr. Squeri are currently the members of our auditcommittee. The audit committee recommends the annual appointment of auditors with whom the audit committee reviews the scope of audit and non-auditassignments and related fees, accounting principles we use in financial reporting, internal auditing procedures and the adequacy of our internal controlprocedures. Though not formally considered by our Board given that our securities are not traded on any national securities exchange, based upon the listingstandards of the New York Stock Exchange, the national securities exchange upon which our common stock was previously listed, we believe that Mr. Squeriwould be considered independent but Ms. Wheeler would not be considered independent because of her employment by one of the Sponsors. The membersof our compensation committee are Mr. Coulter, Mr. Sokoloff, Mr. Squeri and Ms. Wheeler. The compensation committee reviews and approves thecompensation of our executive officers, authorizes and ratifies stock option and/or restricted stock grants and other incentive arrangements, and authorizesemployment agreements with our executive officers.Each of the Sponsors has the right to have at least one of its directors sit on each committee of the Board of Directors, to the extent permitted byapplicable laws and regulation.Director IndependenceBecause of our status as a voluntary filer and because our securities are not traded on any national securities exchange, the Board has not formallyreviewed whether Mr. Feintuch, Mr. Leat and Mr. Squeri can be considered independent under the independence standards of the New York Stock Exchange.Messrs. Coulter, Danhakl and Sokoloff and Ms. Wheeler are employees of our Sponsors and therefore would not be considered independent under thesestandards. In addition, Mr. Drexler, who is an employee of the Company, would also not be considered independent.45 Audit Committee Financial ExpertIn light of our status as a privately held company and the absence of a public listing or trading market for our common stock, we are not required tohave an “audit committee financial expert;” however, we have determined that neither Ms. Wheeler nor Mr. Squeri would qualify for this designation.Section 16(a) Beneficial Ownership Reporting ComplianceIn light of our status as a privately held company, Section 16(a) of the Securities Exchange Act of 1934, as amended, does not apply to our directors,executive officers and significant stockholders.ITEM 11.EXECUTIVE COMPENSATION.Compensation Discussion and AnalysisIn general, this section focuses on, and provides a description of, our executive compensation process and a detailed discussion of each of the keyelements of our compensation program for fiscal 2016 as they apply to the individuals named in the Summary Compensation Table (the “Named ExecutiveOfficers”). Our compensation committee (the “Committee”) consists of representatives from our Sponsors and Mr. Squeri. The following is a discussion of thecurrent compensation philosophy and programs applicable to our executive officers in fiscal 2016.Fiscal 2016 Compensation Philosophy and Compensation Program ObjectivesWe place high value on attracting and retaining our executives and associates since their talent and performance are essential to our long-term success.Our compensation philosophy places high value on performance-based and discretionary compensation. Accordingly, our compensation program is designedto be both competitive and fiscally responsible and seeks to: •attract the highest caliber of talent required for the success of our business, •retain those associates capable of achieving challenging performance standards, •incent associates to strive for superior Company and individual performance, •align the interests of our executives with the financial and strategic objectives of our Sponsors, and •encourage and reward the achievement of our short- and long-term goals and operating plans.We seek to achieve the objectives of our executive compensation program by offering a compensation package that utilizes three key elements:(1) base salary, (2) annual cash incentives, and (3) long-term incentives. We believe that together these elements support the objectives of our compensationprogram without encouraging unnecessary or excessive risk taking on the part of the Company’s associates. •Base Salaries. We seek to provide competitive base salaries factoring in the responsibilities associated with the executive’s position, theexecutive’s skills and experience, and the executive’s performance as well as other factors. We believe appropriate base salary levels are criticalin helping us attract and retain talented associates. •Annual Cash Incentives. The aim of this element of compensation is to reward individual and group contributions to the Company’s annualoperating performance based upon the achievement of pre-established performance standards in the most recent completed fiscal year. •Long-Term Incentives. The long-term element of our compensation program consists of the opportunity for our executive officers to participatedirectly as equity owners of the Company through the roll-over and purchase of Parent shares and grants of stock options to purchase Parentshares. The equity component is the most significant element of our executive compensation program because we believe that a meaningfulequity interest by our executive officers and management team will provide a strong incentive to drive top line growth, increase margins andprofitability and pursue growth opportunities, which we believe will lead to increased equity value and returns to investors. In fiscal 2016, inorder to maintain the incentive value of stock option awards currently outstanding, we offered all eligible employees, including the NamedExecutive Officers (other than Mr. Nicholson), and Mr. Squeri, the opportunity to exchange their outstanding stock option awards for awardswith a lower per-share exercise price and, in the case of time-based vesting stock options, an extended vesting schedule (the “stock option re-pricing”). 46 The Fiscal 2016 Executive Compensation ProcessThe Compensation CommitteeThe Committee oversees our executive compensation program. The Committee meets regularly, both with and without management. The Committee’sresponsibilities are detailed in its charter, which can be found on the investor relations section of our website at www.jcrew.com. These responsibilitiesinclude, but are not limited to, the following: •reviewing and approving our compensation philosophy, •determining executive compensation levels, •annually reviewing and assessing performance goals and objectives for all executive officers, including the Chief Executive Officer (“CEO”),and •determining short-term and long-term incentive compensation for all executive officers, including the CEO.The Committee is responsible for making all decisions with respect to the compensation of the executive officers. With respect to the executiveofficers other than the CEO, the Committee’s compensation decisions involve the review of recommendations made by our CEO and Executive VicePresident of Human Resources (“EVP—HR”). The CEO and EVP—HR attend the Committee’s meetings and provide input to the Committee regarding theeffectiveness of the compensation program in attracting and retaining key talent. They make recommendations to the Committee regarding executive meritincreases, short-term and long-term incentive awards and compensation packages for executives being hired or promoted. The Committee also considers theCEO’s evaluation of the performance of the executive officers (other than himself), each of whom report to him.The compensation of the CEO is determined by the Committee independently of management. The Committee makes decisions about the CEO’scompensation during executive session outside the presence of the CEO. Annually, outside directors of the Board evaluate the performance of the CEO andthat evaluation is then communicated to the CEO by the Chairman of the Committee.The Committee’s process for determining executive compensation is straightforward. In the first quarter of each fiscal year, the Committee’s primaryfocus is to review base salaries, determine payout amounts for annual cash incentives in respect of the prior fiscal year for the executive officers, and reviewlong-term equity for the senior officers and certain other key associates. At this time, the Committee also generally reviews and establishes performancemetrics for the current fiscal year’s annual cash incentive plan.The Committee considers both external and internal factors when making decisions about executive compensation. External factors include thecompetitiveness of each element of our compensation program relative to peer companies and the market demand for executives with specific skills orexperience in the specialty apparel industry. Internal factors include an executive’s level of responsibility, level of performance, long-term potential andprevious levels of compensation, including outstanding equity awards. While all of these factors provide useful data points in setting compensation levels,we take into account the fact that external data typically reflects pay decisions made during a prior year. We also consider the state of the overall retailindustry, the economy and general business conditions.Outside Compensation ConsultantNo independent executive compensation consultants were retained by the Committee during fiscal 2016.Benchmarking ProcessIn making compensation decisions for fiscal 2016, the Committee considered the competitive market for executives and compensation levelsprovided by comparable companies. The comparative group used to benchmark compensation with respect to our executive officers and other key associatesis composed of specialty retailers with highly visible brands that we view as competitors for customers and/or executive talent. For fiscal 2016, the peercompanies were Abercrombie & Fitch Co., American Eagle Outfitters, Inc., Ascena Retail Group, Inc., Chico’s FAS, Inc., Coach, Inc., The Gap, Inc., Guess,Inc., Kate Spade & Company, L Brands, Inc., Michael Kors Holdings Ltd., Nordstrom, Inc., Ralph Lauren Corp., Under Armour, Inc. and Urban Outfitters, Inc.In addition, we monitor the marketplace for innovative and creative compensation programs of those companies that we view as leading their industry.Though the Company generally targets salary levels at the median of our peer group, total compensation may exceed or fall below the median for certain ofour executive officers and other key associates since one of the objectives of our compensation program is to consistently reward and retain top performersand to differentiate compensation based upon individual and Company performance.We also consider compensation survey data from surveys in which we participate or purchase from a variety of publishers which may incorporate datafrom other industries. 47 CEO CompensationAt the time Mr. Drexler joined the Company in 2003, he invested $10 million of his own funds to purchase a substantial equity ownership interest inthe Company. He also paid us $1 million as consideration for a grant of stock options and a grant of restricted stock. His annual base salary was set at$200,000 in 2003 and has not increased.In connection with the Acquisition, Mr. Drexler contributed an aggregate amount of 2,287,545 shares worth approximately $99.5 million in exchangefor an ownership interest in Parent following the Acquisition. Following the Acquisition, in accordance with his new employment agreement, Mr. Drexler wasawarded 32,109,219 non-qualified stock options, a portion of which vest over time and a portion of which are subject to performance-based vestingconditions. In 2013, Mr. Drexler acquired an additional 12,040,957 shares in Parent through the exercise of a portion of these stock options. In 2016, Mr.Drexler participated in the stock option re-pricing, and exchanged 12,040,957 of his fully vested time-vesting stock options with an exercise price of $0.25per share for stock options with an exercise price of $0.10 per share, of which 6,020,479 remained fully vested and 6,020,478 became subject to an additional4 year time-based vesting period. He also exchanged 8,027,305 performance-vesting stock options with an exercise price of $0.25 per share for stock optionswith an exercise price of $0.10 per share and the same performance-vesting hurdles.Mr. Drexler’s substantial investment in the Company and the size of his equity incentive awards are consistent with his role as an owner-manager andare designed to ensure his commitment to the long-term future of the Company. Details regarding Mr. Drexler’s compensation package are contained in tablesthat follow. In addition, a description of his employment agreement, originally entered into in connection with the consummation of the Acquisition, iscontained in a section that follows. We intend to continue to evaluate the components and level of our CEO’s compensation on an ongoing basis.Components of the Executive Compensation ProgramWe believe that a substantial portion of executive compensation should be performance-based. We also believe it is essential for executives to have ameaningful equity stake linked to the long-term performance of the Company; therefore, we have created compensation packages that aim to foster an owner-operator culture. As such, other than base salary, compensation of our executive officers is largely comprised of variable or “at-risk” incentive pay linked tothe Company’s financial performance and individual contributions. Other factors we consider in evaluating executive compensation include internal payequity, external market and competitive information, assessment of individual performance, level of responsibility, and the overall expense of the program. Inaddition, we also strive to offer benefits competitive with those of our peer group and appropriate perquisites.Base SalaryBase salary represents the fixed component of our executive officers’ compensation. The Committee sets base salary levels based upon experience andskills, position, level of responsibility, the ability to replace the individual, and market practices. The Committee reviews base salaries of the executiveofficers annually and approves all salary increases for the executive officers, including Mr. Drexler. Increases are based on several factors, including theCommittee’s assessment of individual performance and contribution, promotions, level of responsibility, scope of position, competitive market data, andgeneral economic, retail and business industry conditions, as well as, with respect to our executive officers other than Mr. Drexler, input from Mr. Drexler andthe EVP—HR.In spring 2016, in conjunction with its annual review process, the Committee reviewed base salaries for the Named Executive Officers. The Committeedecided that Mr. Drexler’s base salary was to remain at $200,000 given his role as owner-manager. This salary is well below the salary level normallyprovided to a Chief Executive Officer of a company of comparable size, complexity, and performance and below the median level of our peer group. TheCommittee also determined that Ms. Lyons’; Mr. Nicholson’s; and Ms. Markoe’s base salaries would remain at $1,000,000; $800,000; and $550,000,respectively. In spring 2016, Ms. Wadle received a $100,000 salary increase resulting in a base salary of $850,000, based upon a review of competitivemarket data.Annual Cash IncentivesOur Named Executive Officers typically have the opportunity to earn cash incentives for meeting annual performance goals. Historically, before theend of the first quarter of the relevant fiscal year, the Committee establishes financial and performance targets and opportunities for such year, which arebased upon the Company’s goals for Earnings Before Interest Taxes Depreciation and Amortization (EBITDA).48 The Company’s goals for EBITDA are linked to our budget and plan for long-term success. These EBITDA performance targets are the key measuresused to determine whether an incentive award will be paid for the fiscal year and, to the extent achieved, determine the range of the incentive awardopportunity for the Named Executive Officers. We calculate EBITDA using the net income recorded for the Company in accordance with Generally AcceptedAccounting Principles (GAAP), adding back interest, depreciation, amortization and income tax expenses for the applicable fiscal year. We also adjust foritems such as non-cash share-based compensation, the impact of purchase accounting resulting from the Acquisition, non-cash impairment losses and chargesrelated to a workforce reduction (as so calculated, “Adjusted EBITDA”).Annual incentive awards to our Named Executive Officers are paid from the same incentive pool used for all of our eligible associates. For fiscal 2016,the potential size of the total pool was determined by the Company’s performance against pre-established Adjusted EBITDA goals for the fiscal year endedJanuary 28, 2017, which were approved by the Committee on April 22, 2016 as follows: for Adjusted EBITDA of $181.4 million, the pool would be fundedat 25% of the target amount; for Adjusted EBITDA of $240.2 million, the pool would be funded at 100% of the target amount, for Adjusted EBITDA of$318.0 million, the pool would be funded at 200% of the target amount, and for Adjusted EBITDA of more than $318.0 million, the pool could be funded atup to 250% of the target amount at the discretion of the Committee.The target amount of the incentive pool is determined by calculating the sum of the target incentive award amount assigned to each plan participant.Mr. Drexler’s target award for fiscal 2016 is $1,200,000, as defined in his employment agreement, with a range of potential payment from $0 to $3,000,000.Target awards of the Named Executive Officers, other than Mr. Drexler, are expressed as a percentage of annual base salary for the relevant fiscal year. Thetarget award for Ms. Lyons and Ms. Wadle for fiscal 2016 is 100%, with a range of potential payments from 0% to 250% of annual base salary. The targetaward for Ms. Markoe is 75%, with a range of potential payments from 0% to 187.5% of annual base salary. Mr. Nicholson’s employment agreement providedthat his annual bonus for fiscal 2016 would be not less than $600,000. If the Company does not meet the threshold Adjusted EBITDA target, then no payments are made to the Named Executive Officers with respect to theannual incentive awards plan.The Committee determines the amount of Mr. Drexler’s annual incentive award independently of management, with no fixed or specific mathematicalweighting applied to the performance metrics or any element of his individual performance. The Committee approves his incentive award based upon theAdjusted EBITDA results and achievement of the performance metrics and other business performance factors they deem relevant.The Committee determines the amount of the annual incentive awards for the other Named Executive Officers using its discretion, subject to themaximum specified in the plan. In making this determination, the Committee takes into account the recommendations of Mr. Drexler. Each of the otherNamed Executive Officers reports directly to Mr. Drexler. Mr. Drexler takes significant time to review both the quantitative and qualitative performanceresults of each such executive and recommends to the Committee an incentive award amount for each of them. Provided the threshold Adjusted EBITDAtarget is achieved, Mr. Drexler then considers whether to recommend payouts for individuals at the level established by Adjusted EBITDA results and withinthe range established by each Named Executive Officer’s target incentive. Final annual incentive awards are established based on the overall judgment of theCommittee, taking into account the recommendations made by Mr. Drexler, with no fixed or specific mathematical weighting applied to any element ofindividual performance.For fiscal 2016, the Company achieved pre-bonus Adjusted EBITDA of $202.2 million and therefore the annual incentive award pool was funded at50%. In determining the size of individual bonuses, the Committee may increase or reduce amounts if in its sole judgement such an adjustment isappropriate. Individual bonuses were determined by the Committee on March 17, 2017, and will be paid as follows. Mr. Drexler will receive $600,000,representing 50% of his target bonus payment. Mr. Nicholson will receive $600,000, representing 75% of his annual base salary. Ms. Lyons will receive$400,000, representing 40% of her annual base salary. Ms. Wadle will receive $340,000, representing 40% of her annual base salary. And Ms. Markoe willreceive $206,250, representing 37.5% of her annual base salary. These bonuses are expected to be paid on or before April 13, 2017, the 75th day of ourcurrent fiscal year.As noted above, Mr. Nicholson was entitled to an annual cash incentive for fiscal 2016 of not less than $600,000 pursuant to his employmentagreement. Therefore, Mr. Nicholson’s annual cash incentive will be $600,000. In addition, in April 2016, Mr. Nicholson received a $43,836 cash payment,which represented a pro-rated guaranteed fiscal 2015 bonus of $800,000, pursuant to the terms of his employment agreement. Ms. Markoe received a$100,000 payment in April 2016 as a discretionary performance bonus.49 Long-Term Equity IncentivesOur Named Executive Officers’ compensation is heavily weighted in long-term equity as we believe stockholder value is achieved through anownership culture that encourages a focus on long-term performance by our Named Executive Officers and other key associates. By providing our executiveswith an equity stake in the Company, we are better able to align the interests of our Named Executive Officers and our Sponsors. In establishing long-termequity incentive grants for our Named Executive Officers, the Committee reviews certain factors, including the outstanding equity investment and grantsheld both by the individual and by our executives as a group, total compensation, performance, vesting dates of outstanding grants, tax and accounting costs,potential dilution and other factors.In 2011, our Named Executive Officers and certain key members of management were provided the opportunity to roll over on a tax deferred basis,shares of J.Crew Group, Inc. stock and stock options they held into shares or stock options, as applicable, of the Parent in connection with the consummationof the Acquisition. They were also provided the opportunity to purchase shares of the Parent. As a result, Mr. Drexler contributed an aggregate amount of2,287,545 shares worth approximately $99.5 million in exchange for an ownership interest in Parent following the Acquisition. Ms. Lyons contributed30,651 shares and 218,401 stock options in exchange for an ownership interest of approximately $4 million. Ms. Wadle contributed 100,590 stock options,6,804 shares and $370,692 cash in exchange for an ownership interest of approximately $2 million. Ms. Markoe contributed 7,663 shares and 45,129 stockoptions in exchange for an ownership interest of approximately $1 million. Mr. Nicholson was not employed by the Company at the time of the Acquisition.The Committee has approved stock option and restricted stock awards to the Named Executive Officers, consistent with its view that long-term equityincentives are an important part of an ownership culture that encourages a focus on long-term performance by our Named Executive Officers and other keyassociates. In May 2016, each of Ms. Lyons and Ms. Wadle received grants of (A) 1,000,000 shares of restricted stock subject to time-vesting conditions and(B) 1,000,000 shares of restricted stock subject to performance-vesting conditions, and Ms. Markoe received a grant of (A) 500,000 shares of restricted stocksubject to time-vesting conditions and (B) 500,000 shares of restricted stock subject to performance-vesting conditions.In fiscal 2016, in order to enhance the incentive value of outstanding stock option awards, we engaged in the stock option re-pricing, in which time-based vesting stock options with an exercise price greater than $0.10 could be exchanged for stock options with an exercise price of $0.10 per share,following which 50% of the vested stock options would remain vested and 50% of the vested stock options, together with all unvested stock options, wouldbe subject to an additional vesting schedule of 4 years (25% per year), and performance-based vesting stock options with an exercise price greater than $0.10could be exchanged for stock options with an exercise price of $0.10 per share and the same performance-vesting hurdles. Stock options rolled over in theAcquisition were not eligible to participate in the stock option re-pricing.Equity Ownership. We believe that Company executives should have a meaningful ownership stake in the Company to underscore the importance oflinking executive and investor interests, and to encourage an owner-manager and long-term perspective in managing the business. This ownership stake hasbeen achieved through the roll-over of shares and stock options, the opportunity for cash investment and the award of stock options and restricted stock.Benefits and Perquisites. Benefits are provided to our Named Executive Officers in the same manner that they are provided to all other associates. OurNamed Executive Officers are eligible to participate in the Company’s 401(k) plan (which includes a Company match component) and receive the samehealth, life, and disability benefits available to our associates generally.We offer all of our associates (including the Named Executive Officers) and directors a discount on most merchandise in our stores, and through our e-commerce business. We offer this discount because it is beneficial to our Company to encourage associates and directors to shop in our stores and online.Additionally, this discount represents common practice in the retail industry. This discount is extended to IRS-qualified dependents and spouses.We do not offer a defined benefit pension, supplemental executive retirement plan (SERP) or a non-qualified deferred compensation plan to ourassociates or Named Executive Officers.In addition, from time to time the Company agrees to provide certain executives with perquisites. The Company provides these perquisites on alimited basis in order to attract key talent and to enhance business efficiency. We believe these perquisites are in line with market practice. For fiscal 2016,we provided certain Named Executive Officers with the following perquisites:Driver. We provide Mr. Drexler with a driver for all business needs. Mr. Drexler reimburses the Company for his personal use of the driver, includingcommuting to and from work.50 Medical Concierge Service. We provide Mr. Drexler with 24/7, on-call worldwide medical care for himself and his immediate family members, up to amaximum of $50,000 per year.The cost incurred by the Company for certain of these perquisites is detailed in the Summary Compensation Table.Tax Gross-ups. Pursuant to the terms of Mr. Drexler’s employment agreement, Mr. Drexler is entitled to receive a gross up in the event that anypayment or benefit provided to him in connection with a change in control (as defined in Section 280G of the Code) occurring after our equity securitiesonce again are publicly traded is subject to the excise taxes imposed by Section 4999 of the Code. If a change in control occurs while the Company isprivate, the Company and Mr. Drexler will use their reasonable best efforts to seek shareholder approval of any parachute payments. These provisions werenegotiated as a part of Mr. Drexler’s employment agreement in connection with the Acquisition. While other executive officers may also have excessparachute payments that are subject to the excise taxes, no such other executive officer is entitled to a tax gross up from the Company.Employment AgreementsFrom time to time, the Company enters into employment agreements in order to attract and retain key executives. Each of Messrs. Drexler andNicholson and Mss. Lyons and Wadle are party to an employment agreement with the Company. As described in a section that follows, the employmentagreements generally define the executive’s position, specify a minimum base salary, and provide for participation in our annual and long-term incentiveplans, as well as other benefits. Most of the agreements contain covenants that limit the executives’ ability to compete with us or solicit our associates orcustomers for a specified period following termination. The agreements also provide for various benefits under certain termination scenarios. In general, thesebenefits consist of salary continuation for periods ranging from 12 to 18 months, a pro-rata or full cash incentive award for the year in which terminationoccurred, and in some cases, the acceleration or continued vesting (in accordance with the original vesting schedule) of a portion of unvested equity. Theagreements provide for automatic renewal upon the same terms and conditions, unless either party gives written notice of its intent not to renew. Theprovisions vary by executive because each agreement is negotiated by the Company and the Named Executive Officer on an individual basis at the time ofhire or renewal, as applicable. We believe that these agreements enhance our ability to recruit and retain the Named Executive Officers, offer them a degree ofsecurity in the very dynamic environment of the retail industry, and protect us competitively through non-competition and non-solicitation requirements ifthe executives terminate their employment with us.The section below contains information, both narrative and tabular, regarding the types of compensation paid to (i) our principal executive officer,(ii) our principal financial officer, and (iii) our other three most highly compensated executive officers as of the end of fiscal 2016 (collectively, the “NamedExecutive Officers”). The Summary Compensation Table contains an overview of the amounts paid to our Named Executive Officers for fiscal years 2016,2015, and 2014, as applicable. The tables following the Summary Compensation Table—the Grants of Plan-Based Awards, Outstanding Equity Awards atFiscal Year-End, and Option Exercises and Stock Vested—contain details of our Named Executive Officers’ recent non-equity incentive and equity grants,past equity awards, general equity holdings, and option exercises. Finally, we have included a table showing potential severance payments to our NamedExecutive Officers pursuant to their individual employment agreements and certain of our equity incentive plans, assuming, for these purposes that therelevant triggering event occurred on January 28, 2017. 51 SUMMARY COMPENSATION TABLEThe following table sets forth the compensation paid to or earned during fiscal years 2016, 2015, and 2014 by our Named Executive Officers: Name and Principal Position FiscalYear Salary($) Bonus(1)($) StockAwards(2)($) OptionAwards(2)($) All OtherCompensation(3)($) Total($) Millard Drexler, 2016 $200,000 $600,000 $— $— $39,527 $839,527 Chairman and Chief 2015 $200,000 $— $— $— $38,789 $238,789 Executive Officer 2014 $200,000 $— $— $— $38,323 $238,323 Michael Nicholson, 2016 $800,000 $600,000 $— $— $10,000 $1,410,000 President, COO 2015 $46,154 $ 43,836 $ 400 $ — $— $ 90,390 & CFO Jenna Lyons, 2016 $1,000,000 $400,000 $— $— $10,600 $1,410,600 President-Executive 2015 $1,000,000 $— $— $— $10,600 $1,010,600 Creative Director 2014 $1,000,000 $— $— $— $10,400 $1,010,400 Libby Wadle, 2016 $832,692 $340,000 $— $ $10,600 $1,183,292 President – J.Crew 2015 $750,000 $— $— $— $10,600 $760,600 Brand 2014 $750,000 $— $— $— $10,400 $760,400 Lynda Markoe, 2016 $550,000 $306,250 $— $— $10,600 $866,850 EVP - 2015 $550,000 $125,000 $— $— $10,600 $685,600 Human Resources 2014 $538,462 $125,000 $— $— $10,400 $673,862 (1)Represents the annual cash incentive awards under our Company annual cash incentive plan and discretionary bonus awards earned by each NamedExecutive Officer. The bonus pool was funded at 50%. Ms. Markoe was granted a discretionary bonus of $100,000 for performance in April 2016 inaddition to her fiscal 2016 annual cash incentive award. A description of our annual cash incentive plan is in a previous section. Pursuant to Mr.Nicholson’s employment agreement, he is entitled to a bonus for fiscal 2016 of not less than $600,000.(2)For each of the Named Executive Officers, represents the aggregate grant date fair value calculated under Accounting Standards Codification (ASC)718—Compensation—Stock Compensation as share-based compensation in our financial statements for fiscal years 2016, 2015, and 2014 of stockawards and option awards made in those fiscal years, excluding the effect of estimated forfeitures. For awards subject to performance conditions, theamount reflects the full grant date fair value of the awards based on the probable outcome of the performance conditions. See note 4, “Share-BasedCompensation” to our consolidated financial statements for a description of assumptions underlying valuation of equity awards. (3)All other compensation for fiscal year 2016 consisted of the following: MatchingContributions(i) MedicalConcierge(ii) Legal Fees(iii) Total Millard Drexler $— $39,527 $— $39,527 Michael Nicholson $— $— $10,000 $10,000 Jenna Lyons $10,600 $— $— $10,600 Libby Wadle $10,600 $— $— $10,600 Lynda Markoe $10,600 $— $— $10,600 (i)Represents total Company contributions to each Named Executive Officer’s account in the Company’s tax-qualified 401(k) Plan.(ii)(iii)Represents Company payment for medical concierge services, as provided by Mr. Drexler’s employment agreement. Represents Company payment for Mr. Nicholson’s legal fees related to the review of his employment contract with the Company. 52 Named Executive Officer Employment AgreementsMillard DrexlerMr. Drexler entered into an employment agreement with us, effective March 7, 2011, pursuant to which Mr. Drexler serves as our Chief ExecutiveOfficer and as the Chairman of our Board. The agreement provides for an initial term of employment through March 7, 2015, subject to automatic renewal forsuccessive one-year periods thereafter unless either Mr. Drexler or the Company provides a notice of non-renewal at least 90 days before the expiration of thethen current term. Pursuant to the employment agreement, Mr. Drexler receives a base salary of $200,000 and has an opportunity to earn an annual bonusaward, with a target opportunity of $1,200,000, based on the achievement of certain performance metrics determined by the Board or a committee thereof.Mr. Drexler is eligible to participate in the Company’s employee benefit plans and the Company will pay or reimburse Mr. Drexler for an amount of up to$50,000 per year for the cost of maintaining the benefits provided under one or more concierge medical services arrangements to be selected by Mr. Drexler.In the event that Mr. Drexler’s employment is terminated prior to the end of the initial four-year term or any subsequent one-year extension of the termwithout cause or by Mr. Drexler for good reason (each as defined in the agreement), Mr. Drexler will receive, among other things (i) a payment equal to anyaccrued but unpaid base salary as of the date of termination, the value of any accrued vacation pay, and the amount of any expenses properly incurred byMr. Drexler prior to the termination date and not yet reimbursed, (ii) a payment equal to one year’s base salary plus Mr. Drexler’s target bonus, (iii) a paymentequal to the pro-rated annual bonus that Mr. Drexler would have earned for the year in which his termination occurs, based on the actual achievement ofapplicable performance objectives in the performance year in which the termination date occurs; and (iv) the immediate vesting of all equity awardspreviously granted to Mr. Drexler that remain outstanding as of the termination date. The agreement also provides that Mr. Drexler is entitled to a full grossup for excise taxes incurred under Sections 280G and 4999 of the Code in connection with any change in control occurring after our equity securities onceagain become publicly traded.As described above, pursuant to the terms of the agreement Mr. Drexler received an option grant under Parent’s 2011 Equity Incentive Plan (the “2011Equity Incentive Plan”) in fiscal year 2011. These options will vest upon meeting certain time- and performance-based vesting conditions and will vest infull upon, as described above, a termination of his employment without cause or by him for good reason. Mr. Drexler’s time-vesting options will vest in fullupon the occurrence of a change in control. The agreement also provides that Mr. Drexler will be subject to non-solicitation and non-competition covenantsduring his employment and for a period of two years and one year, respectively, following the termination of his employment, regardless of the reason forsuch termination. In 2016, Mr. Drexler participated in the stock option re-pricing and exchanged 12,040,957 time-based vesting options with an exerciseprice of $0.25 per share for 6,020,479 vested stock options with an exercise price of $0.10 per share and 6,020,478 unvested stock options with an exerciseprice of $0.10 per share and an additional 4 year time-based vesting period. Mr. Drexler also exchanged 8,027,305 performance-based vesting stock optionswith an exercise price of $0.25 per share for an equal number of performance-based vesting stock options with an exercise price of $0.10.Michael NicholsonMr. Nicholson entered in an employment agreement with us in December 2015 pursuant to which he agreed to serve as our President and ChiefOperating Officer and Chief Financial Officer. The agreement provides for an initial base salary of $800,000, with a target bonus opportunity under theCompany’s annual bonus plan of 100% of base salary based upon the achievement of certain performance objectives to be determined each year. For fiscalyear 2016, Mr. Nicholson’s employment agreement provides that his annual bonus will not be less than $600,000, provided he remains employed throughthe payment date. Under the agreement Mr. Nicholson is subject to non-competition and non-solicitation covenants during his employment and for a periodof 12 and 18 months, respectively, following termination of employment for any reason, provided that the non-competition covenants will not applyfollowing termination of Mr. Nicholson’s employment by the Company without cause or by him for good reason. In the event his employment is terminatedwithout cause, for good reason or due to his death or disability, Mr. Nicholson is entitled under the agreement to certain post-employment compensation, asdetailed in a section that follows. Pursuant to the terms of the agreement, Mr. Nicholson received restricted stock and stock option grants under the 2011 Equity Incentive Plan inJanuary 2016. We granted Mr. Nicholson 2.5 million shares of restricted Class A common stock that vests periodically based on continued employment overfive years. In addition, we granted Mr. Nicholson 1.5 million shares of restricted Class A common stock that vests based on the achievement of performancegoals, within a term of ten years, generally subject to his continued employment prior to the vesting date. In the event that the performance conditions aresatisfied or a change in control of the Company occurs within six months following the termination of Mr. Nicholson’s employment by the Company withoutcause or by Mr. Nicholson for good reason, Mr. Nicholson’s performance-based restricted stock will vest to the same extent that it would have vested had Mr.Nicholson remained employed through the satisfaction of the performance conditions or the occurrence of the change in control. In addition, with respect toboth the time and performance-based vesting restricted stock grants, in the event that a change in control of the Company occurs while Mr. Nicholsonremains employed, any unvested outstanding restricted stock will vest in full, unless the administrator provides for a cash-out of the award, or the acquirerassumes or substitutes the award. 53 We also granted Mr. Nicholson nonqualified stock options to acquire 2 million shares of Class A common stock, with an exercise price of $.10 pershare. The stock options are subject to time-based vesting over five years. In the event that Mr. Nicholson’s employment ceases within two years following achange in control as a result of a termination by the Company without cause or by Mr. Nicholson for good reason, the unvested outstanding stock options, orany deferred cash or property granted in substitution for such options, will vest in full. In the event of Mr. Nicholson’s termination of employment by theCompany without cause or a resignation by Mr. Nicholson for good reason, he will receive an additional 12 months service credit toward vesting of his time-based vesting restricted stock and stock options.Jenna LyonsMs. Lyons entered into a second amended and restated employment agreement with us in July 2010 pursuant to which she has agreed to serve asCreative Director for five years beginning in December 2007, subject to automatic one-year renewals unless we or Ms. Lyons provide four months’ writtennotice prior to the expiration of the current term. The agreement provides for a minimum annual base salary of $675,000, which will be reviewed from time totime by us, and an annual cash incentive award with a target of 50% and a maximum of 100%, in each case, of base salary. In addition, the agreementprovided for payment by the Company of a cash contract supplement of $2,000,000 which was paid to Ms. Lyons in January 2008. The agreement alsosubjects Ms. Lyons to non-competition and non-solicitation covenants during her employment and for a period of 12 months following termination ofemployment for any reason (except that the non-competition covenant will not apply in the event Ms. Lyons’ employment is terminated by the Companywithout cause, by Ms. Lyons for good reason or because the Company provides Ms. Lyons with written notice of our intention not to renew the employmentagreement). In the event her employment is terminated without cause or for good reason, Ms. Lyons is entitled under the agreement to certain post-employment compensation, as detailed in a section that follows. In 2016, Ms. Lyons participated in the stock option re-pricing, and exchanged 4,128,300 ofher time-based vesting stock options with an exercise price of $0.25 per share, and 750,000 of her time-based vesting stock options with an exercise price of$0.57 per share, for 1,830,450 vested stock options with an exercise price of $0.10 per share and 3,047,850 unvested stock options with an exercise price of$0.10 per share and an additional 4 year time-based vesting period. Ms. Lyons also exchanged 2,293,500 performance-based vesting stock options with anexercise price of $0.25 per share, and 750,000 performance-based vesting stock options with an exercise price of $0.57 per share, for 3,043,500 performance-based vesting stock options with an exercise price of $0.10.Libby WadleMs. Wadle entered into an employment agreement with us pursuant to which she has agreed to serve as Executive Vice President—J.Crew for threeyears beginning in November 2011, subject to automatic one-year renewals unless we provide two months’ written notice or Ms. Wadle provides fourmonths’ written notice, in each case, prior to the expiration of the current term. The agreement provides for a minimum annual base salary of $700,000, whichwill be reviewed annually by us, and an annual cash incentive award with a target of 75% and a maximum of 187.5%, in each case, of base salary. Theagreement also subjects Ms. Wadle to non-competition and non-solicitation covenants during her employment and for a period of 12 months followingtermination of employment for any reason (except that the non-competition covenant will not apply in the event Ms. Wadle’s employment is terminated bythe Company without cause or by Ms. Wadle for good reason). In the event her employment is terminated without cause, for good reason, or as a result of theCompany’s non-renewal of the agreement, Ms. Wadle is entitled under the agreement to certain post-employment compensation, as detailed in a section thatfollows. In 2016, Ms. Wadle participated in the stock option re-pricing, and exchanged 1,376,100 of her time-based vesting stock options with an exerciseprice of $0.25 per share, and 500,000 of her time-based vesting stock options with an exercise price of $0.57 per share, for 838,050 vested stock options withan exercise price of $0.10 per share and 1,038,850 unvested stock options with an exercise price of $0.10 per share and an additional 4 year time-basedvesting period. Ms. Wadle also exchanged 1,376,100 performance-based vesting stock options with an exercise price of $0.25 per share, and 500,000performance-based vesting stock options with an exercise price of $0.57 per share, for 1,876,100 performance-based vesting stock options with an exerciseprice of $0.10.54 Lynda MarkoeMs. Markoe entered into a long-term incentive agreement with us in June 2014, pursuant to which she received a long-term cash incentive awardprovided she remains employed with us through the payment dates of each award. The agreement provides for a First Cash Incentive award of $125,000which was paid on June 10, 2014 and a Second Cash Incentive award of $125,000 which was paid on June 1, 2015. If Ms. Markoe were terminated for causeor resigned from employment for any reason on or before May 31, 2016, she would have been obligated to repay us the full gross amount of the Second CashIncentive. For purposes of the agreement, “cause” means, without limitation, unsatisfactory job performance, failure to comply with the Company’s policiesand handbook, including but not limited to the Code of Ethics and Business Practices; indictment, conviction or admission of any crime involvingdishonesty or moral turpitude; participation in any act of misconduct, insubordination or fraud against the Company; use of alcohol or drugs which interfereswith her performance of her duties or compromises our integrity or reputation; and excessive absences from work other than as a result of disability. In 2016,Ms. Markoe participated in the stock option re-pricing, and exchanged 802,750 of her time-based vesting stock options with an exercise price of $0.25 pershare, and 250,000 of her time-based vesting stock options with an exercise price of $0.57 per share, for 476,375 vested stock options with an exercise priceof $0.10 per share and 576,375 unvested stock options with an exercise price of $0.10 per share and an additional 4 year time-based vesting period. Ms.Markoe also exchanged 802,750 performance-based vesting stock options with an exercise price of $0.25 per share, and 250,000 performance-based vestingstock options with an exercise price of $0.57 per share, for 1,052,750 performance-based vesting stock options with an exercise price of $0.10.GRANTS OF PLAN-BASED AWARDS—FISCAL 2016The following table sets forth the non-equity and equity incentive awards and other equity awards granted to our Named Executive Officers for fiscal2016. Estimated Future PayoutsUnder Non-Equity IncentivePlan Awards(1) Estimated Future PayoutsUnder Equity Incentive PlanAwards All OtherStock Awards:Number ofShares ofStock(#)(2)All OtherOptionAwards:Number ofSecuritiesUnderlyingOptions(3)(#) Exerciseor BasePrice ofOptionAwards($/sh) Grant DateFair Valueof Stockand OptionAwards(4)($) Name GrantDate Threshold($) Target($) Maximum($) Threshold(#) Target(#) Maximum(#) Millard Drexler — $300,000 $1,200,000 $3,000,000 — — — — — — — 6/29/16 — — — — — — 20,068,262 $0.10 $ 0 Michael Nicholson — $600,000 $800,000 $2,000,000 — — — — — — — Jenna Lyons — $250,000 $1,000,000 $2,500,000 — — — — — — — 5/10/16 — — — — — — 2,000,000 — $0.10 $ 0 6/29/16 — — — — — — — 7,921,800 $0.10 $ 0 Libby Wadle — $212,500 $850,000 $2,125,000 — — — — — — — 5/10/16 — — — — — — 2,000,000 — $0.10 $ 0 6/29/16 — — — — — — — 3,752,200 $0.10 $ 0 Lynda Markoe — $103,125 $412,500 $1,031,250 — — — — — — — 5/10/16 — — — — — — 1,000,000 — $0.10 $ 0 6/29/16 — — — — — — — 2,105,500 $0.10 $ 0 (1)Represents possible payouts under the Company’s annual cash incentive plan for fiscal 2016. Amounts listed in the maximum column related toachievement of “Super Max” Adjusted EBITDA goal. Achievement of “Max” Adjusted EBITDA goals may result in payouts for Mr. Drexler, Mr.Nicholson, Ms. Lyons, Ms. Wadle, and Ms. Markoe of $2,400,000; $1,600,000, $2,000,000; $1,700,000; and $825,000, respectively. Under the termsof his employment agreement, Mr. Nicholson’s annual bonus will not be less than $600,000. See Summary Compensation Table for incentive awardamounts actually to be paid.(2)Represents shares of restricted stock granted under the 2011 Equity Incentive Plan, of which half vest 25% annually, beginning on thesecond anniversary of the grant date, subject to continued employment, with an additional 12 months of service credited for vesting purposes upon atermination without cause or a resignation for good reason, and the other half vest based upon achievement of annual EBITDA of $350M, subject toadjustment in good faith by the Committee to reflect future acquisitions and dispositions, and provided that the participant has remained incontinuous employment from the grant date through the vesting date.(3)Represents option awards granted under the 2011 Equity Incentive Plan that were exchanged in the option re-pricing, and are either (i) vested andexercisable, (ii) scheduled to vest and become exercisable in four equal annual installments beginning on the date of the option re-pricing, subject tocontinued employment, and have a ten year term, or (iii) vest when certain owners of the Parent receive a specified level of cash proceeds, as definedin the equity incentive plan, from the sale of their initial investment.(4)These amounts represent the aggregate grant date fair value calculated in accordance with ASC 718—Compensation—Stock Compensation,excluding the effect of estimated forfeiture. For the award subject to performance conditions, the amount reflects the aggregate grant date fair value ofthe award based on the probable outcome of the performance conditions. The assumptions used in calculating these amounts are described in note 4,“Share-Based Compensation” to our consolidated financial statements.55 OUTSTANDING EQUITY AWARDS AT FISCAL 2016 YEAR-ENDThe following table sets forth information regarding the outstanding awards under our long-term equity incentive plans held by our Named ExecutiveOfficers at the end of fiscal 2016. Option Awards(1) Stock Awards Original GrantYear Number ofSecuritiesUnderlyingUnexercisedOptions(#)Exercisable Number ofSecuritiesUnderlyingUnexercisedOptions(#)Unexercisable(2) Equity IncentivePlan Awards:Number ofSecuritiesUnderlyingUnexercisedUnearnedOptions(#)(2) OptionExercisePrice($) OptionExpirationDate Numberof Sharesof StockThatHave NotVested(#)(3) MarketValue ofShares ofStockThatHave NotVested($)(5) EquityIncentivePlanAwards:NumberofUnearnedShares orOtherRightsThatHave NotVested(#)(4) EquityIncentivePlanAwards:Market orPayoutValue ofUnearnedShares orOtherRightsThatHave NotVested($)(5)Millard Drexler 2016 6,020,479 6,020,478 8,027,305 0.10 6/29/26 — — — — Michael Nicholson 2015 400,000 1,600,000 — 0.10 1/11/26 2,000,000 — 1,500,000 — Jenna Lyons 2016 1,830,450 3,047,850 3,043,500 0.10 6/29/26 1,000,000 — 1,000,000 — 2011 1,777,777 — — 0.25 9/15/17 — — — — Total 3,608,227 3,047,850 3,043,500 — — 1,000,000 — 1,000,000 — Libby Wadle 2016 838,050 1,038,050 1,876,100 0.10 6/29/26 1,000,000 — 1,000,000 — Lynda Markoe 2016 476,375 576,375 1,052,750 0.10 6/29/26 500,000 — 500,000 — (1)Represents (i) stock options awarded to Ms. Lyons prior to the Acquisition, which were rolled over into vested options of Parent, effective March 7,2011, (ii) stock options that were granted to Mr. Nicholson on January 11, 2016 in connection with his hiring, and (iii) stock options that were subjectto re-pricing in June 2016. All Named Executive Officers (except Mr. Nicholson) participated in the stock option re-pricing offer and, in June 2016,stock options held by Mr. Drexler, My. Lyons, Ms. Wadle, and Ms. Markoe were exchanged for stock options with a $0.10 per share exercise price and,in the case of time-based vesting stock options, an extended vesting schedule, as described above. See Named Executive Officer EmploymentAgreements.(2)The options previously granted were exchanged for re-priced options granted on June 29, 2016, which have an exercise price of $0.10 per share and vestas follows: Vested Time-Based Stock Options Unvested Time-Based Stock Options Performance Vesting Stock OptionsDrexler 6,020,479 time-based options fully-vested as of grant date 6,020,478 options vesting 25%annually beginning on 6/29/17 8,027,305 options with performance-based vesting Lyons 1,830,450 time-based options fullyvested as of grant date 3,047,850 options vesting 25%annually beginning on 6/29/17 3,043,500 options with performance-based vesting Wadle 838,050 time-based options, fully-vestedas of grant date 1,038,050 options vesting 25%annually beginning on 6/29/17 1,876,100 options with performance-based vesting Markoe 476,375 time-based options fully-vestedas of grant date 576,375 options vesting 25% annuallybeginning on 6/29/17 1,052,750 options with performance-based vesting The options granted to Mr. Nicholson on January 11, 2016 have an exercise price of $0.10 per share and vest 20% annually beginning on 1/11/17.(3)Represents shares of restricted stock granted to Mr. Nicholson and to each of Ms. Lyons, Ms. Wadle, and Ms. Markoe, on January 11, 2016 and May 10,2016, respectively, that in Mr. Nicholson’s case vest as to 20% of the shares annually beginning on the first anniversary of the grant date, generallysubject to continued employment on each vesting date, with an additional 12 months of service credited for vesting purposes upon a terminationwithout cause or resignation for good reason and in Ms. Lyons, Ms. Wadle, and Ms. Markoe’s cases vest as to 25% of the shares annually beginning onthe second anniversary of the grant date, generally subject to continued employment on each vesting date.56 (4)Represents shares of restricted stock granted to Mr. Nicholson and to each of Ms. Lyons, Ms. Wadle, and Ms. Markoe, on January 11, 2016 and May 10,2016, respectively that will vest upon achievement by the Company of a specified financial performance goal (with full vesting on a change in control),generally subject to continued employment through the vesting date. If the performance condition is not achieved within ten years, the entire awardwill be forfeited.(5)The market value of a share of our Class A common stock as of the last business day of fiscal 2016 was $0.00.OPTION EXERCISES AND STOCK VESTED—FISCAL 2016In January 2017, Mr. Nicholson vested in 500,000 shares of restricted stock. There was no other vesting of stock and there were no option exercises bythe Named Executive Officers during fiscal 2016.POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROLAs described above under Employment Agreements, we have employment agreements with Mr. Drexler, Mr. Nicholson, Ms. Lyons and Ms. Wadleunder which we are required to pay severance benefits in connection with certain terminations of employment. Mr. Drexler’s stock option award agreementalso provides for accelerated vesting of all his options in connection with a termination of his employment at any time by us without cause (as defined in theaward agreement) or by Mr. Drexler for good reason (as defined in the award agreement) and accelerated vesting of a portion of his options in connection witha termination of his employment by us by reason of his death or disability (as defined in the award agreement). In addition, the stock option awardagreements held by our other Named Executive Officers provide for the accelerated vesting of their time-based options in connection with a termination ofemployment by us without cause (as defined in the award agreement) or by the executive for good reason (as defined in the award agreement) within twoyears following a change in control. Mr. Drexler’s stock option award agreement also provides for accelerated vesting of his time-based options in connectionwith a change in control. Mr. Nicholson’s restricted stock awards provide for accelerated vesting in connection with a change in control, provided that theacquirer does not assume or substitute such awards. Ms. Markoe is not party to an employment agreement with us, but we may agree to pay severance benefitsin connection with a termination of her employment. The following is a description of the severance, termination and change in control benefits payable toeach of our Named Executive Officers pursuant to their respective agreements and our equity incentive plans as in effect during fiscal 2016. This disclosureassumes the applicable triggering date occurred on January 28, 2017, the last business day of our 2016 fiscal year.For these purposes, “change in control” is generally defined as (a) any change in the ownership of the capital stock of Parent if, immediately aftergiving effect thereto, any person (or group of persons acting in concert) other than TPG and LGP and their affiliates will have the direct or indirect power toelect a majority of the members of the board of directors of Parent; (b) any change in the ownership of the capital stock of Parent if, immediately after givingeffect thereto, TPG and LGP and their affiliates own less than 25% (33% in the case of Mr. Drexler) of the outstanding shares of Parent (taking into accountoptions, warrants or convertible securities which may be exercised, converted or exchanged into shares), or (c) the sale of all or substantially all of the assetsof the Parent and its subsidiaries.Millard DrexlerPursuant to the employment agreement between us and Mr. Drexler, executed on March 7, 2011 (the “Drexler Agreement”), the payments and/orbenefits we agreed to pay or provide to Mr. Drexler upon a termination of his employment vary depending on the reason for such termination.We may terminate Mr. Drexler’s employment with us upon his disability, which is generally defined in the Drexler Agreement as Mr. Drexler’sinability to perform his duties for a period of six consecutive months or for 180 days within any 365 day period as a result of his incapacity due to physical ormental illness. In addition, we may terminate Mr. Drexler’s employment for cause or at any time without cause. For these purposes, “cause” is generallydefined under the Drexler Agreement as Mr. Drexler’s (a) willful and continued failure to substantially perform his duties, after written demand for substantialperformance by our Board; (b) willful engagement in illegal conduct or gross misconduct which is materially and demonstrably injurious to us; or (c) breachof the non-solicitation, non-competition and confidential information obligations described below.Mr. Drexler may terminate his employment with us with good reason or at any time, upon at least three months’ advance written notice, without goodreason. For these purposes, “good reason” is generally defined under the Drexler Agreement as (a) the diminution of, or appointment of anyone other thanMr. Drexler to serve in or handle, his positions, authority, duties, and responsibilities without his consent; (b) any purported termination of his employmentby us for a reason or in a manner not expressly permitted by the Drexler Agreement; (c) relocation of more than 50 miles of Mr. Drexler’s principal worklocation; (d) material breach of the Drexler Agreement by us; or (e) removal of Mr. Drexler from the Board.57 In addition, Mr. Drexler’s employment will terminate upon his death or in the event either party provides notice to the other party not to renew theDrexler Agreement at least 90 days prior to the expiration of its term.If Mr. Drexler’s employment with us is terminated (i) as a result of his death, disability or either party’s failure to renew the term, (ii) by us for cause, or(iii) by Mr. Drexler without good reason, then Mr. Drexler will only be entitled to any accrued but unpaid salary, accrued but unused vacation, and any un-reimbursed expenses, in each case through the date of his termination.If we terminate Mr. Drexler’s employment without cause or he terminates his employment with good reason, Mr. Drexler will be entitled to receive (i) apayment of his earned but unpaid annual base salary through the termination date, any accrued vacation pay and any un-reimbursed expenses, and(ii) subject to Mr. Drexler’s execution of a valid general release and waiver of claims against us, as well as his compliance with the non-competition, non-solicitation and confidential information restrictions described below, (a) a payment equal to his annual base salary and target cash incentive award, one-halfof such payment to be paid on the first business day that is six months and one day following the termination date and the remaining one-half of suchpayment to be paid in six equal monthly installments commencing on the first business day of the seventh calendar month following the termination date,(b) a payment equal to the pro-rated amount of any annual cash incentive award that he would have otherwise received, based on actual performance, for thefiscal year in which he was terminated, such amount to be paid when annual bonuses are generally paid but in any event no later than the date that is 2.5months following the end of the year in which the termination date occurs, and (c) the immediate vesting of all then outstanding equity awards previouslygranted to Mr. Drexler.In addition, upon any termination of Mr. Drexler’s employment with us, Mr. Drexler will be entitled to any benefit or right under the Companyemployee benefit plans in which he is vested (except for any additional severance or termination payments). At this time, Mr. Drexler is not vested in anybenefits or rights under our employee benefit plans.In addition, pursuant to the Drexler Agreement, in the event that any payment or benefit provided to Mr. Drexler under the Drexler Agreement or underany other plan, program or arrangement of ours in connection with a change in control (as defined in Section 280G of the Code) becomes subject to theexcise taxes imposed by Section 4999 of the Code, Mr. Drexler will be entitled to receive a “gross-up” payment in connection with any such excise taxes. Wehave also agreed to purchase and maintain, at our own expense, directors and officers liability insurance providing coverage for Mr. Drexler for the six yearperiod following his termination of employment in the same amount as our other executive officers and directors.Pursuant to the Drexler Agreement, for the two year period following the termination of Mr. Drexler’s employment, Mr. Drexler has agreed not tosolicit or hire any of our associates. In addition, Mr. Drexler has agreed that, for the one year period following his termination of employment, he will notcompete with us in the retail apparel business in any geographic area in which we are engaged in such business. Mr. Drexler is also subject to standard non-disclosure of confidential information restrictions.Michael NicholsonPursuant to the employment agreement between us and Mr. Nicholson, dated December 3, 2015 (the “Nicholson Agreement”), the payments and/orbenefits we have agreed to pay or provide Mr. Nicholson on a termination of his employment vary depending on the reason for such termination. Pursuant to the Nicholson Agreement, we may terminate Mr. Nicholson’s employment upon his disability, which is generally defined in the NicholsonAgreement as Mr. Nicholson’s inability to perform his duties for a 90 day period as a result of his incapacity due to physical or mental illness. The NicholsonAgreement provides that if Mr. Nicholson’s employment is terminated due to death or disability, he will be entitled to (i) the annual bonus earned for thefiscal year immediately prior to his termination date (to the extent not yet paid), (ii) the annual bonus, if any, to which he would otherwise have been entitledfor the fiscal year of his death or disability based on actual performance, pro-rated for the period completed as of the date of his death or disability, and (iii)full vesting of time-based equity awards, pro-rated for the period completed as of the date of his death or disability.58 In addition, we may terminate Mr. Nicholson’s employment for cause or at any time without cause. For these purposes, “cause” is generally definedunder the Nicholson Agreement as Mr. Nicholson’s (a) indictment for a felony or any crime involving moral turpitude or being charged or sanctioned by thefederal or state government or governmental authority or agency with violations of securities laws, or having been found by any court or governmentalauthority or agency to have committed any such violation except in the event that Mr. Nicholson is found to be “not guilty” by a court or the charges aredismissed or reduced to a misdemeanor; (b) willful misconduct or gross negligence in connection with his performance of duties; (c) willful and materialbreach of the Nicholson Agreement, including without limitation, his failure to perform his duties and responsibilities (provided that he be given writtennotice and has 30 days to cure to the extent such violation is reasonably susceptible to cure); (d) fraudulent act or omission by Mr. Nicholson adverse to ourreputation; (e) disclosure of any confidential information to persons not authorized to know such information; or (f) his violation of or failure to comply withany material Company policy or any legal or regulatory obligations or requirements, including without limitation, our Code of Ethics and Business Practicesor any legal or regulatory obligations or requirements (provided that he has 30 days to cure to the extent such violation is reasonably susceptible to cure).Furthermore, if subsequent to the termination of Mr. Nicholson’s employment it is determined that he could have been terminated for cause, Mr. Nicholson’semployment, at our election, shall be deemed to have been terminated for cause, in which event we would be entitled to immediately cease providing anyseverance benefits described below and to recover any severance benefits previously paid to Mr. Nicholson.Pursuant to the Nicholson Agreement, Mr. Nicholson may terminate his employment with us for good reason, or without good reason upon at least twomonths’ advance notice. For these purposes, “good reason” is generally defined under the Nicholson Agreement as either (a) any action by us that results in amaterial and continuing diminution of Mr. Nicholson’s duties or responsibilities as President and Chief Operating Officer, including a change such that hewill no longer report directly to the Chief Executive Officer or have the Chief Financial Officer of the Company report to him; or (b) a reduction of more than10% by us of Mr. Nicholson’s base salary or annual cash incentive award opportunity as in effect from time to time, (c) a relocation of more than 25 miles ofhis principal place of employment, or (d) a change in control, provided Mr. Nicholson must remain employed for up to 12 months if requested by theacquirer following a change in control; in each case without Mr. Nicholson’s written consent. Mr. Nicholson’s employment will also terminate upon hisdeath.Pursuant to the Nicholson Agreement, if Mr. Nicholson’s employment with us is terminated (i) by us without cause or (ii) by Mr. Nicholson for goodreason, then Mr. Nicholson will be entitled to, subject to his execution of a valid general release and waiver of any claims he may have against us, (a)continued payment of base salary and continued medical benefits for a period of one year, (b) the annual bonus earned for the fiscal year immediately prior tohis termination date (to the extent not yet paid), (c) an amount equal to his target annual bonus, (d) the annual bonus, if any, to which he would otherwisehave been entitled for the fiscal year of his employment termination based on actual performance, pro-rated for the period completed prior to suchemployment termination, (e) an additional 12 months’ service credit with respect to vesting of time-based equity awards, and (f) in the event that theapplicable performance conditions are satisfied or a change in control transaction occurs within six months following termination, performance-based equityawards shall vest to the extent they would have if Mr. Nicholson had remained employed with the Company through the satisfaction of such performanceconditions or the date of the change in control, as applicable. In addition, following termination of Mr. Nicholson’s employment by the Company withoutcause or for good reason within two years following a change in control transaction, all of the outstanding stock options awards subject to time-based vestingconditions shall vest.Amounts payable to Mr. Nicholson as a result of termination by us without cause or by Mr. Nicholson with good reason, may be deferred andaccumulated for six months, then paid in a lump-sum on the first day of the seventh month following termination, if required for compliance with the deferredcompensation rules under Section 409A of the Code.Pursuant to the Nicholson Agreement, Mr. Nicholson has agreed that, for the 12 month period following termination of his employment (other than atermination by us without cause or by Mr. Nicholson for good reason), he will not engage in or perform services for certain competitive entities in the retail,mail order and Internet apparel and accessories business or solicit any of our customers or suppliers. In addition, for the 18 month period following thetermination of his employment for any reason, Mr. Nicholson has agreed not to solicit or hire any of our associates. Mr. Nicholson is also subject to standardnon-disclosure of confidential information and non-disparagement restrictions.Jenna LyonsPursuant to the second amended and restated employment agreement between us and Ms. Lyons, dated July 15, 2010 (the “Lyons Agreement”), thepayments and/or benefits we have agreed to pay or provide Ms. Lyons on a termination of her employment vary depending on the reason for suchtermination.59 Pursuant to the Lyons Agreement, we may terminate Ms. Lyons’ employment with us upon her disability, which is generally defined in the LyonsAgreement as Ms. Lyons’ inability to perform her duties for a 90 day period as a result of her incapacity due to physical or mental illness and failure to returnto work within 30 days of notice by the Company. In addition, we may terminate Ms. Lyons’ employment for cause or at any time without cause. For thesepurposes, “cause” is generally defined under the Lyons Agreement as Ms. Lyons’ (a) indictment for a felony or any crime involving moral turpitude or beingcharged or sanctioned by the federal or state government or governmental authority or agency with violations of securities laws, or having been found by anycourt or governmental authority or agency to have committed any such violation; (b) willful misconduct or gross negligence in connection with herperformance of duties; (c) willful and material breach of the Lyons Agreement, including without limitation, her failure to perform her duties andresponsibilities (provided that she be given written notice and has 30 days to cure to the extent such violation is reasonably susceptible to cure);(d) fraudulent act or omission by Ms. Lyons adverse to our reputation; (e) disclosure of any confidential information to persons not authorized to know suchinformation; or (f) her violation of or failure to comply with any material Company policy or any legal or regulatory obligations or requirements, includingwithout limitation, our Code of Ethics and Business Practices or any legal or regulatory obligations or requirements (provided that she has 30 days to cure tothe extent such violation is reasonably susceptible to cure). Furthermore, if subsequent to the termination of Ms. Lyons’ employment it is determined that shecould have been terminated for cause, Ms. Lyons’ employment, at our election, shall be deemed to have been terminated for cause, in which event we wouldbe entitled to immediately cease providing any severance benefits described below and to recover any severance benefits previously paid to Ms. Lyons.Pursuant to the Lyons Agreement, Ms. Lyons may terminate her employment with us with good reason or at any time, upon at least two months’advance notice, without good reason. For these purposes, “good reason” is generally defined under the Lyons Agreement as either (a) any action by us thatresults in a material and continuing diminution of Ms. Lyons’ duties or responsibilities, including an adverse change in her title from Creative Director or achange such that she will no longer report directly to the Chief Executive Officer; or (b) a material reduction by us of Ms. Lyons’ base salary or annual cashincentive award opportunity as in effect from time to time, or (c) a relocation of more than 50 miles of her principal place of employment, in each casewithout Ms. Lyons’ written consent. Ms. Lyons’ employment will also terminate upon her death.Pursuant to the Lyons Agreement, if Ms. Lyons’ employment with us is terminated (i) by us without cause or (ii) by Ms. Lyons with good reason, thenMs. Lyons will be entitled to, subject to her execution of a valid general release and waiver of any claims she may have against us and her continuedcompliance with the post-employment restrictive covenants to which she is subject, (a) continued payment of base salary and continued medical benefits fora period of one year following her termination date and (b) a lump sum in an amount equal to the annual cash incentive award that she received for the fiscalyear prior to her termination. However, Ms. Lyons’ right to the continuation of her base salary and medical benefits for one year following the termination ofher employment will cease, respectively, upon the date that she becomes employed by a new employer or otherwise begins providing services for anotherentity and the date she becomes eligible for coverage under another group health plan; provided that if the cash compensation she receives from her newemployer or otherwise is less than her base salary in effect immediately prior to her termination date, she will be entitled to receive the difference between herbase salary and her new amount of cash compensation during the remainder of the severance period. In addition, if Ms. Lyons’ employment with us isterminated for any reason, Ms. Lyons will also be entitled to any earned but unpaid base salary.Amounts payable to Ms. Lyons as a result of termination by us without cause or by Ms. Lyons with good reason, may be deferred and accumulated forsix months, then paid in a lump-sum on the first day of the seventh month following termination, if required for compliance with the deferred compensationrules under Section 409A of the Code.Pursuant to the Lyons Agreement, Ms. Lyons has agreed that, for the 12 month period following the termination of her employment (other than atermination by us without cause, by Ms. Lyons with good reason, or as a result of our election not to renew the employment period), she will not engage in orperform services for certain competitive entities in the retail, mail order and Internet apparel and accessories business within a 100 mile radius of any of ourstore locations or in the same area as we direct our mail order operations or solicit any of our customers or suppliers. In addition, for the 12 month periodfollowing the termination of her employment for any reason, Ms. Lyons has agreed not to solicit or hire any of our associates. Ms. Lyons is also subject tostandard non-disclosure of confidential information and non-disparagement restrictions.Libby WadlePursuant to the Letter Agreement between us and Ms. Wadle, dated November 28, 2011 (the “Wadle Agreement”), the payments and/or benefits wehave agreed to pay or provide Ms. Wadle on a termination of her employment vary depending on the reason for such termination.60 Pursuant to the Wadle Agreement, we may terminate Ms. Wadle’s employment with us upon her disability, which is generally defined in the WadleAgreement as Ms. Wadle’s inability to perform her duties for a 90 day period as a result of her incapacity due to physical or mental illness or injury andfailure to return to work within 30 days of receiving notice from the Company. In addition, we may terminate Ms. Wadle’s employment for cause or at anytime without cause. For these purposes, “cause” is generally defined under the Wadle Agreement as Ms. Wadle’s (a) indictment for a felony or any crimeinvolving moral turpitude or being charged or sanctioned by the federal or state government or governmental authority or agency with violations ofapplicable laws, or having been found by any court or governmental authority or agency to have committed any such violation; (b) willful misconduct orgross negligence in connection with her performance of duties; (c) willful and material breach of the Wadle Agreement, including without limitation, herfailure to perform her duties and responsibilities thereunder (provided that she be given written notice and has 30 days to cure to the extent such violation isreasonably susceptible to cure); (d) fraudulent act or omission adverse to our reputation; (e) willful disclosure of any confidential information to persons notauthorized to know such information; or (f) her violation of or failure to comply with any material Company policy or any legal or regulatory obligations orrequirements, including without limitation, our Code of Ethics and Business Practices or any legal or regulatory obligations or requirements (provided thatshe has 30 days to cure to the extent such violation is reasonably susceptible to cure). Furthermore, if subsequent to the termination of Ms. Wadle’semployment it is determined that she could have been terminated for cause, Ms. Wadle’s employment, at our election, shall be deemed to have beenterminated for cause, in which event we would be entitled to immediately cease providing any severance benefits described below and to recover anyseverance benefits previously paid to Ms. Wadle.Pursuant to the Wadle Agreement, Ms. Wadle may terminate her employment with us with good reason or at any time, upon at least two months’advance notice, without good reason. For these purposes, “good reason” is generally defined under the Wadle Agreement as (a) any action by us that resultsin a material and continuing diminution of Ms. Wadle’s duties or responsibilities (including, without limitation, an adverse change in Ms. Wadle’s title or achange such that she no longer reports directly to the CEO), (b) a reduction by us of Ms. Wadle’s base salary or annual cash incentive award opportunity as ineffect from time to time, or (iii) a relocation of more than 50 miles of her principal place of employment, in each case without Ms. Wadle’s written consent.Ms. Wadle’s employment will also terminate upon her death.Pursuant to the Wadle Agreement, if Ms. Wadle’s employment with us is terminated (i) by us without cause (ii) by Ms. Wadle with good reason or(iii) by us as a result of non-renewal of the agreement, then Ms. Wadle will be entitled to, subject to her execution of a valid general release and waiver of anyclaims she may have against us and her continued compliance with the post-employment restrictive covenants to which she is subject, (a) continued paymentof base salary and continued medical benefits (which may consist of our reimbursement of COBRA payments) for a period of 12 months following hertermination date; (b) her annual bonus for the preceding year to the extent not yet paid; and (c) a lump sum in an amount equal to the pro-rated amount of anyannual cash incentive award that she would have otherwise received, based on actual performance, for the fiscal year in which she was terminated. However,except in the event Ms. Wadle is terminated in the 24 months following a change in control, Ms. Wadle’s right to the continuation of her base salary andmedical benefits for 12 months following the termination of her employment will cease, respectively, upon the date that she becomes employed by a newemployer or otherwise begins providing services for another entity and the date she becomes eligible for coverage under another group health plan, providedthat if the cash compensation she receives from her new employer or otherwise is less than her base salary in effect immediately prior to her termination date,she will be entitled to receive the difference between her base salary and her new amount of cash compensation during the remainder of the severance period.In addition, if Ms. Wadle’s employment with us is terminated for any reason, Ms. Wadle will also be entitled to any earned but unpaid salary.Amounts payable to Ms. Wadle as a result of termination by us without cause or by Ms. Wadle with good reason, may be deferred and accumulated forsix months, then paid in a lump-sum on the first day of the seventh month following termination, if required for compliance with the deferred compensationrules under Section 409A of the Code.Pursuant to the Wadle Agreement, Ms. Wadle has agreed that, for the 12 month period following the termination of her employment (other than atermination by us without cause, by Ms. Wadle with good reason or as a result of our election not to renew the employment period), she will not engage in orperform services for any entity in the retail, mail order and Internet specialty apparel and accessories business within a 100 mile radius of any of our storelocations or in the same area as we direct our mail order operations or solicit any of our customers or suppliers. In addition, for the 12 month period followingthe termination of her employment for any reason, Ms. Wadle has agreed not to solicit or hire any of our associates. Ms. Wadle is also subject to standard non-disclosure of confidential information restrictions.61 Lynda MarkoeWe have not entered into a written employment agreement with Ms. Markoe. In the event of her termination of employment by the Company, it willbe within the Company’s sole discretion whether to pay any severance benefits. The Company may choose to pay Ms. Markoe severance taking into accounther level and tenure with the Company, based on practices that may be in effect with respect to senior executives from time to time. In that regard, if theCompany had terminated Ms. Markoe’s employment at the end of fiscal 2016, it is likely that she would have received (a) continued payment of base salaryfor a period of up to 52 weeks (but ceasing if she became employed by or provided services to any other entity), (b) 50% of her actual bonus, if any, for the2016 fiscal year, and (c) if so elected by Ms. Markoe, outplacement assistance. The provision of such payments and benefits would be subject to therequirement that Ms. Markoe execute (and not revoke) a general release of claims in favor of the Company.Equity PlanNone of the options to purchase shares of our common stock held by our Named Executive Officers and granted under our 2011 Equity Incentive Planwill vest solely because of a “change in control.” However, stock options and/or, except with respect to Mr. Nicholson, restricted shares granted to our NamedExecutive Officers under the plan may provide for the acceleration of the vesting schedule in the event of the termination by us of a Named ExecutiveOfficer’s employment without cause or the termination by the Named Executive Officer for good reason within two years following a change in control.Unvested shares of restricted stock held by Mr. Nicholson will fully vest upon a change in control.In addition, in the event of (i) a consolidation, merger or similar transaction or series of related transactions, including a sale or disposition of stock, inwhich Parent is not the surviving corporation or which results in the acquisition of all or substantially all of Parent’s then outstanding common stock by asingle person or entity or by a group of persons and/or entities acting in concert, (ii) a sale of all or substantially all of Parent’s assets, (iii) a change in controlas defined in the Management Stockholders Agreement, or (iv) a dissolution or liquidation of Parent, the compensation committee of Parent has the right, inits discretion, to cancel all outstanding equity awards (whether vested or unvested) and, in full consideration of such cancellation, pay to the holder of suchaward an amount in cash, for each share of common stock subject to the award, equal to, (A) with respect to an option, the excess of (x) the value, asdetermined by the Committee, of securities and property (including cash) received by ordinary stockholders as a result of such event over (y) the exerciseprice of such option or (B) with respect to restricted shares, the value, as determined by the Committee, of securities and property (including cash) received bythe ordinary stockholders as a result of such event.If any of the events described above had occurred on January 28, 2017 and the Committee exercised its discretion to cash-out each outstanding andunvested equity award (including performance-based awards) held by the Named Executive Officers as of such date, then each Named Executive Officerwould have received an amount equal to the amount disclosed with respect to such Named Executive Officer in “Equity-Based Incentive Compensation” rowof the tables below. For purposes of this calculation, we have assumed that the value per share received in connection with such event would be equal to$0.00 per share for Class A common stock, which was the valuation of this class of stock on the last business day of our fiscal year 2016.The following tables estimate the amounts that would be payable to our Named Executive Officers if their employment terminated on January 28,2017 and a change in control occurred on such date.62 Millard Drexler Termination by(i) Executive WithoutGood Reason,(ii) by Executive’sNotice ofNon-Renewal or(iii) by Company forCause Termination(i) by the Companywithout Cause, or(ii) by Executive forGood Reason(1) Death/Disability Terminationas a result ofCompanyNotice ofNon-Renewal Change inControl-Terminationof Employmentby the Companywithout Causeor by Executive forGood Reason(1) Cash Severance — $2,000,000(2) — — $2,000,000(2)Equity-Based Incentive Compensation — $—(3) — — $—(3)Other Benefits/ Tax Gross-Ups — — — — $—(4) (1)All severance payments and benefits payable to our Named Executive Officers upon a termination of employment by us without cause or by theexecutive with good reason are subject to the Named Executive Officer’s execution of a valid general release and waiver of all claims against theCompany and compliance with applicable non-competition, non-solicitation and confidential information restrictions.(2)Represents amount equal to (i) Mr. Drexler’s base salary ($200,000) and target cash incentive award ($1,200,000) (one half of such payment to be paidon the first business day that is six months and one day following the assumed termination date and the remaining one half of such payment to be paidin six equal monthly installments commencing on the first business day of the seventh calendar month following such date) and (ii) pro-rated lumpsum payment of any annual cash incentive award he would have otherwise received for fiscal 2016 (which was $600,000 for fiscal 2016). (3)Represents an amount equal to the number of shares underlying all of Mr. Drexler’s unvested stock options as of January 28, 2017 multiplied by thespread between the valuation of the applicable class of common stock as of that date and the applicable exercise price of each stock option. Becausethe exercise price of each stock option is above the assumed fair market value of $0.00 per share of common stock, no value would be attributable toMr. Drexler’s unvested stock options.(4)Represents the estimated amount of the “gross-up” payment that Mr. Drexler would be entitled to receive in connection with any excise taxes imposedby Section 4999 of the Code as a result of a change in control (as defined by Section 280G of the Code). Since the Company was privately-owned asof January 28, 2017, no such gross-up payment would have been made. 63 Michael Nicholson Termination by (i)Executive WithoutGood Reason,(ii) by Executive’sNotice of Non-Renewal or(iii) by Company forCause Termination(i) by the Companywithout Cause, or(ii) by Executive forGood Reason(1) Death/Disability Change inControl Terminationas a result ofCompanyNotice ofNon-Renewal Change inControl-Terminationof Employment bythe Companywithout Cause orby Executive forGood Reason(1) Cash Severance — $2,243,836(2) — — — $2,243,836(2)Equity-Based Incentive Compensation — —(3) — —(5) — $—(6)Other Benefits/Tax Gross-Ups — $21,252(4) — — — — (1)All severance payments and benefits payable to our Named Executive Officers upon a termination of employment by us without cause or by theexecutive with good reason are subject to the Named Executive Officer’s execution of a valid general release and waiver of all claims against theCompany and compliance with applicable non-competition, non-solicitation and confidential information restrictions.(2)Represents amount equal to (i) continued payment of base salary ($800,000) for one year following termination and (ii) the annual cash incentiveaward earned for the fiscal year immediately prior to the fiscal year which includes the assumed termination date (which was $43,836 for fiscal 2015)to the extent not yet paid, (iii) an amount equal to Mr. Nicholson’s target annual cash incentive award ($800,000), and (iv) the pro-rata annual cashincentive award for the fiscal year in which Mr. Nicholson’s termination of employment occurs (which was $600,000 for fiscal 2016).(3)Represents an amount equal to (a) the number of shares underlying Mr. Nicholson’s unvested time-based stock options as of January 28, 2017 thatwould have vested in the 12 months following the termination date, multiplied by the spread between the valuation of the applicable class of commonstock as of that date and the applicable exercise price of each stock option and (b) the number of shares underlying Mr. Nicholson’s unvested time-based restricted stock as of January 28, 2017 that would have vested in the 12 months following the termination date and unvested performance-basedrestricted stock as of January 28, 2017, multiplied by the valuation of the applicable class of common stock as of that date. Because the exercise priceof each stock option is above the assumed fair market value of $0.00 per share of common stock, no value would be attributable to Mr. Nicholson’sunvested stock options.(4)Represents an amount equal to the Company’s total COBRA cost for Mr. Nicholson to continue coverage under the Company’s health insurance planfor one year assuming that Mr. Nicholson did not obtain other employment during that period.(5)Represents an amount equal to the number of shares underlying Mr. Nicholson’s unvested restricted stock as of January 28, 2017 multiplied by thevaluation of the applicable class of common stock as of that date.(6)Represents an amount equal to the number of shares underlying all of (a) Mr. Nicholson’s unvested stock options as of January 28, 2017 multiplied bythe spread between the valuation of the applicable class of common stock as of that date and the applicable exercise price of each stock option and (b)Mr. Nicholson’s unvested restricted stock as of January 28, 2017 multiplied by the valuation of the applicable class of common stock as of thatdate. Because the exercise price of each stock option is above the assumed fair market value of $0.00 per share of common stock, no value would beattributable to Mr. Nicholson’s unvested stock options. 64 Jenna Lyons Termination by (i)Executive WithoutGood Reason,(ii) by Executive’sNotice of Non-Renewal or(iii) by Company forCause Termination(i) by the Companywithout Cause, or(ii) by Executive forGood Reason(1) Death/Disability Terminationas a result ofCompanyNotice ofNon-Renewal Change inControl-Terminationof Employment bythe Companywithout Cause orby Executive forGood Reason(1) Cash Severance — $1,000,000(2) — — $1,000,000(2)Equity-Based Incentive Compensation — — — — $—(3)Other Benefits/Tax Gross-Ups — $11,954(4) — — — (1)All severance payments and benefits payable to our Named Executive Officers upon a termination of employment by us without cause or by theexecutive with good reason are subject to the Named Executive Officer’s execution of a valid general release and waiver of all claims against theCompany and compliance with applicable non-competition, non-solicitation and confidential information restrictions.(2)Represents amount equal to (i) continued payment of base salary ($1,000,000) for one year following termination assuming that Ms. Lyons does notobtain other paid employment during that period and (ii) a lump sum payment equal to the annual cash incentive award, if any, that she received forthe fiscal year ended prior to the fiscal year which includes the assumed termination date (which was $0 for fiscal 2015).(3)Represents an amount equal to the number of shares underlying all of Ms. Lyons’ unvested stock options as of January 28, 2017 multiplied by thespread between the valuation of the applicable class of common stock as of that date and the applicable exercise price of each stock option. Becausethe exercise price of each stock option is above the assumed fair market value of $0.00 per share of common stock, no value would be attributable toMs. Lyons’ unvested stock options.(4)Represents an amount equal to the Company’s total COBRA cost for Ms. Lyons to continue coverage under the Company’s health insurance plan forone year assuming that Ms. Lyons did not obtain other employment during that period.Libby Wadle Termination by(i) Executive WithoutGood Reason,(ii) by Executive’sNotice ofNon-Renewal or(iii) by Company forCause Termination(i) by the Companywithout Cause, or(ii) by Executive forGood Reason(1) Death/Disability Terminationas a result ofCompanyNotice ofNon-Renewal Change inControl-Terminationof Employment bythe Companywithout Cause orby Executive forGood Reason(1) Cash Severance — $1,190,000(2) — — $1,190,000(2)Equity-Based Incentive Compensation — — — — $—(3)Other Benefits/Tax Gross-Ups — $21,252(4) — — — (1)All severance payments and benefits payable to our Named Executive Officers upon a termination of employment by us without cause or by theexecutive with good reason are subject to the Named Executive Officer’s execution of a valid general release and waiver of all claims against theCompany and compliance with applicable non-competition, non-solicitation and confidential information restrictions.(2)Represents amount equal to (i) continued payment of base salary ($850,000) for one year following termination assuming that Ms. Wadle does notobtain other paid employment during that period and (ii) pro-rated lump sum payment of any annual cash incentive award that she would haveotherwise received for fiscal 2016 (which was $340,000 for fiscal 2016).(3)Represents an amount equal to the number of shares underlying all of Ms. Wadle’s unvested stock options as of January 28, 2017 multiplied by thespread between the valuation of the applicable class of common stock as of that date and the applicable exercise price of each stock option. Becausethe exercise price of each stock option is above the assumed fair market value of $0.00 per share of common stock, no value would be attributable toMs. Wadle’s unvested stock options.(4)Represents an amount equal to the Company’s total COBRA cost for Ms. Wadle to continue coverage under the Company’s health insurance plan forone year assuming that Ms. Wadle did not obtain other employment during that period. 65 Lynda Markoe QualifiedTerminationby the Company(1) Death/Disability Change inControl-Terminationof Employment bythe Companywithout Cause orby Executive forGood Reason Cash Severance $653,125(2) — — Equity-Based Incentive Compensation — — $—(3)Other Benefits/Tax Gross-Ups $— — — (1)The payment of severance of benefits is within the sole discretion of the Company and, if paid, would be subject to the Named Executive Officer’sexecution of a valid general release of all claims against the Company.(2)The amount of severance benefits, if any, would be determined by the Company taking into account Ms. Markoe’s level and tenure with theCompany, based on practices that may be in effect with respect to senior executives from time to time. The stated amount represents an estimate ofwhat would likely have been paid to Ms. Markoe had she terminated employment at the end of 2016 fiscal year, equal (i) continued payment of basesalary ($550,000) for 52 weeks following termination of employment assuming that Ms. Markoe does not obtain other paid employment during thatperiod and (ii) 50% of any annual cash incentive award she would have otherwise received for fiscal 2016 (which was $206,250 for fiscal 2016).(3)Represents an amount equal to the number of shares underlying all of Ms. Ms. Markoe’s unvested stock options as of January 28, 2017 multiplied bythe spread between the valuation of the applicable class of common stock as of that date and the applicable exercise price of each stock option.Because the exercise price of each stock option is above the assumed fair market value of $0.00 per share of common stock, no value would beattributable to Ms. Markoe’s unvested stock options. DIRECTOR COMPENSATIONThe following table sets forth information regarding compensation for each of the Company’s non-management directors for fiscal 2016. Messrs.Coulter, Danhakl and Sokoloff and Ms. Wheeler are representatives of our Sponsors. As a result, these directors are not individually compensated by theCompany. Name Fees earned orpaid in cash($)(1) StockAwards($)(2) OptionAwards($)(2) All OtherCompensation($) Total($) James Coulter $— $— $— $— $— John Danhakl $— $— $— $— $— Richard Feintuch $31,250 $— $— $17,481 $48,731 Chad Leat $31,250 $— $— $31,121 $62,371 Jonathan Sokoloff $— $— $— $— $— Stephen Squeri $40,000 $— $— $— $40,000 Carrie Wheeler $— $— $— $— $— (1)Reflects an annual cash retainer for service as a member of the Board. The amounts for Mr. Feintuch and Mr. Leat have been prorated based on partialyear service.(2)In fiscal 2016, the Compensation Committee granted Mr. Squeri restricted stock awards with respect to 26,667 shares of Class A common stock and13,333 shares of Class L common stock for his service as a member of the Board during fiscal 2016 with a grant date fair value of $0. As of January 28,2017, Mr. Squeri held 53,334 shares of unvested Class A restricted stock, 26,666 shares of unvested Class L restricted stock and 32,000 outstandingstock options. No other stock awards or option awards were granted to our non-management directors during fiscal 2016. Mr. Squeri participated inthe offer to eligible employees to exchange outstanding stock options for stock options with a lower exercise price and, in the case of time-basedvesting stock options, an extended vesting schedule.66 Compensation of Directors for Fiscal 2016Neither Mr. Drexler nor the representatives of our Sponsors receive individual compensation from us for serving on the Board. Mr. Drexler received noadditional compensation for his service as a director. The compensation received by Mr. Drexler for his service as our Chief Executive Officer during fiscal2016 is included in the Summary Compensation Table included in this Form 10-K. In exchange for services as a director in 2016, Mr. Squeri received anannual cash retainer of $40,000. Each of Mr. Feintuch and Mr. Leat received cash payments of $31,250, representing a prorated portion of their $125,000annual retainer. In fiscal 2016, the Compensation Committee granted Mr. Squeri restricted stock award of 26,667 shares of Class A common stock and13,333 shares of Class L common stock for service as a member of the Board during fiscal 2016. The Company pays on behalf of Mr. Feintuch and Mr. Leatthe travel expenses and legal fees related to their service on the Board. In Fiscal 2016, Mr. Feintuch received $2,692 in travel expenses and $14,789 towardslegal fees, and Mr. Leat received $16,332 in travel expenses and $14,789 towards legal fees.Each of our directors receives a discount on most merchandise in our stores and through our e-commerce business, which we believe is a commonpractice in the retail industry.Compensation Committee Interlocks and Insider ParticipationThe members of the compensation committee of the Board of the Company are Mr. Coulter, Mr. Sokoloff, Mr. Squeri and Ms. Wheeler. None of thesecommittee members were officers or employees of the Company during fiscal year 2016, were formerly Company officers or had any relationship otherwiserequiring disclosure. There were no interlocks or insider participation between any member of the Board or compensation committee and any member of theBoard or compensation committee of another company.REPORT OF THE COMPENSATION COMMITTEEThe compensation committee of our Board has reviewed and discussed the “Compensation Discussion and Analysis” section with management. Basedon the review and discussions, the compensation committee recommended that the Board include the “Compensation Discussion and Analysis” in thisannual report on Form 10-K.COMPENSATION COMMITTEEJames Coulter, ChairmanJonathan SokoloffStephen SqueriCarrie Wheeler 67 ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS.All of the outstanding shares of common stock of J.Crew Group, Inc. are held indirectly by Parent.The following table describes the beneficial ownership of Parent’s common stock, consisting of both Class A common stock and Class L commonstock, as of March 21, 2017 by each person known to the Company to beneficially own more than five percent of Parent’s common stock, each director, eachexecutive officer named in the “Summary Compensation Table,” and all directors and executive officers as a group. The number of shares of common stockoutstanding used in calculating the percentage for each listed person includes the shares of Class A common stock underlying options beneficially owned bythat person that are exercisable within 60 days following March 21, 2017. The beneficial ownership percentages reflected in the table below are based on91,070,424 shares of Parent’s Class L common stock and 832,163,066 shares of Parent’s Class A common stock outstanding as of March 21, 2017. Name of Beneficial Owner Amount and Nature of BeneficiallyOwned Class L Percent ofClass L Amount and Nature of BeneficiallyOwned Class A Percent of Class A5% Shareholders Affiliates of TPG 60,275,627(a) 66.19% 542,480,716(b) 65.19%Affiliates of LGP 22,666,665(c) 24.89% 203,999,999(d) 24.51 % Directors and Executive Officers James Coulter 60,275,627(a) 66.19% 542,480,716(b) 65.19%Millard S. Drexler 7,370,977(e) 8.09% 84,400,241(f) 10.07%John G. Danhakl 22,666,665(g) 24.89% 203,999,999(g) 24.51%Jonathan D. Sokoloff 22,666,665(h) 24.89% 203,999,999(h) 24.51%Stephen J. Squeri 54,053(i) * 345,833(j) *Carrie Wheeler — (k) * — (k) *Richard Feintuch — * — *Chad Leat — * — *Jenna Lyons 296,296 * 5,386,004(l) *Libby Wadle 148,148 * 2,615,827(m) *Lynda Markoe 74,074 * 1,365,263(n) *Michael Nicholson — * 900,000(o) *All Executive Officers and Directors as a Group 90,885,840 99.80% 841,493,883 99.76%* Indicates less than one percent of common stock. Except as described in the agreements mentioned above or as otherwise indicated in a footnote, each of the beneficial owners listed has, to ourknowledge, sole voting, dispositive and investment power with respect to the indicated shares of common stock beneficially owned by them. Unlessotherwise indicated in a footnote, the address for each individual listed below is c/o J.Crew Group, Inc. 770 Broadway, New York NY 10003. (a)Represents 60,275,627 shares of Class L common stock of Chinos Holdings, Inc. (the “TPG Class L Stock”) held by TPG Chinos, L.P., a Delawarelimited partnership (“TPG Chinos”), whose general partner is TPG Advisors VI, Inc., a Delaware corporation (“Advisors VI”). Messrs. James G. Coulterand David Bonderman are officers, directors and sole shareholders of Advisors VI and may therefore be deemed to beneficially own the TPG stock.Messrs. Bonderman and Coulter disclaim beneficial ownership of the TPG stock held by Advisors VI except to the extent of their pecuniary interesttherein. The address of Advisors VI and Messrs. Bonderman and Coulter is c/o TPG Global, LLC, 301 Commerce Street, Suite 3300, Fort Worth, TX76102.(b)Represents 542,480,716 shares of Class A common stock of Chinos Holdings, Inc. (the “TPG Class A Stock” and, together with the TPG Class L Stock,the “TPG Stock”) held by TPG Chinos.68 (c)Represents 17,091,769 shares of Class L common stock held by Green Equity Investors V, L.P., a Delaware limited partnership (“GEI V”), 5,127,119shares of Class L common stock held by Green Equity Investors Side V, L.P., a Delaware limited partnership (“GEI Side”) and 447,777 shares of Class Lcommon stock held by LGP Chino Coinvest LLC, a Delaware limited Liability Company (“LGP Chino Coinvest” and, together with GEI V and GEISide, the “LGP Funds”). GEI Capital V, LLC, a Delaware limited liability company (“GEI Capital”), is the general partner of each of GEI V and GEISide. GEI Capital may be deemed to have voting and dispositive power with respect to the 22,218,888 shares of Class L common stock held by GEI Vand GEI Side. GEI Capital expressly disclaims beneficial ownership of any securities owned beneficially or of record by any personor persons other than itself for purposes of Section 13(d)(3) and Rule 13d-3 of the Exchange Act and expressly disclaims beneficial ownership of anysuch securities except to the extent of its pecuniary interest therein. LGP Associates V LLC, a Delaware limited liability company (“LGP Associates V”)is the manager of LGP Chino Coinvest. Peridot Coinvest Manager LLC, a Delaware limited partnership (“Peridot”) is the manager of LGP Associates V.The sole member and manager of Peridot is Leonard Green & Partners, L.P., a Delaware limited partnership (“LGP”). LGP serves as the managementcompany of GEI V and GEI Side. LGP may be deemed to have voting and dispositive power with respect to the 22,666,665 shares of Class L commonstock held by the LGP Funds and Peridot may be deemed to have voting and dispositive power with respect to the 447,777 shares of Class L commonstock held by LGP Chino Coinvest. LGP and Peridot expressly disclaim beneficial ownership of any securities owned beneficially or of record by anyperson or persons other than itself for purposes of Section 13(d)(3) and Rule 13d-3 of the Exchange Act and expressly disclaims beneficial ownershipof any such securities except to the extent of its pecuniary interest therein. The business address of each of the LGP Funds and LGP is c/o LeonardGreen & Partners, 11111 Santa Monica Boulevard Suite 2000, Los Angeles, CA 90025.(d)Represents 153,825,921 shares of Class A common stock held by GEI V, 46,144,078 shares of Class A common stock held by GEI Side and 4,030,000shares of Class A common stock held by LGP Chino Coinvest. GEI Capital is the general partner of each of GEI V and GEI Side. GEI Capital may bedeemed to have voting and dispositive power with respect to the 199,969,999 shares of Class A common stock held by GEI V and GEI Side. GEICapital expressly disclaims beneficial ownership of any securities owned beneficially or of record by any person or persons other than itself forpurposes of Section 13(d)(3) and Rule 13d-3 of the Exchange Act and expressly disclaims beneficial ownership of any such securities except to theextent of its pecuniary interest therein. LGP Associates V is the manager of LGP Chino Coinvest. Peridot is the manager of LGP Associates V. The solemember and manager of Peridot is LGP. LGP is the manager of LGP Chino Coinvest and serves as the management company of GEI V and GEI Side.LGP may be deemed to have voting and dispositive power with respect to the 203,999,999 shares of Class A common stock held by the LGP Funds andPeridot may be deemed to have voting and dispositive power with respect to the 4,030,000 of Class A common stock held by LGP Chino Coinvest.LGP and Peridot expressly disclaim beneficial ownership of any securities owned beneficially or of record by any person or persons other than itself forpurposes of Section 13(d)(3) and Rule 13d-3 of the Exchange Act and expressly disclaims beneficial ownership of any such securities except to theextent of its pecuniary interest therein.(e)Represents 2,424,282 shares of Class L common stock held by The Drexler Family Revocable Trust, 1,867,278 shares of Class L common stock held byThe Drexler 2008 Family Trust f/b/o Alexander Fischman Drexler, 1,867,277 shares of Class L common stock held by The Drexler 2008 Family Trustf/b/o Katherine Elizabeth Fischman Drexler, 606,070 shares of Class L common stock held by The 2012 Drexler Family GST Trust f/b/o KatherineDrexler and 606,070 shares of Class L common stock held by The 2012 Drexler Family GST Trust f/b/o Alexander Drexler.(f)Represents 29,845,841 shares of Class A common stock held by The Drexler Family Revocable Trust, 16,805,500 shares of Class A common stock heldby The Drexler 2008 Family Trust f/b/o Alexander Fischman Drexler, 16,805,500 shares of Class A common stock held by The Drexler 2008 FamilyTrust f/b/o Katherine Elizabeth Fischman Drexler, 7,461,461 shares of Class A common stock held by The 2012 Drexler Family GST Trust f/b/oKatherine Drexler and 7,461,460 shares of Class A common stock held by The 2012 Drexler Family GST Trust f/b/o Alexander Drexler. This alsoincludes 6,020,079 shares of Class A common stock that Mr. Drexler has the right to acquire within 60 days of March 21, 2017 upon the exercise ofstock options at an exercise price of $0.10 per share.(g)Mr. Danhakl is a Managing Partner of LGP, and by virtue of this and the relationships described in Footnotes (c) and (d) above, may be deemed to sharevoting and dispositive power with respect to the 22,666,665 shares of Class L common stock and 203,999,999 shares of Class A common stockbeneficially owned by the LGP Funds. Mr. Danhakl disclaims beneficial ownership of all such shares except to the extent of his pecuniary interesttherein. The business address of Mr. Danhakl is c/o Leonard Green & Partners, 11111 Santa Monica Boulevard Suite 2000, Los Angeles, CA 90025.(h)Mr. Sokoloff is a Managing Partner of LGP, and by virtue of this and the relationships described in Footnote (c) and (d) above, may be deemed to sharevoting and dispositive power with respect to the 22,666,665 shares of Class L common stock and 203,999,999 shares of Class A common stockbeneficially owned by the LGP Funds. Mr. Sokoloff disclaims beneficial ownership of all such shares except to the extent of his pecuniary interesttherein. The business address of Mr. Sokoloff is c/o Leonard Green & Partners, 11111 Santa Monica Boulevard Suite 2000, Los Angeles, CA 90025.(i)Includes 47,386 shares of Class L common stock held by Mr. Squeri and 6,667 shares of Class L restricted common stock.(j)Includes 300,500 shares of Class A common stock held by Mr. Squeri, 45,333 shares of Class A restricted common stock that Mr. Squeri has the right toacquire within 60 days of March 21, 2017 upon the exercise of stock options at an exercise price of $0.10 per share.(k)Ms. Wheeler is a TPG Partner. Ms. Wheeler does not have voting or dispositive power over and disclaims beneficial ownership of the TPG Stock. Thebusiness address of Ms. Wheeler is c/o TPG Global, LLC, 301 Commerce Street, Suite 3300, Fort Worth, TX 76102.(l)Includes 1,777,777 shares of Class A common stock held by Ms. Lyons, 1,777,777 shares of Class A common stock that Ms. Lyons has the right toacquire within 60 days of March 21, 2017 upon the exercise of stock options at an exercise price of $0.25 per share and 1,830,450 shares of Class Acommon stock that Ms. Lyons has the right to acquire within 60 days of March 21, 2017 upon the exercise of stock options at an exercise price of$0.10 per share.69 (m) Includes 1,777,777 shares of Class A common stock held by Ms. Wadle and 838,050 shares of Class A common stock that Ms.Wadle has the right to acquire within 60 days of March 21, 2017 upon the exercise of stock options at an exercise price of $0.10 per share.(n)Includes 888,888 shares of Class A common stock held by Ms. Markoe and 476,375 shares of Class A common stock that Ms. Markoe has the right toacquire within 60 days of March 21, 2017 upon the exercise of stock options at an exercise price of $0.10 per share.(o)Includes 500,000 shares of Class A restricted common stock held by Mr. Nicholson and 400,000 shares of Class A common stock that Mr. Nicholsonhas the right to acquire within 60 days of March 21, 2017 upon the exercise of stock options at an exercise price of $0.10 per share.ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONSStockholders AgreementsThe Company has entered into each of a Principal Investors Stockholders’ Agreement and a Management Stockholders’ Agreement with the Sponsors,certain parent companies of the Company (including Parent), certain other stockholders of Parent party thereto and, with respect to the ManagementStockholders’ Agreement, certain members of management party thereto including but not limited to Mss. Lyons, Markoe and Wadle and Mr. Nicholson(collectively, the “Stockholders Agreements”). These agreements contain arrangements among the parties thereto with respect to the business and affairs ofthe Company and the ownership of securities of Parent, including with respect to election of the Company’s directors and the directors of its parentcompanies, restrictions on the issuance or transfer of interests in the Company and its parent entities and other corporate governance provisions (includingthe right to approve various corporate actions).Pursuant to the Stockholders Agreements, (i) the LGP Funds have the right to nominate, and have nominated, two directors to the Company’s Board,(ii) Millard S. Drexler has been nominated to the Board and will serve so long as he is the chief executive officer of the Company and (iii) TPG has the rightto set the size of the Board and nominate the remaining directors. At the closing of the Acquisition in March 2011, TPG nominated two directors to theCompany’s Board. In May 2012, Stephen Squeri was unanimously appointed to the Board. In January 2017, Richard Feintuch and Chat Leat wereunanimously appointed to the Board, such that the Board is currently comprised of eight directors. Pursuant to the Amended and Restated Certificate ofIncorporation of the Company as well as the Stockholders Agreements, each director nominated by TPG has four votes for purposes of any Board action andeach other director has one vote for purposes of any Board action. All decisions of the Board require the approval of a majority of the voting power held bythe directors appointed in accordance with the Stockholders Agreements. In addition, the Stockholders Agreements provide that certain significanttransactions regarding the Company and its parent companies require the consent of the LGP Funds.The Stockholders Agreements contain customary agreements with respect to restrictions on the issuance or transfer of shares of common stock in theCompany and its parent entities, including preemptive rights, rights of first offer upon a disposition of shares, tag along rights and drag along rights.The Principal Investors Stockholders’ Agreement contains customary demand and piggyback registration rights in favor of the Sponsors and the otherstockholders party thereto. The Management Stockholders’ Agreement also contains call rights allowing Parent and, in certain circumstances, the Sponsors,to purchase shares of Parent held by members of management party thereto in the event of a termination of employment of such member of management.Agreements with the SponsorsIn connection with the Acquisition, we entered into a management services agreement with the Sponsors, and/or affiliates of the Sponsors if theSponsors so choose (the “Managers”), pursuant to which the Managers will provide us with certain management services until December 31, 2021, withevergreen one year extensions thereafter. The management services agreement provides that the Managers will receive an aggregate annual retainer fee equalto the greater of 40 basis points of annual revenue and $8 million to be allocated between the Managers as set forth in the management agreement. Themanagement services agreement provides that the Managers will be entitled to receive fees in connection with certain subsequent financing, acquisition,disposition and change of control transactions equal to customary fees charged by internationally-recognized investment banks for serving as financialadvisor in similar transactions. The management agreement also provides for reimbursement for out-of-pocket expenses incurred by the Managers or theirdesignees after the consummation of the Acquisition.The management services agreement includes customary exculpation and indemnification provisions in favor of the Managers, their designees andeach of their respective affiliates. The management services agreement may be terminated by TPG, the board of directors of Parent or upon an initial publicoffering or change of control unless TPG determines otherwise. In the event the management services agreement is terminated, we expect to pay the Managersor their designees all unpaid fees plus the sum of the70 net present values of the aggregate annual retainer fees that would have been payable with respect to the period from the date of termination until theexpiration date in effect immediately prior to such termination.Indemnification of Directors and Officers; Directors’ and Officers’ InsuranceOn January 3, 2017, we entered into indemnification agreements with each of our directors (the “Indemnification Agreements”). TheseIndemnification Agreements clarify and supplement indemnification provisions already contained in our Articles of Incorporation and Bylaws and, amongother things, provide for indemnification of the director to the fullest extent permitted by the laws of the state of Delaware, advancement of legal fees andexpenses in connection with legal proceedings, certain procedures for determining whether the director is entitled to indemnification and dispute resolutionprocedures. The form of Indemnification Agreement is attached as Exhibit 10.24 to this Annual Report on Form 10-K.Those directors and officers of J.Crew and its subsidiary at or prior to the closing of the Acquisition are entitled, under the merger agreement relatingto the Acquisition, to continued indemnification coverage for acts or omissions at or prior to the closing of the Acquisition.Certain Charter and Bylaws ProvisionsOur amended and restated certificate of incorporation and our amended and restated bylaws contain provisions limiting directors’ obligations inrespect of corporate opportunities. In addition, our amended and restated certificate of incorporation provides that Section 203 of the Delaware GeneralCorporation Law will not apply to the Company. Section 203 restricts “business combinations” between a corporation and “interested stockholders,”generally defined as stockholders owning 15% or more of the voting stock of a corporation.Private AircraftMr. Drexler travels extensively for Company business, including for purposes of site visitations to the Company’s stores. For purposes of businessefficiency, Mr. Drexler uses his private airplane. Mr. Drexler’s airplane is owned by an entity which he controls. We pay an established charter rate to a third-party commercial aircraft operator for business use of his airplane. Mr. Drexler also has a fractional interest in a helicopter and we reimburse him for businessuse of the helicopter at an established rate. The audit committee has reviewed the terms of these arrangements to ensure they are at, or below, market and inthe best interests of the Company. During fiscal 2016, we paid $1,117,400 pursuant to these arrangements.Review, Approval or Ratification of Transactions with Related PersonsThe Board has adopted a written policy regarding the approval or ratification of all transactions required to be reported under the SEC’s rulesregarding transactions with related persons. In accordance with this policy, the audit committee of the Board will evaluate each related person transaction forthe purpose of recommending to the disinterested members of the Board that the transactions are fair, reasonable and within Company policy, and should beratified and approved by the Board. At least annually, management will provide the audit committee with information pertaining to related persontransactions. The audit committee will consider each related person transaction in light of all relevant factors and the controls implemented to protect theinterests of the Company and its stockholders. Relevant factors will include: •the benefits of the transaction to the Company; •the terms of the transaction and whether they are arm’s-length and in the ordinary course of the Company’s business; •the direct or indirect nature of the related person’s interest in the transaction; •the size and expected term of the transaction; and •other facts and circumstances that bear on the materiality of the related person transaction under applicable law.Approval by the Board of any related person transaction involving a director will also be made in accordance with applicable law and the Company’sorganizational documents as from time to time in effect. Where a vote of the disinterested directors is required, such vote will be called only following fulldisclosure to such directors of the facts and circumstances of the relevant related person transaction. Related person transactions entered into, but notapproved or ratified as required by the Board’s policy, will be subject to termination by the Company (or any relevant subsidiary), if so directed by the auditcommittee or the Board, as applicable, taking into account such factors as such body deems appropriate and relevant. 71 ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES.During fiscal years 2016, 2015 and 2014, KPMG LLP served as our independent registered public accounting firm and in that capacity rendered anunqualified opinion on our consolidated financial statements as of and for the three years ended January 28, 2017.The following table sets forth the aggregate fees billed or expected to be billed to us by our independent registered public accounting firm in each ofthe last two fiscal years: Fiscal 2016 Fiscal 2015 Audit fees $1,326,000 $1,399,000 Audit-related fees — — Tax fees 132,000 110,000 Total fees $1,458,000 $1,509,000 Audit FeesThese amounts represent fees billed or expected to be billed by KPMG LLP for professional services rendered for the audits of the Company’s annualfinancial statements for fiscal 2016 and fiscal 2015 and the reviews of the financial statements included in the Company’s quarterly reports on Form 10-Q.Audit-Related FeesThis amount represents fees billed by KPMG LLP for professional services rendered that were not included under “Audit Fees” or “Tax fees.”Tax FeesThis amount represents fees billed or expected to be billed by KPMG LLP for professional services rendered in connection with sales and use taxcompliance.Auditor IndependenceThe Audit Committee has considered whether the provision of the services set forth in the table above is compatible with maintaining the auditor’sindependence and has determined that the provision of such services has not adversely affected the auditor’s independence.Policy on Audit Committee Pre-Approval of Audit and Permitted Non-Audit ServicesThe audit committee has established policies and procedures regarding the pre-approval of audit and other services that our independent auditor mayperform for us. Under the policy, the audit committee has pre-approved the engagement of our independent auditors to perform specific audit, audit related,tax and other non-audit services, subject to the fee limits established from time to time by the Audit Committee, as being consistent with auditorindependence. The provision of all other services, and all generally pre-approved services in excess of the applicable fee limits, by the independentregistered public accounting firm must be specifically pre-approved by the Audit Committee on a case-by-case basis. Management updates the AuditCommittee at regularly scheduled meetings about the pre-approved services performed by the independent registered public accounting firm since the lastAudit Committee meeting. Requests to provide services that require separate approval by the Audit Committee must be submitted to the Audit Committeeby both the independent registered public accounting firm and the Chief Financial Officer and must include a joint statement as to whether, in their view, therequest is consistent with the SEC’s and the PCAOB’s rules on auditor independence. The Audit Committee may delegate pre-approval authority to one ofits members and has currently delegated such authority to the Audit Committee’s Chair. All pre-approved decisions made by the Chair must be reported tothe full Audit Committee at its next scheduled meeting.For fiscal 2016, the Audit Committee established fee limits on pre-approved services outside the scope of the pre-approved annual audit engagementof up to $200,000 in the aggregate for statutory audits or financial audits for subsidiaries of the Company; up to $20,000 for audits of the Company’s 401(k)Savings Plan; up to $150,000 for sales and use tax compliance; up to $50,000 in the aggregate for VAT compliance and indirect tax advice for certain foreignsubsidiaries; and up to $250,000 for services associated with SEC registration statements, periodic reports and other documents filed with the SEC or otherdocuments issued in connection with securities offerings and assistance in responding to SEC comment letters.72 The audit committee is governed by a written charter, which is available free of charge on the investor relations section of our website atwww.jcrew.com or upon written request to the Secretary of the Company, J.Crew Group, Inc., 770 Broadway, New York, New York 10003. The auditcommittee held 4 meetings in fiscal 2016. 73 PART IV ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES. (a)Financial Statements and Financial Statement Schedules. See “Index to Financial Statements” which is located on page F-1 of this report. (b)Exhibits. See the exhibit index which is included herein.ITEM 16.FORM 10-K SUMMARY.Not applicable. 74 SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized. J.CREW GROUP, INC. Date: March 21, 2017 By: /S/ MILLARD DREXLER Millard DrexlerChief Executive OfficerPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities indicated, on March 20, 2017. Signature Title /s/ Millard Drexler Chairman of the Board, Millard Drexler Chief Executive Officer and a Director (Principal Executive Officer) /s/ Michael J. Nicholson President, Chief Operating Officer and Chief Financial OfficerMichael J. Nicholson (Principal Financial Officer) /s/ JEREMY BROOKS Vice President, Chief Accounting OfficerJeremy Brooks (Principal Accounting Officer) * DirectorJames Coulter * DirectorJohn Danhakl * DirectorRichard Feintuch * DirectorChad Leat * DirectorJonathan Sokoloff * DirectorStephen Squeri * DirectorCarrie Wheeler *By:/s/ Michael J. Nicholson Michael J. Nicholson Attorney-in-Fact 75 J.Crew Group, Inc.INDEX TO FINANCIAL STATEMENTS Audited Consolidated Financial Statements Report of Independent Registered Public Accounting Firm F–2Consolidated Balance Sheets at January 28, 2017 and January 30, 2016 F–3Consolidated Statements of Operations and Comprehensive Loss for the years ended January 28, 2017, January 30, 2016 and January 31, 2015 F–4Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended January 28, 2017, January 30, 2016 and January 31, 2015 F–5Consolidated Statements of Cash Flows for the years ended January 28, 2017, January 30, 2016 and January 31, 2015 F–6Notes to Consolidated Financial Statements F–7Financial Statement Schedules Schedule II—Valuation and Qualifying Accounts for the years ended January 28, 2017, January 30, 2016 and January 31, 2015 F–28 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMThe Board of Directors and StockholdersJ.Crew Group, Inc.: We have audited the accompanying consolidated balance sheets of J.Crew Group, Inc. and its subsidiaries as of January 28, 2017 and January 30,2016, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for each of theyears in the three-year period ended January 28, 2017. In connection with our audits of the consolidated financial statements, we also have audited financialstatement schedule II. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express anopinion on these consolidated financial statements and financial statement schedule based on our audits.We conducted our audits in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States) and inaccordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for ouropinion.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 its subsidiaries as of January 28, 2017 and January 30, 2016, and the results of their operations and their cash flows for each of the years in the three-year period ended January 28, 2017, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statementschedule, when considered in relation to the consolidated financial statements taken as a whole, present fairly, in all material respects, the information setforth therein. /s/ KPMG LLPNew York, New YorkMarch 21, 2017 F-2 J.CREW GROUP, INC.Consolidated Balance Sheets(in thousands, except share data) January 28,2017 January 30,2016 ASSETS Current assets: Cash and cash equivalents $132,226 $87,812 Merchandise inventories 314,492 372,410 Prepaid expenses and other current assets 59,494 65,605 Total current assets 506,212 525,827 Property and equipment, at cost 642,339 645,065 Less accumulated depreciation (280,152) (246,821)Property and equipment, net 362,187 398,244 Intangible assets, net 450,204 460,744 Goodwill 107,900 107,900 Other assets 6,207 7,261 Total assets $1,432,710 $1,499,976 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable $194,494 $248,342 Other current liabilities 157,141 157,765 Interest payable 7,977 5,279 Income taxes payable to Parent 25,215 7,086 Current portion of long-term debt 15,670 15,670 Total current liabilities 400,497 434,142 Long-term debt, net 1,494,490 1,501,917 Lease-related deferred credits, net 132,566 131,812 Deferred income taxes, net 148,200 148,819 Other liabilities 43,168 52,273 Total liabilities 2,218,921 2,268,963 Stockholders’ deficit: Common stock $0.01 par value; 1,000 shares authorized, issued and outstanding — — Additional paid-in capital 980,368 979,333 Accumulated other comprehensive loss (11,536) (16,791)Accumulated deficit (1,755,043) (1,731,529)Total stockholders’ deficit (786,211) (768,987)Total liabilities and stockholders’ deficit $1,432,710 $1,499,976 The accompanying notes are an integral part of these consolidated financial statements. F-3 J.CREW GROUP, INC.Consolidated Statements of Operations and Comprehensive Loss(in thousands) For the Year Ended January 28,2017 January 30,2016 January 31,2015 Revenues: Net sales $2,359,622 $2,447,692 $2,540,449 Other 65,840 58,135 39,246 Total revenues 2,425,462 2,505,827 2,579,695 Cost of goods sold, including buying and occupancy costs 1,550,185 1,610,256 1,608,777 Gross profit 875,277 895,571 970,918 Selling, general and administrative expenses 818,546 834,137 845,953 Impairment losses 7,752 1,381,642 709,985 Income (loss) from operations 48,979 (1,320,208) (585,020)Interest expense, net 79,359 69,801 74,352 Loss on refinancings 435 — 58,960 Loss before income taxes (30,815) (1,390,009) (718,332)Benefit for income taxes (7,301) (147,333) (60,559)Net loss $(23,514) $(1,242,676) $(657,773)Other comprehensive income (loss): Reclassification of losses on cash flow hedges, net of tax, to earnings 6,387 74 13,652 Unrealized gain (loss) on cash flow hedges, net of tax 449 (7,012) (10,634)Foreign currency translation adjustments (1,581) 200 2,113 Comprehensive loss $(18,259) $(1,249,414) $(652,642) The accompanying notes are an integral part of these consolidated financial statements. F-4 J.CREW GROUP, INC.Consolidated Statements of Changes in Stockholders’ Equity (Deficit)(in thousands, except shares) Additionalpaid-incapital Retainedearnings(accumulateddeficit) Accumulatedothercomprehensiveloss Totalstockholders’equity (deficit) Common Stock Shares AmountBalance at February 1, 2014 1,000 $— $1,008,984 $196,620 $(15,184) $1,190,420 Net loss — — — (657,773) — (657,773)Share-based compensation — — 5,968 — — 5,968 Excess tax benefit from share-based awards — — 8 — — 8 Dividend and contribution to Parent — — (30) (27,700) — (27,730)Reclassification of realized losses on cash flowhedges, net of tax of $8,728, to earnings — — — — 13,652 13,652 Unrealized loss on cash flow hedges, net of tax of$6,799 — — — — (10,634) (10,634)Foreign currency translation adjustments — — — — 2,113 2,113 Balance at January 31, 2015 1,000 $— $1,014,930 $(488,853) $(10,053) $516,024 Net loss — — — (1,242,676) — (1,242,676)Share-based compensation — — 2,580 — — 2,580 Dividend and contribution to Parent — — (38,177) — — (38,177)Reclassification of realized losses on cash flowhedges, net of tax of $47, to earnings — — — — 74 74 Unrealized loss on cash flow hedges, net of tax of$4,483 — — — — (7,012) (7,012)Foreign currency translation adjustments — — — — 200 200 Balance at January 30, 2016 1,000 $— $979,333 $(1,731,529) $(16,791) $(768,987)Net loss — — — (23,514) — (23,514)Share-based compensation — — 1,035 — — 1,035 Reclassification of realized losses on cash flowhedges, net of tax of $4,083, to earnings — — — — 6,387 6,387 Unrealized loss on cash flow hedges, net of tax of$287 — — — — 449 449 Foreign currency translation adjustments — — — — (1,581) (1,581)Balance at January 28, 2017 1,000 $— $980,368 $(1,755,043) $(11,536) $(786,211) The accompanying notes are an integral part of these consolidated financial statements. F-5 J.CREW GROUP, INC.Consolidated Statements of Cash Flows(in thousands) For the Year Ended January 28,2017 January 30,2016 January 31,2015 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(23,514) $(1,242,676) $(657,773)Adjustments to reconcile to cash flows from operating activities: Depreciation of property and equipment 109,503 103,966 93,458 Amortization of intangible assets 10,540 15,559 15,944 Reclassification of hedging losses to earnings 10,470 119 — Impairment losses 7,752 1,381,642 709,985 Amortization of deferred financing costs and debt discount 5,021 5,030 5,657 Share-based compensation 1,035 2,580 5,968 Loss on refinancings 435 — 58,960 Excess tax benefit from share-based awards — — (8)Foreign currency transaction (gains) losses (1,539) 2,027 5,480 Deferred income taxes (5,140) (151,232) (75,015)Changes in operating assets and liabilities: Merchandise inventories 57,798 (5,351) (15,071)Prepaid expenses and other current assets 5,989 (4,265) (4,585)Other assets 741 (701) (832)Accounts payable and other liabilities (62,965) 16,910 4,934 Federal and state income taxes 21,707 11,945 11,016 Net cash provided by operating activities 137,833 135,553 158,118 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (80,140) (103,657) (127,874)Other investing activities — — (4,817)Net cash used in investing activities (80,140) (103,657) (132,691)CASH FLOWS FROM FINANCING ACTIVITIES: Principal repayments of Term Loan Facility (11,753) (15,670) (11,753)Cost paid in connection with refinancings of debt (1,099) (137) (22,182)Dividend and contribution to Parent — (38,177) (27,730)Proceeds from Term Loan Facility, net of discount — — 1,559,165 Repayments of former term loan — — (1,167,000)Redemption of Senior Notes — — (400,000)Excess tax benefit from share-based awards — — 8 Net cash used in financing activities (12,852) (53,984) (69,492)Effect of changes in foreign exchange rates on cash and cash equivalents (427) (1,197) (1,487)Increase (decrease) in cash and cash equivalents 44,414 (23,285) (45,552)Beginning balance 87,812 111,097 156,649 Ending balance $132,226 $87,812 $111,097 Supplemental cash flow information: Income taxes paid $1,245 $1,328 $3,985 Interest paid $72,558 $73,923 $92,973 The accompanying notes are an integral part of these consolidated financial statements. F-6 J.CREW GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor the Years Ended January 28, 2017, January 30, 2016 and January 31, 2015(Dollars in thousands, unless otherwise indicated) 1. Nature of Business and Summary of Significant Accounting Policies(a) Basis of PresentationJ.Crew Group, Inc. and its wholly owned subsidiaries (the “Company” or “Group”) was acquired (the “Acquisition”) on March 7, 2011 through amerger with a subsidiary of Chinos Holdings, Inc. (the “Parent”). The Parent was formed by investment funds affiliated with TPG Capital, L.P. (“TPG”) andLeonard Green & Partners, L.P. (“LGP” and together with TPG, the “Sponsors”). Subsequent to the Acquisition, Group became an indirect, wholly ownedsubsidiary of Parent, which is owned by affiliates of the Sponsors, co-investors and members of management. Prior to March 7, 2011, the Company operatedas a public company with its common stock traded on the New York Stock Exchange.All significant intercompany balances and transactions within Group are eliminated in consolidation.(b) BusinessThe Company designs, contracts for the manufacture of, markets and sells women’s, men’s and children’s apparel, shoes and accessories under theJ.Crew and Madewell brand names. The Company’s products are marketed primarily in the United States, Canada, the United Kingdom, Hong Kong andFrance through its retail and factory stores, and its websites and catalogs.The Company is subject to seasonal fluctuations in its merchandise sales and results of operations. The Company expects its revenues generally to belower in the first and second quarters than in the third and fourth quarters (which includes the holiday season) of each fiscal year.A significant amount of the Company’s products are produced in Asia through arrangements with independent contractors. As a result, the Company’soperations could be adversely affected by political instability resulting in the disruption of trade from the countries in which these contractors are located orby 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 YearThe Company’s fiscal year ends on the Saturday closest to January 31. The fiscal years 2016, 2015, and 2014, ended on January 28, 2017, January 30,2016, and January 31, 2015, respectively, and each consisted of 52 weeks.(d) Use of Estimates in the Preparation of Financial StatementsManagement is required to make estimates and assumptions about future events in preparing financial statements in conformity with generallyaccepted accounting principles (“GAAP”). These estimates and assumptions affect the amounts of assets, liabilities, revenues and expenses and the disclosureof loss contingencies at the date of the consolidated financial statements. While management believes that past estimates and assumptions have beenmaterially accurate, current estimates are subject to change if different assumptions as to the outcome of future events are made. Management evaluatesestimates and judgments on an ongoing basis and predicates those estimates and judgments on historical experience and on reasonable factors. Since futureevents and their effects cannot be determined with absolute certainty, actual results may differ from the estimates used in preparing the accompanyingconsolidated financial statements.(e) Revenue RecognitionRevenue is recognized at the point of sale in the stores, and at an estimated date of receipt by the customer in the e-commerce business. Prices for allmerchandise are listed in the Company’s websites and catalogs and are confirmed with the customer upon order. The customer has no cancellation privilegesother than customary rights of return. The Company accrues a sales return allowance for estimated returns of merchandise that will occur subsequent to thebalance sheet date, but relate to sales prior to the balance sheet date. The Company presents taxes collected from customers and remitted to governmentalauthorities on a net basis on the consolidated statements of operations and comprehensive loss.F-7J.CREW GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)For the Years Ended January 28, 2017, January 30, 2016 and January 31, 2015(Dollars in thousands, unless otherwise indicated) A liability is recognized at the time a gift card is sold, and revenue is recognized at the time the gift card is redeemed for merchandise. Revenue isdeferred and a liability is recognized for gift cards issued in connection with the Company’s customer loyalty program. Any unredeemed loyalty gift cards arerecognized as income in the period in which they expire.Amounts billed to customers for shipping and handling fees are recorded in other revenues. Other revenues also include (i) income from unredeemedgift cards, estimated based on Company specific historical trends, which amounted to $5,208 in fiscal 2016, $4,539 in fiscal 2015, and $4,101 in fiscal 2014,and (ii) revenues from third party resellers, which amounted to $29,107 in fiscal 2016, $24,088 in fiscal 2015, and $9,012 in fiscal 2014.(f) Merchandise InventoriesMerchandise inventories are stated at the lower of average cost or market. The Company capitalizes certain design, purchasing and warehousing costsin inventory and these costs are included in cost of goods sold as the inventories are sold.(g) Advertising and Catalog CostsDirect response advertising, which consists primarily of catalog production and mailing costs, are capitalized and amortized over the expected futurerevenue stream. Amortization of capitalized advertising costs is computed using the ratio of current period revenues for the catalog cost pool to the total ofcurrent and estimated future period revenues for that catalog cost pool. The capitalized costs of direct response advertising are amortized, commencing withthe date catalogs are mailed, over the duration of the expected revenue stream, which is approximately two months. Deferred catalog costs, included inprepaid expenses and other current assets, as of January 28, 2017 and January 30, 2016 were $4,789 and $6,452, respectively. Catalog costs, which arereflected in selling, general and administrative expenses, were $41,268 in fiscal 2016, $48,533 in fiscal 2015, and $47,372 in fiscal 2014.All other advertising costs, which are expensed as incurred, were $63,427 in fiscal 2016, $71,095 in fiscal 2015, and $63,278 in fiscal 2014.(h) Lease-Related Deferred CreditsRental payments under operating leases are charged to expense on a straight-line basis after consideration of rent holidays, step rent provisions andescalation clauses. Differences between rental expense, which is recognized from the date of possession, and actual rental payments are recorded as deferredrent and included in deferred credits.The Company receives construction allowances upon entering into certain store leases. These construction allowances are recorded as deferred creditsand are amortized as a reduction of rent expense over the term of the related lease. Deferred construction allowances were $83,028 and $83,347 at January 28,2017 and January 30, 2016, respectively.Additionally, in connection with the Acquisition, the Company recorded liabilities for unfavorable lease commitments, which are amortized on astraight-line basis over the remaining lease life, which aggregated to $4,733 and $7,478 at January 28, 2017 and January 30, 2016, respectively.(i) Share-Based CompensationThe fair value of time-based employee awards is recognized as compensation expense on a straight line basis over the requisite service period of theaward. The fair value of the options exercisable when certain owners of the Parent receive a specified level of cash proceeds from the sale of their initialinvestment will not be recognized until such event is deemed probable. Determining the fair value of options at the grant date requires judgment, includingestimating the expected term that stock options will be outstanding prior to exercise, the associated volatility and the expected dividend yield. Upon grant ofawards, the Company also estimates an amount of forfeitures that will occur prior to vesting. See note 4 for more information regarding share-based awards.F-8J.CREW GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)For the Years Ended January 28, 2017, January 30, 2016 and January 31, 2015(Dollars in thousands, unless otherwise indicated) (j) Property and EquipmentProperty and equipment are stated at cost and are depreciated over the estimated useful lives using the straight-line method. Buildings andimprovements are depreciated over estimated useful lives of twenty years. Furniture, fixtures and equipment are depreciated over estimated useful lives,ranging from three to ten years. Leasehold improvements are depreciated over the shorter of their useful lives or related lease terms (without consideration ofoptional renewal periods).The Company capitalizes certain costs (included in fixtures and equipment) related to the acquisition and development of software and amortizesthese costs using the straight line method over the estimated useful life of the software, which is three to five years. Certain development costs not meetingthe criteria for capitalization are expensed as incurred.(k) Impairment of Long-Lived AssetsThe Company reviews long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate thatthe carrying amount of an asset may not be recoverable. The Company assesses the recoverability of such assets based upon estimated cash flow forecasts.Charges for impairment of long-lived assets were $7,752 in fiscal 2016, $4,522 in fiscal 2015 and $2,785 in fiscal 2014. See notes 3 and 9 for moreinformation regarding impairment of long-lived assets.(l) Income TaxesThe Company accounts for income taxes using an asset and liability method. Deferred tax assets and deferred tax liabilities are recognized based onthe difference between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred taxes are measuredusing current enacted tax rates in effect in the years in which those temporary differences are expected to reverse. The provision for income taxes includestaxes currently payable and deferred taxes resulting from the tax effects of temporary differences between the financial statement and tax bases of assets andliabilities.The Company maintains valuation allowances where it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changesin the valuation allowances are included in the Company’s tax provision in the period of change. In determining whether a valuation allowance is warranted,the Company evaluates factors such as prior earnings history, expected future earnings, carry-back and carry-forward periods and tax strategies that couldpotentially enhance the likelihood of the realization of a deferred tax asset.With respect to uncertain tax positions taken or expected to be taken on a tax return, the Company recognizes in its financial statements the impact oftax positions that meet a “more likely than not” threshold, based on the technical merits of the position. The tax benefits recognized from uncertain positionsare measured based on the largest benefit that has a greater than 50% likelihood of being realized upon effective settlement.The Company recognizes interest expense and income related to income taxes as a component of interest expense, and penalties as a component ofselling, general and administrative expenses.(m) Segment InformationThe Company has two operating segments, J.Crew and Madewell, which are aggregated into one reportable segment. The Company’s identifiableassets are located primarily in the United States. Export sales are not material.(n) Cash and Cash EquivalentsThe Company considers all highly liquid marketable securities, with maturities of 90 days or less when purchased, to be cash equivalents. Cashequivalents, which were $96,450 and $50,103 at January 28, 2017 and January 30, 2016, respectively, are stated at cost, which approximates fair marketvalue.(o) Operating ExpensesCost of goods sold (including buying and occupancy costs) includes the direct cost of purchased merchandise, freight, design, buying and productioncosts, occupancy costs related to store operations, and all shipping and handling and delivery costs.F-9J.CREW GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)For the Years Ended January 28, 2017, January 30, 2016 and January 31, 2015(Dollars in thousands, unless otherwise indicated) Selling, general and administrative expenses include all operating expenses not included in cost of goods sold, primarily catalog production andmailing costs, administrative payroll, store expenses other than occupancy costs, depreciation and amortization, certain warehousing expenses (aggregatingto $40,841 in fiscal 2016, $44,164 in fiscal 2015 and $43,442 in fiscal 2014) and credit card fees.(p) Deferred Financing CostsDeferred financing costs are amortized over the term of the related debt agreements. The amortization is included in interest expense, net.(q) Store Pre-opening CostsCosts associated with the opening of new stores are expensed as incurred.(r) Goodwill and Intangible AssetsThe Acquisition of the Company was accounted for as a purchase business combination, whereby the purchase price paid was allocated to recognizethe acquired assets and liabilities at fair value. In connection with the purchase price allocation, intangible assets were established for the J.Crew andMadewell trade names, loyalty program, customer lists and favorable lease commitments. The purchase price in excess of the fair value of assets andliabilities was recorded as goodwill, which consists primarily of intangible assets related to the knowhow, design and merchandising abilities that do notqualify for separate recognition.Indefinite-lived intangible assets, such as the J.Crew trade name and goodwill, are not subject to amortization. The Company assesses therecoverability of indefinite-lived intangibles whenever there are indicators of impairment, or at least annually in the fourth quarter. If the recorded carryingvalue of an intangible asset exceeds its estimated fair value, the Company records a charge to write the intangible asset down to its fair value. Definite-livedintangibles, such as the Madewell trade name and favorable lease commitments, are amortized on a straight line basis over their useful life or remaining leaseterm. See note 3 for more information regarding goodwill and intangible assets of the Company.The Company assesses the recoverability of goodwill at the reporting unit level, which consists of its operating segments, J.Crew and Madewell, ofwhich only Madewell has goodwill. In this assessment, the Company first compares the estimated enterprise fair value of the Madewell reporting unit to itsrecorded carrying value. The Company estimates the enterprise fair value based on a combination of an income approach, specifically the discounted cashflow, a market approach, and a transaction approach. If the recorded carrying value of the Madewell reporting unit exceeds its estimated enterprise fair valuein the first step, a second step is performed in which the Company allocates the enterprise fair value to the fair value of the Madewell’s net assets. The secondstep of the impairment testing process requires, among other things, estimates of fair values of substantially all of the Company’s tangible and intangibleassets. Any enterprise fair value in excess of amounts allocated to such net assets represents the implied fair value of goodwill for Madewell. If the recordedgoodwill balance for Madewell exceeds the implied fair value of goodwill, an impairment charge is recorded to write goodwill down to its fair value.See note 3 for more information regarding impairment of goodwill and intangible assets.(s) DividendsDividends are recorded at the declaration date as a reduction of retained earnings included in stockholders’ equity (deficit). If the amount of thedividend exceeds retained earnings, the dividend is recorded as a reduction of additional paid-in capital.(t) Foreign Currency TranslationThe financial statements of the Company’s foreign operations are translated into U.S. dollars. Assets and liabilities are translated at current exchangerates as of the balance sheet date, equity accounts at historical exchange rates, while revenue and expense accounts are translated at the average rates in effectduring the year. Translation adjustments are not included in determining net income, but are included in accumulated other comprehensive loss withinstockholders’ equity (deficit). As of January 28, 2017 and January 30, 2016, foreign currency translation adjustments resulted in accumulated losses of$1,581 and accumulated gains of $200, respectively. Foreign currency transaction gains (losses) included in operating results were $1.5 million in fiscal2016, $(2.0) million in fiscal 2015 and $(5.5) in fiscal 2014.F-10J.CREW GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)For the Years Ended January 28, 2017, January 30, 2016 and January 31, 2015(Dollars in thousands, unless otherwise indicated) (u) Derivative Financial InstrumentsThe Company enters into interest rate swap agreements to manage a portion of its interest rate risk related to floating rate indebtedness. As cash flowhedges, unrealized gains are recognized as assets while unrealized losses are recognized as liabilities. The interest rate swap agreements are highly correlatedto the changes in interest rates to which the Company is exposed. Unrealized gains and losses on these instruments are designated as effective or ineffective.The effective portion of such gains or losses is recorded as a component of accumulated other comprehensive loss, while the ineffective portion of such gainsor losses is recorded as a component of interest expense. Realized gains and losses in connection with each required interest payment are reclassified fromaccumulated other comprehensive loss to interest expense.(v) ReclassificationCertain prior year amounts have been reclassified to conform to the current year’s presentation. Specifically, the Company adopted an accountingstandard which requires certain deferred financing costs related to a recognized debt liability to be presented in the balance sheet as a reduction of thecarrying amount of that debt liability. The adoption of this pronouncement resulted in the reclassification of $16,301 from long-term assets to long-termliabilities on the Company’s consolidated balance sheet at January 30, 2016. 2. Management Services AgreementPursuant to a management services agreement entered into in connection with the Acquisition, and in exchange for on-going consulting andmanagement advisory services, the Sponsors receive an aggregate annual monitoring fee prepaid quarterly equal to the greater of (i) 40 basis points ofconsolidated annual revenues or (ii) $8 million. The Sponsors also receive reimbursement for out-of-pocket expenses incurred in connection with servicesprovided pursuant to the agreement. The Company recorded an expense of $10.0 million in fiscal 2016, $10.3 million in fiscal 2015, and $10.4 million infiscal 2014 for monitoring fees and out-of-pocket expenses, included in selling, general and administrative expenses in the statements of operations andcomprehensive loss.3. Goodwill and Intangible AssetsA summary of the components of intangible assets is as follows: Loyalty Program andCustomer Lists Favorable LeaseCommitments MadewellTrade Name Key Money J.Crew Trade Name Balance at January 31, 2015 $5,633 $20,009 $65,942 $4,724 $740,300 Amortization expense (5,200) (5,801) (4,100) (458) — Impairment losses — — — — (360,305) Balance at January 30, 2016 433 14,208 61,842 4,266 379,995 Amortization expense (433) (5,568) (4,100) (439) — Impairment losses — — — — — Balance at January 28, 2017 $— $8,640 $57,742 $3,827 $379,995 Total accumulated amortization or impairment losses atJanuary 28, 2017 $(27,010) $(52,370) $(24,258) $(988) $(505,305) Estimated amortization expense of intangible assets for the next five fiscal years is as follows: $9 million in fiscal 2017, $8 million in fiscal 2018, $5million in fiscal 2019, $5 million in fiscal 2020, and $5 million in fiscal 2021. F-11J.CREW GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)For the Years Ended January 28, 2017, January 30, 2016 and January 31, 2015(Dollars in thousands, unless otherwise indicated) A summary of goodwill is as follows: Goodwill Balance at January 31, 2015 $1,124,715 Impairment losses (1,016,815) Balance at January 30, 2016 107,900 Impairment losses — Balance at January 28, 2017 $107,900 The Company recorded non-cash impairment charges of $7.8 million in fiscal 2016, $1,381.6 million in fiscal 2015 and $710.0 million in fiscal 2014.The impairment losses were the result of the write-down of the following assets: For theYear EndedJanuary 28, 2017 For theYear EndedJanuary 30, 2016 For theYear EndedJanuary 31,2015 Goodwill allocated to the J.Crew reporting unit$— $1,016,815 $562,200 Intangible asset related to the J.Crew trade name — 360,305 145,000 Long-lived assets (see note 9) 7,752 4,522 2,785 Impairment losses$7,752 $1,381,642 $709,985 The carrying value of goodwill of $107.9 million relates to the Madewell reporting unit. There is no remaining goodwill attributable to the J.Crewreporting unit, which has previously recorded accumulated impairment losses of $1,579.0 million. The carrying value of the intangible asset for the J.Crewand Madewell trade names was $380.0 million and $57.7 million, respectively, at January 28, 2017. If operating results decline below the Company’sexpectations, additional impairment charges may be recorded in the future.4. Share-Based CompensationChinos Holdings, Inc. 2011 Equity Incentive PlanOn March 4, 2011, the Parent adopted the Chinos Holdings, Inc. 2011 Equity Incentive Plan (the “2011 Plan”), which authorizes equity awards to begranted for up to 91,740,627 shares of the common stock of the Parent. The types of equity awards issued from the 2011 Plan include: (i) stock options thatbecome exercisable over the requisite service period, (ii) stock options that only become exercisable when certain owners of the Parent receive a specifiedlevel of cash proceeds, as defined in the equity incentive plan, from the sale of their initial investment, (iii) restricted stock that vests over the requisiteservice period, and (iv) restricted stock that vests when certain performance conditions are met.Accounting for Option ExchangeIn the second quarter of fiscal 2016, the Parent completed an option exchange program (the “Option Exchange”) which allowed eligible associates ofthe Company to exchange outstanding options for options with an exercise price of $0.10 per share. The new awards will vest over a four year period. TheOption Exchange resulted in no incremental fair value of the options when comparing the value of the options immediately before and immediately after theexchange. Therefore, there is no additional expense in connection with the Option Exchange. F-12J.CREW GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)For the Years Ended January 28, 2017, January 30, 2016 and January 31, 2015(Dollars in thousands, unless otherwise indicated) A summary of the shares available for grant as equity awards under the 2011 Plan is as follows: Shares Available for grant at January 30, 2016 15,225,070 Cancelled pursuant to Option Exchange 51,401,962 Reissued pursuant to Option Exchange (51,401,962) Granted as options (9,120,000) Granted as restricted stock (8,380,000) Forfeited and available for reissuance 6,292,550 Available for grant at January 28, 2017 4,017,620 Stock OptionsIn fiscal 2016, the Company granted 9,120,000 stock option awards outside of the option exchange. The fair value of stock options was estimated atthe date of grant using an option pricing model with the following weighted average assumptions: Option Valuation Assumptions Fiscal 2016 Fiscal 2015 Fiscal 2014 Risk-free interest rates(1) 1.5% 1.8% 1.8% Dividend yield — — — Expected volatility(2) 50.3% 49.7% 53.2% Expected term(3) 10.0 6.5 6.5 (1)Based on the U.S. Treasury yield curve in effect at the time of grant.(2)Based on average volatility of stock prices of companies in a peer group analysis.(3)Represents the period of time (in years) options are expected to be outstanding.The weighted-average grant-date fair value of options granted was $0.00, $0.01, and $0.37 in fiscal 2016, fiscal 2015 and fiscal 2014, respectively.As of January 28, 2017, there was $1.1 million of total unrecognized compensation cost related to non-vested options that is expected to berecognized over the remaining weighted-average vesting period of 3.5 years. Expense associated with the options exercisable when certain owners of theParent receive a specified level of cash proceeds will not be recognized until that event is probable.F-13J.CREW GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)For the Years Ended January 28, 2017, January 30, 2016 and January 31, 2015(Dollars in thousands, unless otherwise indicated) A summary of stock option activity under the 2011 Plan is as follows: Shares Weighted AverageExercise Price Weighted AverageRemainingContractual Term AggregateIntrinsicValue (in years) (in millions) Outstanding at January 30, 2016 58,781,462 $0.31 Cancelled pursuant to Option Exchange (51,401,962) $0.31 Reissued pursuant to Option Exchange 51,401,962 $— Granted 9,120,000 $— Exercised — $— Forfeited (6,292,550) $0.23 Outstanding at January 28, 2017 61,608,912 $0.10 9.3 $— Exercisable at January 28, 2017 12,737,554 $0.11 9.3 $— Expected to vest at January 28, 2017 46,251,756 $0.10 9.3 $— A summary of stock option vesting activity under the 2011 Plan is as follows: Shares Weighted AverageGrant Date Fair Value Unvested at January 30, 2016 36,220,225 $0.30 Cancelled pursuant to Option Exchange (27,454,455) $0.36 Reissued pursuant to Option Exchange 39,428,208 $— Granted 9,120,000 $— Vested (3,551,570) $0.38 Forfeited (4,891,050) $0.10 Unvested at January 28, 2017 48,871,358 $— A summary of stock option activity for awards rolled over by management during the Acquisition is as follows: Shares Weighted AverageExercise Price Weighted AverageRemainingContractual Term AggregateIntrinsicValue (in years) (in millions) Outstanding at January 30, 2016 2,180,331 $0.25 Exercised — $— Forfeited (15,000) $0.25 Outstanding at January 28, 2017 2,165,331 $0.25 4.1 $— Exercisable at January 28, 2017 2,165,331 $0.25 4.1 $— The aggregate intrinsic value of options exercised during fiscal 2016, fiscal 2015 and fiscal 2014 was $0, $0 and $261, respectively. The total fairvalue of stock options vested during fiscal 2016, fiscal 2015 and fiscal 2014 was $0, $1,031 and $5,848.F-14J.CREW GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)For the Years Ended January 28, 2017, January 30, 2016 and January 31, 2015(Dollars in thousands, unless otherwise indicated) Restricted StockIn fiscal 2016, the Company issued 8,380,000 shares of restricted stock, of which 4,230,000 shares vest over the requisite service periods of two to fiveyears and 4,150,000 shares vest when certain performance conditions are met. The fair value of the restricted stock grant was zero.A summary of restricted stock activity under the 2011 Plan is as follows: Shares Weighted AverageGrant Date Fair Value Outstanding at January 30, 2016 4,061,494 $0.01 Granted 8,380,000 $— Vested (561,494) $0.08 Forfeited — $— Outstanding at January 28, 2017 11,880,000 $— 5. Property and EquipmentA summary of property and equipment, net is as follows: January 28, 2017 January 30, 2016 Land $3,784 $3,784 Buildings and improvements 29,320 29,328 Fixtures and equipment 274,268 274,721 Leasehold improvements 319,510 309,285 Asset retirement obligations 210 183 Construction in progress 15,247 27,764 642,339 645,065 Less accumulated depreciation and amortization (280,152) (246,821) $362,187 $398,244 6. Other Current LiabilitiesA summary of other current liabilities is as follows: January 28,2017 January 30,2016 Customer liabilities $41,968 $43,586 Accrued compensation 19,644 10,324 Reserve for sales returns 11,157 10,731 Deferred revenue 6,950 7,205 Taxes, other than income taxes 3,764 5,230 Accrued occupancy 2,005 2,683 Other, primarily accrued operating expenses 71,653 78,006 $157,141 $157,765 F-15J.CREW GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)For the Years Ended January 28, 2017, January 30, 2016 and January 31, 2015(Dollars in thousands, unless otherwise indicated) 7. Long-term Debt and Credit AgreementsA summary of long-term debt is as follows: January 28,2017 January 30,2016 Term Loan Facility $1,527,825 $1,539,578 Less: current portion (15,670) (15,670) Less: deferred financing costs (13,095) (16,301) Less: discount (4,570) (5,690) Long-term debt, net $1,494,490 $1,501,917 Borrowings under the ABL Facility $— $— ABL FacilityThe Company has an ABL Facility, which is governed by an asset-based credit agreement with Bank of America, N.A., as administrative agent and theother agents and lenders party thereto, that provides for a $350 million senior secured asset-based revolving line of credit (which may be increased by up to$100 million in certain circumstances), subject to a borrowing base limitation. The ABL Facility includes borrowing capacity in the form of letters of creditup to $200 million, and up to $25 million in U.S. dollars for loans on same-day notice, referred to as swingline loans, and is available in U.S. dollars,Canadian dollars and Euros. Any amounts outstanding under the ABL Facility are due and payable in full on the maturity date. On November 17, 2016, theABL Facility was amended to extend the scheduled maturity date from December 10, 2019 to November 17, 2021.Loans drawn under the ABL Facility bear interest at a rate per annum equal to, at Group’s option, any of the following, plus, in each case, anapplicable margin: (a) in the case of loans in U.S. dollars, a base rate determined by reference to the highest of (1) the prime rate of Bank of America, N.A.,(2) the federal funds effective rate plus 0.50% and (3) a LIBOR determined by reference to the costs of funds for U.S. dollar deposits for an interest period ofone month adjusted for certain additional costs, plus 1.00%; (b) in the case of loans in U.S. dollars or in Euros, a LIBOR determined by reference to the costsof funds for deposits in the relevant currency for the interest period relevant to such loan adjusted for certain additional costs; (c) in the case of loans inCanadian dollars, the average offered rate for Canadian dollar bankers’ acceptances having an identical term of the applicable loan; and (d) in the case ofloans in Canadian dollars, a fluctuating rate determined by reference to the higher of (1) the average offered rate for 30 day Canadian dollar bankers’acceptances plus 0.50% and (2) the prime rate of Bank of America, N.A. for loans in Canadian dollars. The applicable margin for loans under the ABL Facilityvaries based on Group’s average historical excess availability and ranges from 0.25% to 0.75% with respect to base rate loans and loans in Canadian dollarsbearing interest at the rate described in the immediately preceding clause (d), and from 1.25% to 1.75% with respect to LIBOR loans and loans in Canadiandollars bearing interest at the rate described in the immediately preceding clause (c). In addition, Group is required to pay a commitment fee of 0.25% perannum, in respect of the unutilized commitments under the ABL Facility, as well as customary letter of credit and agency fees.All obligations under the ABL Facility are unconditionally guaranteed by Group’s immediate parent and certain of Group’s existing and future whollyowned domestic subsidiaries (referred to herein as the subsidiary guarantors) and are secured, subject to certain exceptions, by substantially all of Group’sassets and the assets of Group’s immediate parent and the subsidiary guarantors, including, in each case subject to customary exceptions and exclusions: •a first-priority security interest in personal property consisting of accounts receivable, inventory, cash, deposit accounts (other than anydesignated deposit accounts containing solely the proceeds of collateral with respect to which the obligations under the ABL Facility haveonly a second-priority security interest), securities accounts, commodities accounts and certain assets related to the foregoing and, in each case,proceeds thereof (such property, the “Current Asset Collateral”); •a second-priority pledge of all of Group’s capital stock directly held by Group’s immediate parent and a second priority pledge of all of thecapital stock directly held by Group and any subsidiary guarantors (which pledge, in the case of the capital stock of each (a) domesticsubsidiary that is directly owned by Group or by any subsidiary guarantor and that is a disregarded entity for United States Federal income taxpurposes substantially all of the assets of which consist of equity interests in one or more foreign subsidiaries or (b) foreign subsidiary, islimited to 65% of the stock of such subsidiary); andF-16J.CREW GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)For the Years Ended January 28, 2017, January 30, 2016 and January 31, 2015(Dollars in thousands, unless otherwise indicated) •a second-priority security interest in substantially all other tangible and intangible assets, including substantially all of the Company’s ownedintellectual property.The ABL Facility includes restrictions on Group’s ability and the ability of certain of its subsidiaries to, among other things, incur or guaranteeadditional indebtedness, pay dividends (including to the Parent) on, or redeem or repurchase, capital stock, make certain acquisitions or investments,materially change its business, incur or permit to exist certain liens, enter into transactions with affiliates or sell its assets to, or merge or consolidate with orinto, another company. In addition, from the time when excess availability under the ABL Facility is less than the greater of (a) 10.0% of the lesser of (1) thecommitment amount and (2) the borrowing base and (b) $27.5 million, until the time when Group has excess availability under the ABL Facility equal to orgreater than the greater of (a) 10.0% of the lesser of (1) the commitment amount and (2) the borrowing base and (b) $27.5 million for 30 consecutive days, thecredit agreement governing the ABL Facility requires Group to maintain a Fixed Charge Coverage Ratio (as defined in the ABL Facility) tested as of the lastday of each fiscal quarter, of not less than 1.0 to 1.0.Although Group’s immediate parent is not generally subject to the negative covenants under the ABL Facility, such parent is subject to a holdingcompany covenant that limits its ability to engage in certain activities.The credit agreement governing the ABL Facility additionally contains certain customary representations and warranties, affirmative covenants andprovisions relating to events of default, including without limitation, a cross-default according to the terms of any indebtedness with an aggregate principalamount of $35 million or more. If an event of default occurs under the ABL Facility, the lenders may declare all amounts outstanding under the ABL Facilityimmediately due and payable. In such event, the lenders may exercise any rights and remedies they may have by law or agreement, including the ability tocause all or any part of the collateral securing the ABL Facility to be sold.On January 28, 2017, standby letters of credit were $22.8 million, excess availability, as defined, was $327.2 million, and there were no borrowingsoutstanding. Average short-term borrowings under the ABL Facility were $10.2 million and $17.5 million in fiscal 2016 and fiscal 2015, respectively. Demand Letter of Credit FacilitiesThe Company has unsecured, demand letter of credit facilities with HSBC and Bank of America which provide for the issuance of up to $50 millionand $20 million, respectively, of documentary letters of credit on a no fee basis. On January 28, 2017, outstanding documentary letters of credit were$8.4 million, and aggregate availability under these facilities was $61.6 million.Term Loan FacilityOn March 5, 2014, the Company refinanced its Term Loan Facility, the proceeds of which were used to (i) refinance amounts outstanding under theformer term loan facility of $1,167 million and (ii) together with cash on hand, redeem in full $400 million of 8.125% senior notes due 2019 (the “SeniorNotes”), and to pay fees, call premiums and accrued interest to the date of redemption, pursuant to the indenture governing the Senior Notes. The maturitydate of the Term Loan Facility is March 5, 2021.Borrowings under the Term Loan Facility bear interest at a rate per annum equal to an applicable margin plus, at Group’s option, either (a) LIBORdetermined by reference to the costs of funds for U.S. dollar deposits for an interest period of one month adjusted for certain additional costs (subject to afloor) or (b) a base rate determined by reference to the highest of (1) the prime rate of Bank of America, N.A., (2) the federal funds effective rate plus 0.50%and (3) a LIBOR determined by reference to the costs of funds for U.S. dollar deposits for an interest period of one month adjusted for certain additional costs,plus 1.00%.The Company is required to make principal repayments equal to 0.25% of the original principal amount of the Term Loan Facility, or $3.9 million, onthe last day of January, April, July, and October. The Company is also required to repay the term loan based on an annual calculation of excess cash flow, asdefined in the agreement.F-17J.CREW GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)For the Years Ended January 28, 2017, January 30, 2016 and January 31, 2015(Dollars in thousands, unless otherwise indicated) All obligations under the Term Loan Facility are unconditionally guaranteed by Group’s immediate parent and the subsidiary guarantors and aresecured, subject to certain exceptions, by substantially all of Group’s assets and the assets of Group’s immediate parent and the subsidiary guarantors,including, in each case subject to customary exceptions and exclusions: •a first-priority pledge of all of Group’s capital stock directly held by Group’s immediate parent and a first-priority pledge of all of the capitalstock directly held by Group and the subsidiary guarantors (which pledge, in the case of the capital stock of each (a) domestic subsidiary that isdirectly owned by Group or by any subsidiary guarantor and that is a disregarded entity for United States Federal income tax purposessubstantially all of the assets of which consist of equity interests in one or more foreign subsidiaries or (b) foreign subsidiary, is limited to 65%of the stock of such subsidiary); •a first-priority security interest in substantially all of Group’s immediate parent’s, Group’s and the subsidiary guarantor’s other tangible andintangible assets (other than the assets described in the following bullet point), including substantially all of the Company’s real property andintellectual property, and designated deposit accounts containing solely the proceeds of collateral with respect to which the obligations underthe Term Loan Facility have a first-priority security interest; and •a second-priority security interest in Current Asset Collateral.The Term Loan Facility includes restrictions on Group’s ability and the ability of Group’s immediate parent and certain of Group’s subsidiaries to,among other things, incur or guarantee additional indebtedness, pay dividends (including to the Parent) on, or redeem or repurchase, capital stock, makecertain acquisitions or investments, materially change the business of the Company, incur or permit to exist certain liens, enter into transactions withaffiliates or sell the Company’s assets to, or merge or consolidate with or into, another company.The credit agreement governing the Term Loan Facility does not require the Company to comply with any financial maintenance covenants, butcontains certain customary representations and warranties, affirmative covenants and provisions relating to events of default, including without limitation, across-default according to the terms of any indebtedness with an aggregate principal amount of $35 million or more. If an event of default occurs under theTerm Loan Facility, the lenders may declare all amounts outstanding under the Term Loan Facility immediately due and payable. In such event, the lendersmay exercise any rights and remedies they may have by law or agreement, including the ability to cause all or any part of the collateral securing the TermLoan Facility to be sold.The interest rate on the borrowings outstanding under the Term Loan Facility was 4.00% on January 28, 2017. The applicable margin in effect for baserate borrowings was 2.00% and the LIBOR Floor and applicable margin with respect to LIBOR borrowings were 1.00% and 3.00%, respectively, at January28, 2017.On December 30, 2016, Bank of America, N.A. (“BAML”) resigned as administrative agent under the Company’s Term Loan Facility. Effective as ofJanuary 29, 2017, Wilmington Savings Fund Society, FSB was appointed to replace BAML as administrative agent under its Term Loan Facility.On February 1, 2017, the Company filed a complaint in the New York State Supreme Court, Commercial Division, against Wilmington Savings FundSociety, FSB, as successor agent under the Term Loan Facility seeking a declaration from the court that its actions with respect to certain intellectual propertyassets are in full compliance with the terms of the Company's Term Loan Facility. The Company asserts that any attempt by the successor agent or the ad hocgroup of lenders under its Term Loan Facility to challenge its actions is invalid and intend to vigorously assert its rights under its Term Loan Facility. TheCompany has been in compliance with its covenants under the terms of the agreement.F-18J.CREW GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)For the Years Ended January 28, 2017, January 30, 2016 and January 31, 2015(Dollars in thousands, unless otherwise indicated) Interest ExpenseA summary of the components of interest expense is as follows: For the Year Ended January 28, 2017 January 30, 2016 January 31, 2015 Term Loan Facility (refinanced on March 5, 2014) $62,027 $62,660 $61,877 Realized hedging losses 10,472 218 770 Amortization of deferred financing costs and debt discount 5,021 5,030 5,657 Senior Notes (redeemed on March 5, 2014) — — 5,314 Other, net of interest income of $67, $180, and $324 1,839 1,893 734 Interest expense, net $79,359 $69,801 $74,352 Loss on RefinancingsA summary of the components of the loss on refinancings is as follows: For the Year Ended January 28, 2017 January 30, 2016 January 31, 2015 Write-off of deferred financing costs $435 $— $ 15,797 Prior unrealized losses on cash flow hedges (see note 8) — — 22,380 Call premium on Senior Notes (redeemed on March 5, 2014) — — 16,252 Other financing costs — — 4,531 Loss on refinancings $435 $— $58,960 8. Derivative Financial InstrumentsIn August 2014, the Company entered into interest rate cap and swap agreements that limit exposure to interest rate increases on a portion of theCompany’s floating rate indebtedness. The interest rate cap agreements covered notional amounts of $400 million and capped LIBOR at 2.00% from March2015 to March 2016. The interest rate swap agreements cover a notional amount of $800 million from March 2016 to March 2019 and carry a fixed rate of2.56% plus the applicable margin.The Company designated the interest rate swap agreements as cash flow hedges. As cash flow hedges, unrealized gains are recognized as assets whileunrealized losses are recognized as liabilities. The interest rate swap agreements are highly correlated to the changes in interest rates to which the Company isexposed. Unrealized gains and losses on this instrument are designated as effective or ineffective. The effective portion of such gains or losses is recorded as acomponent of accumulated other comprehensive loss, while the ineffective portion of such gains or losses is recorded as a component of interest expense.Future realized gains and losses in connection with each required interest payment will be reclassified from accumulated other comprehensive loss to interestexpense.The fair values of the interest rate swap agreements are estimated using industry standard valuation models using market-based observable inputs,including interest rate curves (level 2). Liabilities for interest rate swaps, included in other liabilities, were $18.6 million and $31.1 million at January 28,2017 and January 30, 2016, respectively. F-19J.CREW GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)For the Years Ended January 28, 2017, January 30, 2016 and January 31, 2015(Dollars in thousands, unless otherwise indicated) 9. Fair Value MeasurementsThe Company uses a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximizethe use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: •Level 1 – Quoted prices in active markets for identical assets or liabilities. •Level 2 – Observable inputs, other than quoted prices included in Level 1, such as quoted prices for markets that are not active; or other inputsthat are observable or can be corroborated by observable market data. •Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.Financial assets and liabilitiesThe fair value of the Company’s debt was estimated to be $878 million and $1,051 million at January 28, 2017 and January 30, 2016 based on quotedmarket prices of the debt (level 1 inputs).The Company’s interest rate swap agreements are measured in the financial statements at fair value on a recurring basis. See note 8 for moreinformation regarding the fair value of this financial liability.The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts payable and other current liabilitiesapproximate fair value because of their short-term nature.Non-financial assets and liabilitiesCertain non-financial assets, including goodwill, the intangible asset for the J.Crew trade name, and certain long-lived assets, have been written downand measured in the financial statements at fair value. The Company does not have any other non-financial assets or liabilities as of January 28, 2017 orJanuary 30, 2016 that are measured on a recurring basis in the financial statements at fair value.The Company assesses the recoverability of goodwill and intangibles whenever there are indicators of impairment, or at least annually in the fourthquarter. If the recorded carrying value of an intangible asset exceeds its fair value, the Company records a charge to write down the intangible asset to its fairvalue. Impairment charges of goodwill are based on fair value measurements derived using a combination of an income approach, specifically the discountedcash flow, a market approach, and a transaction approach. Impairment charges of intangible assets are based on fair value measurements derived using anincome approach, specifically relief from royalty method; a revenue and royalty rate approach. The valuation methodologies incorporate unobservableinputs reflecting significant estimates and assumptions made by management (level 3 inputs). For more information related to goodwill and intangible assetimpairment charges, see note 3.The Company performs impairment tests of certain long-lived assets whenever there are indicators of impairment. These tests typically contemplateassets at a store level (e.g. leasehold improvements). The Company recognizes an impairment loss when the carrying value of a long-lived asset is notrecoverable in light of the undiscounted future cash flows and measures an impairment loss as the difference between the carrying amount and fair value ofthe asset based on discounted future cash flows. The Company has determined that the future cash flow approach (level 3 inputs) provides the most relevantand reliable means by which to determine fair value in this circumstance. F-20J.CREW GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)For the Years Ended January 28, 2017, January 30, 2016 and January 31, 2015(Dollars in thousands, unless otherwise indicated) A summary of the impact of the impairment of certain long-lived assets on financial condition and results of operations is as follows: For theYear EndedJanuary 28,2017 For theYear EndedJanuary 30,2016 For theYear EndedJanuary 31,2015 Carrying value of long-term assets written down to fair value $— $1,349 $— Impairment charge $7,752 $4,522 $2,785 10. Commitments and ContingenciesOperating LeasesAs of January 28, 2017, the Company was obligated under various long-term operating leases, which require minimum annual rent for retail andfactory stores, office space and equipment.These operating leases expire on varying dates through 2028. A summary of aggregate minimum rent at January 28, 2017 is as follows:Fiscal year Amount 2017 $190,336 2018 $171,253 2019 $147,623 2020 $131,691 2021 $122,946 Thereafter $262,046 Certain of these leases include renewal options and escalation clauses and provide for contingent rent based upon sales and require the lessee to paytaxes, insurance and other occupancy costs.Rent expense was $186,960 in fiscal 2016, $185,866 in fiscal 2015, and $174,411 in fiscal 2014 (including contingent rent, based on store sales, of$3,977, $4,510, and $5,193, respectively).Employment AgreementsThe Company is party to employment agreements with certain executives, which provide for compensation and certain other benefits. The agreementsalso provide for severance payments under certain circumstances.LitigationThe Company is subject to various legal proceedings and claims arising in the ordinary course of business. Management does not expect that theresults of any of these legal proceedings, either individually or in the aggregate, would have a material effect on the Company’s financial position, results ofoperations or cash flows. As of January 28, 2017, the Company has recorded a reserve for certain legal contingencies in connection with ongoing claims andlitigation. The reserve is not material to its results of operations. In addition, there are certain other claims and legal proceedings pending against theCompany for which accruals have not been established.F-21J.CREW GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)For the Years Ended January 28, 2017, January 30, 2016 and January 31, 2015(Dollars in thousands, unless otherwise indicated) On February 1, 2017, the Company filed a complaint in the New York State Supreme Court, Commercial Division, against Wilmington Savings FundSociety, FSB, as successor agent under the Term Loan Facility seeking a declaration from the court that its actions with respect to certain intellectual propertyassets are in full compliance with the terms of the Company's Term Loan Facility. The Company asserts that any attempt by the successor agent or the ad hocgroup of lenders under its Term Loan Facility to challenge its actions is invalid and intend to vigorously assert its rights under its Term Loan Facility. 11. Employee Benefit PlanThe Company has a 401(K) Savings Plan pursuant to Section 401 of the Internal Revenue Code whereby all eligible associates may contribute up to25% of their annual base salaries subject to certain limitations. The Company’s contribution is based on a percentage formula set forth in the plan agreement.Company contributions to the 401(K) Savings Plan were $5,730 in fiscal 2016, $5,720 in fiscal 2015, and $5,714 in fiscal 2014.12. Other RevenuesA summary of the components of other revenues is as follows: For theYear EndedJanuary 28,2017 For theYear EndedJanuary 30,2016 For theYear EndedJanuary 31,2015 Shipping and handling fees $31,525 $29,508 $26,133 Revenues from third party resellers 29,107 24,088 9,012 Other 5,208 4,539 4,101 Total $65,840 $58,135 $39,246 F-22J.CREW GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)For the Years Ended January 28, 2017, January 30, 2016 and January 31, 2015(Dollars in thousands, unless otherwise indicated) 13. Income TaxesGroup is included in the consolidated federal income tax return of its Parent, which includes all of its wholly owned subsidiaries. Pursuant to its taxsharing policy, Group calculates its tax liabilities on a standalone basis and provides accordingly in its consolidated financial statements. Each subsidiaryfiles separate, or combined where required, state tax returns in required jurisdictions. Group and its subsidiaries have entered into a tax sharing agreementproviding that each of the subsidiaries will reimburse Group for its share of income taxes based on the proportion of such subsidiaries’ tax liability on aseparate return basis to the total tax liability of Group.A summary of the components of the benefit for income taxes is as follows: (Dollars in millions) For theYear EndedJanuary 28,2017 For theYear EndedJanuary 30,2016 For theYear EndedJanuary 31,2015 Current: Federal $(3.8) $(1.2) $9.9 State and local 1.8 5.1 4.5 Foreign (0.2) — 0.1 (2.2) 3.9 14.5 Deferred: Federal (10.5) (127.4) (63.6) State and local 5.4 (23.8) (11.4) Foreign — — — (5.1) (151.2) (75.0) Total income taxes (benefit) recorded on the consolidated statement of operations (7.3) (147.3) (60.5) Income taxes charged (credited) to shareholders’ equity (deficit): Deferred income taxes (benefit) arising from the change in financialinstrument liability credited to OCI 4.4 (4.4) 1.9 Total income taxes $(2.9) $(151.7) $(58.6) A reconciliation between the effective tax and the U.S. federal statutory income tax rate is as follows: For theYear EndedJanuary 28, 2017 For theYear EndedJanuary 30, 2016 For theYear EndedJanuary 31, 2015 Federal income tax rate 35.0% 35.0% 35.0% Foreign rate differential 19.5 0.6 0.5 Income tax credits 3.7 — — Goodwill impairment — (25.6) (27.4) State and local income taxes, net of federal benefit (4.0) 0.9 0.6 Uncertain tax positions (7.1) (0.3) (0.3) Valuation allowances (26.7) (0.4) (0.6) Other 3.3 0.4 0.6 Effective tax rate 23.7% 10.6% 8.4% F-23J.CREW GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)For the Years Ended January 28, 2017, January 30, 2016 and January 31, 2015(Dollars in thousands, unless otherwise indicated) A summary of the tax effect of temporary differences which give rise to deferred tax assets and liabilities is as follows: (Dollars in millions) January 28, 2017 January 30, 2016 Deferred tax assets: Rent $35.4 $40.1 Customer liabilities 13.4 12.4 Foreign net operating losses 13.2 8.9 Share-based payments 11.3 10.9 Charitable contribution carryforward 9.4 9.3 Financial instruments 8.0 12.7 Transaction costs 7.4 8.2 State taxes and interest 5.5 5.1 Sales returns 4.3 4.1 State net operating losses 1.6 1.2 Tax credit carryforward 1.1 — Other 3.7 4.3 114.3 117.2 Less: Valuation allowance (20.3) (12.1) Deferred tax assets, net of valuation allowance 94.0 105.1 Deferred tax liabilities: Intangible assets (170.8) (172.6) Difference in book and tax basis for property and equipment (55.2) (65.5) Prepaid catalog and other prepaid expenses (16.2) (15.8) Deferred tax liabilities (242.2) (253.9) Net deferred income tax liability $(148.2) $(148.8) The financial statements of the Company reflect a benefit for income taxes at the Group level. The federal tax return, however, is filed at the Parentlevel. The difference between the entity at which the provision is calculated and the entity which files the tax return gives rise to intercompany balances. Asummary of the components of the income taxes payable to Parent is as follows: January 28, 2017 January 30, 2016 Refundable income taxes of Parent $8,247 $10,196 Due to Parent (33,462) (17,282)Income taxes payable to Parent $(25,215) $(7,086)In the third quarter of fiscal 2016, the Parent filed its federal income tax return for the tax year ended January 2016, which reflected a taxable loss of$66 million. The loss was carried back to the tax year ended January 2014 and gave rise to refundable income taxes of $23 million, which the Companycollected in the fourth quarter of fiscal 2016. F-24J.CREW GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)For the Years Ended January 28, 2017, January 30, 2016 and January 31, 2015(Dollars in thousands, unless otherwise indicated) The Company regularly assesses the need for a valuation allowance related to its deferred tax assets. In making that assessment, the Companyconsiders both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on a weighing process ofavailable evidence, whether it is more-likely-than-not that its deferred tax assets will not be realized. In that weighing process, the Company assignssignificant weight to the negative evidence of its cumulative losses in recent years. As a result, in fiscal 2016, the Company determined that the negativeevidence outweighed the positive evidence, and recorded a non-cash charge to income tax expense of $8.2 million to record a valuation allowance related toits deferred tax assets balance. This accounting treatment has no effect on the Company’s ability to utilize deferred tax assets to reduce future cash taxpayments. The Company will continue to assess the likelihood that the deferred tax assets will be realizable at the end of each reporting period and thevaluation allowance will be adjusted accordingly.It is the Company’s intention to permanently reinvest undistributed earnings and profits from the Company’s foreign operations that have beengenerated through January 28, 2017. Future plans do not demonstrate a need to repatriate the foreign amounts to fund U.S. operations. Cumulativeundistributed earnings of international subsidiaries were $69.8 million at January 28, 2017. No deferred federal income taxes were provided for theundistributed earnings as they are permanently reinvested in the Company’s international operations. Cash held by the Company’s foreign subsidiaries is$21.4 million, valued in U.S. dollars, at January 28, 2017.As of January 28, 2017, the Company has $24.6 million in liabilities associated with uncertain tax positions (including interest and penalties of $2.5million) reflected in other liabilities. The amount, if recognized, that would affect the effective tax rate is $17.5 million. While the Company expects theamount of unrecognized tax benefits to change in the next 12 months, the change is not expected to have a significant effect on the estimated effectiveannual tax rate, financial position, results of operations or cash flows. However, the outcome of tax matters is uncertain and unforeseen results can occur.A roll-forward of unrecognized tax benefits is as follows: (Dollars in millions) For theYear EndedJanuary 28,2017 For theYear EndedJanuary 30,2016 Balance at beginning of period $23.4 $18.1 Additions for tax positions taken during current year 5.2 6.1 Additions for tax positions taken during prior years — 1.0 Reductions for tax positions taken during prior years (0.4) (0.7) Settlements (0.2) — Expirations of statutes of limitations (2.0) (1.1) Balance at end of period $26.0 $23.4 During fiscal 2016, the IRS concluded its examination of the federal income tax returns for the periods ended January 2012 and January 2013. The taxperiods ended January 2014 and January 2016 are currently under examination. Various state and local jurisdiction tax authorities are in the process ofexamining income tax returns for certain tax years ranging from 2009 to 2014. The results of these audits and appeals are not expected to have a significanteffect on the results of operations or financial position.As of January 28, 2017, the Company has state and local net operating loss carryovers, net of unrecognized tax benefits, of approximately $33.7million. These carryovers are available to offset future taxable income for state and local tax purposes and expire primarily in May 2028. F-25J.CREW GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)For the Years Ended January 28, 2017, January 30, 2016 and January 31, 2015(Dollars in thousands, unless otherwise indicated) 14. Related Party TransactionsMadewell TrademarkOn October 20, 2005, the Company, Millard Drexler, Chairman of the Board and Chief Executive Officer and Millard S. Drexler, Inc. entered into aTrademark License Agreement whereby Mr. Drexler granted the Company a thirty-year exclusive, worldwide license to use the Madewell trademark andassociated intellectual property rights owned by him (the “Properties”). In consideration for the license, the Company reimbursed Mr. Drexler’s actual costsexpended in acquiring and developing the Properties (which amounted to $242,300) and agreed to pay royalties of $1 per year during the term of the license.In January 2007, the Company provided notice to Mr. Drexler that the Company had met certain conditions outlined in the agreement, and Mr. Drexlerassigned to the Company all of his residual rights in the Properties. The Company also agreed that it would not assign or spin off ownership of the Propertiesduring the term of Mr. Drexler’s employment without his consent other than as part of a sale of the entire Company (except that the Company may pledge orhypothecate its interest in the Properties as part of a bank or other financings).Chinos Intermediate Holdings A, Inc. Senior PIK Toggle NoteOn November 4, 2013 in a private transaction, Chinos Intermediate Holdings A, Inc. (the “Issuer”), an indirect parent holding company of Group,issued $500 million aggregate principal of 7.75/8.50% Senior PIK Toggle Notes due May 1, 2019 (the “PIK Notes”). The PIK Notes pay interest semi-annually on May 1 and November 1 of each year. Interest for the first and final interest periods is required to be paid in cash at the cash interest rate of 7.75%.For each other interest period, the Issuer is required to pay interest in cash, unless certain conditions are satisfied, in which case the Issuer may elect to payPIK interest either by increasing the principal amount or issuing new notes. The PIK interest rate is equal to the cash interest rate plus 75 basis points, or8.50%. The net proceeds of $490 million from this offering were used by the Issuer to fund a cash dividend of $484 million to equity holders, and dividendequivalent compensation payments of $6.1 million to certain equity-award holders.The PIK Notes are: (i) senior unsecured obligations of the Issuer, (ii) structurally subordinated to all of the liabilities of the Issuer’s subsidiaries, and(iii) not guaranteed by any of the Issuer’s subsidiaries, including Group, and therefore are not recorded in the financial statements of the Company. The PIKNotes provide for redemption at certain prices, including with respect to a change in control or equity offering.During fiscal 2016, the Issuer made interest payments on the PIK Notes by paying in kind at the PIK interest rate of 8.50% instead of paying in cash.On October 28, 2016, the Issuer also delivered notice to U.S. Bank N.A., as trustee, under the indenture governing the PIK Notes, that with respect to theinterest that will be due on such notes on the May 1, 2017 interest payment date, the Issuer will make such interest payment by paying in kind at the PIKinterest rate of 8.50% instead of paying in cash. The PIK election will increase the outstanding principal balance of the PIK Notes by $23.1 million to $566.5million. Therefore, the Company will not pay a dividend to the Issuer in the second quarter of fiscal 2017. Pursuant to the terms of the indenture governingthe PIK Notes, the Issuer intends to evaluate this option prior to the beginning of each interest period based on relevant factors at that time. The Company has recorded a receivable of $2.2 million due from its indirect parent, included in prepaid expenses and other current assets, related tothe payment in fiscal 2016 of certain transactions costs on behalf of the Issuer. 15. Recent Accounting PronouncementsIn May 2014, a pronouncement was issued that clarified the principles of revenue recognition, which standardizes a comprehensive model forrecognizing revenue arising from contracts with customers. The pronouncement is effective for fiscal years beginning after December 15, 2017. The Companyis currently evaluating the impact of the new pronouncement on its consolidated financial statements.In July 2015, a pronouncement was issued that more closely aligns the measurement of inventory in U.S. GAAP with International Financial ReportingStandards by requiring companies using the first-in, first-out and average costs methods to measure inventory using the lower of cost and net realizable value.The pronouncement is effective for fiscal years beginning after December 15, 2016. The Company is currently evaluating the impact of the newpronouncement on its consolidated financial statements.F-26J.CREW GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)For the Years Ended January 28, 2017, January 30, 2016 and January 31, 2015(Dollars in thousands, unless otherwise indicated) In February 2016, a pronouncement was issued that requires lessees to recognize assets and liabilities on the balance sheet for leases with accountinglease terms of more than 12 months. The pronouncement is effective for fiscal years beginning after December 15, 2018. The Company is currently evaluatingthe impact of the new pronouncement on its consolidated financial statements. However, the adoption is expected to have a significant impact because mostof the Company’s leases will be subject to these new requirements.In August 2016, a pronouncement was issued which aims to reduce the diversity in presentation and classification of the following specific cash flowissues: debt prepayment, settlement of zero-coupon bonds, contingent consideration, insurance proceeds, distributions received from equity methodinvestees, beneficial interest in securitization transactions and separately identifiable cash flows. The pronouncement is effective for fiscal years beginningafter December 15, 2017. The Company is currently evaluating the impact of the new pronouncement on its consolidated financial statements.In January 2017, a pronouncement was issued that simplifies the measurement of goodwill impairment by no longer requiring an entity to perform ahypothetical purchase price allocation. Instead, impairment will be measured using the difference between the carrying amount and the fair value of thereporting unit. The pronouncement is effective for annual and interim periods in fiscal years beginning after December 15, 2019. The Company is currentlyevaluating the impact of the new pronouncement on its consolidated financial statements.16. Quarterly Financial Information (Unaudited)A summary of quarterly financial results for fiscal 2016 and fiscal 2015 is as follows: (in thousands) FirstQuarter SecondQuarter ThirdQuarter FourthQuarter Fiscal 2016 Total revenues $567,499 $569,820 $593,155 $694,988 Gross profit 204,954 203,199 225,856 241,268 Net income (loss) $(8,041) $(8,627) $(7,900) $1,054 Fiscal 2015 Total revenues $581,804 $593,649 $619,415 $710,959 Gross profit 216,523 203,385 239,216 236,447 Net loss (1) $(462,411) $(13,568) $(759,663) $(7,034) (1)Includes the impact of the non-cash impairment losses recorded in the first and third quarters of fiscal 2015. F-27 SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS BeginningBalance Charged toCost andExpenses(a) Charged tootherAccounts Deductions(a) EndingBalance (in thousands) Inventory reserve (deducted from merchandise inventories) Year ended January 28, 2017 $8,322 $896 $— $— $9,218 Year ended January 30, 2016 7,871 451 — — 8,322 Year ended January 31, 2015 7,850 21 — — 7,871 Allowance for sales returns (included in other current liabilities) Year ended January 28, 2017 $10,731 $426 $— $— $11,157 Year ended January 30, 2016 12,158 — — 1,427 10,731 Year ended January 31, 2015 12,464 — — 306 12,158 (a)The inventory reserve and allowance for sales returns are evaluated at the end of each fiscal quarter and adjusted (increased or decreased) based on thequarterly evaluation. During each period, inventory write-downs and sales returns are charged to the statement of operations as incurred. F-28 EXHIBIT INDEX Exhibit No. Document 2.1 Agreement and Plan of Merger, dated November 23, 2010, by and among J.Crew Group, Inc., Chinos Holdings, Inc. and Chinos AcquisitionsCorporation. Incorporated by reference to Exhibit 2.1 to the Form 8-K filed on November 26, 2010. 2.2 Amendment No. 1 to the Agreement and Plan of Merger, dated November 23, 2010, by and among J.Crew Group, Inc., Chinos Holdings, Inc. andChinos Acquisitions Corporation, dated January 18, 2011. Incorporated by reference to Exhibit 2.1 to the Form 8-K filed on January 18, 2011. 3.1 Amended and Restated Certificate of Incorporation of J.Crew Group, Inc., adopted March 7, 2011. Incorporated by reference to Exhibit 3.1 tothe Form 8-K filed on March 10, 2011. 3.2 Amended and Restated By-laws of J.Crew Group, Inc., adopted March 7, 2011. Incorporated by reference to Exhibit 3.2 to the Form 8-K filed onMarch 10, 2011. Material Contracts 10.1 Credit Agreement dated as of March 7, 2011 among Chinos Acquisition Corporation, which on March 7, 2011 was merged with and into J.CrewGroup, Inc., with J.Crew Group, Inc. surviving such merger as the Borrower, Chinos Intermediate Holdings B, Inc., as Holdings, Bank ofAmerica, N.A., as Administrative Agent and Issuer, and the other Lenders and Issuers party thereto. Incorporated by reference to Exhibit 10.1 tothe Form 8-K filed on March 10, 2011. 10.2 Credit Agreement dated as of March 7, 2011 among Chinos Acquisition Corporation, which on March 7, 2011 was merged with and into J.CrewGroup, Inc., with J.Crew Group, Inc. surviving such merger as the Borrower, Chinos Intermediate Holdings B, Inc. as Holdings, Bank of America,N.A., as Administrative Agent, and the other Lenders party thereto. Incorporated by reference to Exhibit 10.2 to the Form 8-K filed on March 10,2011. 10.3 Security Agreement dated as of March 7, 2011 among Chinos Acquisition Corporation, which on March 7, 2011 was merged with and intoJ.Crew Group, Inc., with J.Crew Group, Inc. surviving such merger as the Borrower, Chinos Intermediate Holdings B, Inc., as Holdings, thesubsidiary guarantors party thereto from time to time, and Bank of America, N.A., as Collateral Agent under the ABL Facility. Incorporated byreference to Exhibit 10.3 to the Form 8-K filed on March 10, 2011. 10.4 Security Agreement dated as of March 7, 2011 among Chinos Acquisition Corporation, which on March 7, 2011 was merged with and intoJ.Crew Group, Inc., with J.Crew Group, Inc. surviving such merger as the Borrower, Chinos Intermediate Holdings B, Inc., as Holdings, thesubsidiary guarantors party thereto from time to time, and Bank of America, N.A., as Collateral Agent under the Term Loan Facility.Incorporated by reference to Exhibit 10.4 to the Form 8-K filed on March 10, 2011. 10.5 Guaranty dated as of March 7, 2011 among Chinos Intermediate Holdings B, Inc., as Holdings, the other guarantors party hereto from time totime, and Bank of America, N.A., as Administrative Agent and Collateral Agent under the ABL Facility. Incorporated by reference to Exhibit10.5 to the Form 8-K filed on March 10, 2011. 10.6 Guaranty dated as of March 7, 2011 among Chinos Intermediate Holdings B, Inc., as Holdings, the other guarantors party hereto from time totime, and Bank of America, N.A., as the Administrative Agent and Collateral Agent under the Term Loan Facility. Incorporated by reference toExhibit 10.6 to the Form 8-K filed on March 10, 2011. 10.7 First Amendment to the Credit Agreement, dated as of October 11, 2012, by and among J.Crew Group, Inc., Chinos Intermediate Holdings B,Inc., Bank of America, N.A., as administrative agent and as collateral agent, and each lender party thereto. Incorporated by reference to Exhibit10.1 to the Form 8-K filed on October 15, 2012. 10.8 Amendment No. 1 to the Credit Agreement, dated as of December 18, 2012, by and among J.Crew Group, Inc., Chinos Intermediate Holdings B,Inc., Bank of America, N.A., as administrative agent and each lender party thereto. Incorporated by reference to Exhibit 10.1 to the Form 8-Kfiled on December 18, 2012. 10.9 Amendment No. 2 to the Credit Agreement, dated as of February 4, 2013, by and among J.Crew Group, Inc., Chinos Intermediate Holdings B,Inc., Bank of America, N.A., as administrative agent and each lender party thereto. Incorporated by reference to Exhibit 10.1 to the Form 8-Kfiled on February 4, 2013. 10.10 Second Amendment to Credit Agreement, dated as of March 5, 2014, by and among J. Crew Group, Inc., Bank of America, N.A., asadministrative agent and collateral agent, and each lender party thereto. Incorporated by reference to Exhibit 10.1 to the Form 8-K filed onMarch 11, 2014. 10.11 Amended and Restated Credit Agreement, dated as of March 5, 2014, by and among J. Crew Group, Inc., Chinos Intermediate Holdings B, Inc.,Bank of America, N.A., as administrative agent and collateral agent, and each lender from time to time party thereto. Incorporated by referenceto Exhibit 10.2 to the Form 8-K filed on March 11, 2014.  Exhibit No. Document 10.12 Third Amendment to Credit Agreement, dated as of December 10, 2014, by and among J. Crew Group, Inc., Bank of America, N.A., asadministrative agent and collateral agent, and each lender party thereto. Incorporated by reference to Exhibit 10.1 to the Form 8-K filed onDecember 11, 2014. 10.13 Fourth Amendment to Credit Agreement (Incremental Amendment), dated as of December 17, 2015, by and among J.Crew Group, Inc., ChinosIntermediate Holdings B, Inc., Bank of America, N.A., as administrative agent and as collateral agent, and each lender partythereto. Incorporated by reference to Exhibit 10.1 to the Form 8-K filed on December 18, 2015. 10.14 Fifth Amendment to Credit Agreement and Consent to release of Mortgages, dated as of November 17, 2016, by and among J. Crew Group, Inc.,Chinos Intermediate Holdings B, Inc., Bank of America, N.A., as administrative agent and as collateral agent, and each lender partythereto. Incorporated by reference to Exhibit 10.1 to the Form 10-Q filed on November 22, 2016. 10.15 Trademark License Agreement by and among J.Crew Group, Inc., Millard S. Drexler and Millard S. Drexler, Inc. dated as of October 20, 2005.Incorporated by reference to Exhibit 10.2 to the Form 8-K filed on October 21, 2005. 10.16 Employment Agreement by and among J.Crew Group, Inc., Chinos Holdings, Inc. and Millard S. Drexler dated as of March 7, 2011.Incorporated by reference to Exhibit 10.8 to the Form 10-K filed on March 21, 2011. 10.17 Amended and Restated Employment Agreement, dated July 15, 2010, between J.Crew Group, Inc. and Jenna Lyons. Incorporated by reference toExhibit 10.8 to the Form 10-Q filed on September 3, 2010. 10.18 Special Bonus Agreement, dated April 15, 2013, between J.Crew Group, Inc. and Jenna Lyons. Incorporated by reference to Exhibit 10.1 to theForm 8-K filed on April 16, 2013. 10.19 Letter Agreement, dated November 28, 2011, between J.Crew Group, Inc. and Libby Wadle. Incorporated by reference to Exhibit 10.1 to theForm 8-K filed on November 29, 2011. 10.20 Letter Agreement, dated December 3, 2015, between J.Crew Group, Inc. and Michael J. Nicholson. Incorporated by reference to Exhibit 10.20 toForm 10-K filed March 17, 2016. 10.21 Non-Disclosure, Non-Solicitation and Non-Competition and Dispute Resolution Agreement, dated January 22, 2013, between the Company andJoan Durkin. Incorporated by reference to Exhibit 10.20 to the Form 10-K filed on March 17, 2015. 10.22 Long Term Incentive Bonus Agreement, dated June 9, 2014, between J.Crew Group, Inc. and Lynda Markoe. Incorporated by reference toExhibit 10.21 to the Form 10-K filed on March 17, 2015. 10.23 Long Term Incentive Bonus Agreement, dated May 11, 2015, between J.Crew Group, Inc. and Joan Durkin. Incorporated by reference to Exhibit10.1 to the Form 10-Q filed on June 4, 2015. 10.24 Form of Indemnification Agreement between Chinos Holdings, Inc., Chinos Intermediate Holdings A, Inc., Chinos Intermediate Holdings B,Inc., J.Crew Group, Inc. and the directors thereof. † 10.25 Management Services Agreement, entered into as of March 7, 2011, between Chinos Acquisition Corporation, Chinos Intermediate Holdings A,Inc., Chinos Intermediate Holdings B, Inc., Chinos Holdings, Inc., TPG Capital, L.P., and Leonard Green and Partners, L.P. Incorporated byreference to Exhibit 10.14 to the Form S-4 filed on June 22, 2011. 10.26 Principal Investors Stockholders’ Agreement, dated as of March 7, 2011, by and among Chinos Holdings, Inc., Chinos Acquisition Corporation,Chinos Intermediate Holdings A, Inc., Chinos Intermediate Holdings B, Inc. and the stockholder parties thereto. Incorporated by reference toExhibit 10.15 to the Form S-4 filed on June 22, 2011. 10.27 Management Stockholders’ Agreement, dated as of March 7, 2011, by and among Chinos Holdings, Inc., Chinos Intermediate Holdings A, Inc.,Chinos Intermediate Holdings B, Inc., Chinos Acquisition Corporation, and the Principal Investors, the MD Investors and Managers namedtherein. Incorporated by reference to Exhibit 10.2 to the Form 10-Q filed on September 1, 2011. Other Exhibits 21.1 Subsidiaries of J.Crew Group, Inc.† 24.1 Power of Attorney† 31.1 Certification of chief executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.† 31.2 Certification of chief financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.†  Exhibit No. Document32.1 Certification of chief executive officer and chief financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* 101 Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets at January 28, 2017 and January 30, 2016, (ii)the Consolidated Statements of Operations and Comprehensive Loss for the years ended January 28, 2017, January 30, 2016 and January 31,2015, (iii) the Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended January 28, 2017, January 30, 2016and January 31, 2015, (iv) the Consolidated Statements of Cash Flows for the years ended January 28, 2017, January 30, 2016 and January 31,2015, and (v) the Notes to the Consolidated Financial Statements.† †Filed herewith.*Furnished herewith Exhibit 10.24Indemnification AgreementThis Indemnification Agreement (this “Agreement”) is made and entered into as of January 3, 2017 between ChinosHoldings, Inc., a Delaware corporation (“Chinos Holdings”), Chinos Intermediate Holdings A, Inc., a Delaware corporation (“ChinosA”), Chinos Intermediate Holdings B, Inc., a Delaware corporation (“Chinos B”), J. Crew Group, Inc., a Delaware corporation (“J.Crew Group” and together with Chinos Holdings, Chinos A, and Chinos B, each a “Company” and, collectively, the “Companies”)and _________________ (“Indemnitee”), on the other hand.RECITALS:WHEREAS, Indemnitee is a member of the Board of Directors of each Company (each, a “Board”);WHEREAS, Indemnitee is entitled to indemnification pursuant to the General Corporation Law of the State of Delaware(“DGCL”);WHEREAS, Indemnitee has certain rights to indemnification under the directors’ and officers’ liability insurancemaintained by Chinos Holdings (the “Insurance”) as an “Insured Person” of an “Organization” (as such terms are defined in theInsurance); andWHEREAS, this Agreement is intended as a clarification of and supplement to and in furtherance of the indemnificationrights that Indemnitee has under the DCGL and the Bylaws and Certificate of Incorporation of each Company, any resolutions adoptedpursuant thereto, as well as the Insurance, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights ofIndemnitee thereunder.NOW, THEREFORE, in consideration of Indemnitee’s agreement to serve as a director of each Company from and afterthe date hereof, the parties hereto agree as follows:1.Indemnity of Indemnitee. Each Company, as applicable, hereby agrees to hold harmless and indemnify Indemnitee to thefullest extent permitted by law, as such may be amended from time to time, and acknowledges and agrees that Indemnitee is serving asa director of such Company at the request of such Company and, accordingly, such Company hereby agrees to indemnify Indemniteeto the fullest extent permitted by law and in accordance with the provisions of its Certificate of Incorporation and By-laws. Infurtherance of the foregoing indemnification, and without limiting the generality thereof:(a)Proceedings Other Than Proceedings by or in the Right of the Companies. Indemnitee shall be entitled to therights of indemnification provided in this Section l(a) if, by reason of the Indemnitee’s Corporate Status (as defined below), Indemniteeis, or is threatened to be made, a party to or participant in any Proceeding (as defined below) other than a Proceeding by or in the rightof the applicable Company. Pursuant to this Section 1(a), Indemnitee shall be indemnified against all Expenses (as defined below),judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by the Indemnitee, or on the Indemniteebehalf, in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a mannerIndemnitee reasonably believed to be in or not  opposed to the best interests of the applicable Company, and with respect to any criminal Proceeding, had no reasonable cause tobelieve Indemnitee’s conduct was unlawful.(b)Proceedings by or in the Right of the Companies. Indemnitee shall be entitled to the rights of indemnificationprovided in this Section 1(b) if, by reason of the Indemnitee’s Corporate Status, Indemnitee is, or is threatened to be made, a party to orparticipant in any Proceeding brought by or in the right of the applicable Company. Pursuant to this Section 1(b), Indemnitee shall beindemnified against all Expenses actually and reasonably incurred by Indemnitee, or on Indemnitee’s behalf, in connection with suchProceeding if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the bestinterests of the applicable Company; provided, however, if applicable law so provides, no indemnification against such Expenses shallbe made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable tosuch Company unless and to the extent that the Court of Chancery of the State of Delaware shall determine that such indemnificationmay be made.(c)Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any otherprovision of this Agreement, to the extent that Indemnitee is, by reason of his or her Corporate Status, a party to and is successful inwhole or in part, on the merits or otherwise, in any Proceeding, he or she shall be indemnified to the maximum extent permitted bylaw, as such may be amended from time to time, against all Expenses actually and reasonably incurred by the Indemnitee or on his orher behalf in connection therewith. For purposes of this Section and without limitation, the termination of any claim, issue or matter insuch a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.2.Additional Indemnity. In addition to, and without regard to any limitations on, the indemnification provided for in Section1 of this Agreement or under law, the applicable Company shall and hereby does indemnify and hold harmless Indemnitee against allExpenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by the Indemnitee or on his orher behalf if, by reason of his or her Corporate Status, the Indemnitee is, or is threatened to be made, a party to or participant in anyProceeding (including a Proceeding by or in the right of such Company), including, without limitation, all liability arising out of thenegligence or active or passive wrongdoing of Indemnitee; provided (a) either that (i) Indemnitee, at the time of such action or inaction,believed, in good faith, that its, his or her course of conduct was in, or not opposed to, the best interests of such Company, or (ii) in thecase of inaction by the Indemnitee, the Indemnitee did not intend its, his or her inaction to be opposed to the best interests of suchCompany, and (b) the action or inaction did not constitute fraud or willful misconduct by the Indemnitee.3.Contribution.(a)Whether or not the indemnification provided in Sections 1 and 2 of this Agreement is available, in respect ofany threatened, pending or completed action, suit or proceeding in which the applicable Company is jointly liable with Indemnitee (orwould be if joined in such action, suit or proceeding), such Company shall pay, in the first instance, the entire amount of any judgmentor settlement of such action, suit or proceeding without requiring Indemnitee to contribute to such payment and such Company herebywaives and relinquishes any right of contribution it may have against Indemnitee. The applicable Company shall not  enter into any settlement of any action, suit or proceeding in which such Company is jointly liable with Indemnitee (or would be ifjoined in such action, suit or proceeding) unless such settlement provides for a full and final release of all claims asserted againstIndemnitee.(b)Without diminishing or impairing the obligations of the applicable Company set forth in the precedingsubparagraph, if, for any reason, Indemnitee shall elect or be required to pay all or any portion of any judgment or settlement in anythreatened, pending or completed action, suit or proceeding in which such Company is jointly liable with Indemnitee (or would be ifjoined in such action, suit or proceeding), such Company shall contribute to the amount of Expenses, judgments, fines and amountspaid in settlement actually and reasonably incurred and paid or payable by Indemnitee in proportion to the relative benefits received bysuch Company and all officers, directors or employees of such Company, other than Indemnitee, who are jointly liable with Indemnitee(or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, from the transaction orevents from which such action, suit or proceeding arose; provided, however, that the proportion determined on the basis of relativebenefit may, to the extent necessary to conform to law, be further adjusted by reference to the relative fault of such Company and allofficers, directors or employees of such Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joinedin such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, in connection with the transaction or eventsthat resulted in such expenses, judgments, fines or settlement amounts, as well as any other equitable considerations which applicablelaw may require to be considered. The relative fault of the applicable Company and all officers, directors or employees of suchCompany, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), onthe one hand, and Indemnitee, on the other hand, shall be determined by reference to, among other things, the degree to which theiractions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary and thedegree to which their conduct is active or passive.(c)Each Company hereby agrees to fully indemnify and hold Indemnitee harmless from any claims of contributionwhich may be brought by officers, directors, or employees of such Company, other than Indemnitee, who may be jointly liable withIndemnitee.(d)To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement isunavailable to Indemnitee for any reason whatsoever, the applicable Company, in lieu of indemnifying Indemnitee, shall contribute tothe amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlementand/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as isdeemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received bysuch Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding and/or (ii) the relativefault of such Company (and their directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/ortransaction(s).4.Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent thatIndemnitee is, by reason of his or her Corporate Status, a witness, or is made (or asked) to respond to discovery requests or requests forinformation, in connection with any Proceeding to which Indemnitee is not a party, he or she shall be  indemnified against all Expenses actually and reasonably incurred by the Indemnitee or on his or her behalf in connection therewith.5.Advancement of Expenses. Notwithstanding any other provision of this Agreement, the applicable Company shalladvance all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding by reason of Indemnitee’s CorporateStatus within thirty (30) days after the receipt by such Company of a statement or statements from Indemnitee requesting such advanceor advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shallreasonably evidence the Expenses incurred by Indemnitee and shall, to the extent required by applicable law, include or be preceded oraccompanied by a written undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately bedetermined that Indemnitee is not entitled to be indemnified against such Expenses. Any advances and undertakings to repay pursuantto this Section 5 shall be unsecured and interest free.6.Procedures and Presumptions for Determination of Entitlement to Indemnification. It is the intent of the parties to thisAgreement to secure for Indemnitee rights of indemnity that are as favorable as may be permitted under the DGCL and public policyof the State of Delaware. Accordingly, the parties agree that the following procedures and presumptions shall apply in the event of anyquestion as to whether Indemnitee is entitled to indemnification under this Agreement:(a)To obtain indemnification under this Agreement, Indemnitee shall submit to the applicable Company a writtenrequest, including therein or therewith such non-privileged documentation and information as is reasonably available to Indemnitee andis reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of suchCompany shall, promptly upon receipt of such a request for indemnification, advise the Board of such Company in writing thatIndemnitee has requested indemnification. Notwithstanding the foregoing, any failure of Indemnitee to provide such a request to theapplicable Company, or to provide such a request in a timely fashion, shall not relieve such Company of any liability that it may haveto Indemnitee unless, and to the extent that, such failure actually and materially prejudices the interests of such Company.(b)Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 6(a) hereof, adetermination with respect to Indemnitee’s entitlement thereto shall be made in the specific case by one of the following four methods,which shall be at the election of the Board of the applicable Company (1) by a majority vote of the disinterested directors, even thoughless than a quorum, (2) by a committee of disinterested directors designated by a majority vote of the disinterested directors, eventhough less than a quorum, (3) if there are no disinterested directors or if the disinterested directors so direct, by Independent Counselin a written opinion to the Board of such Company, a copy of which shall be delivered to Indemnitee, or (4) if so directed by the Boardof such Company, by the stockholders of such Company. For purposes hereof, disinterested directors are those members of theapplicable Board who are not parties to the action, suit or proceeding in respect of which indemnification is sought by Indemnitee.(c)If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section6(b) hereof, the Independent Counsel shall be selected as provided in this Section 6(c). The Independent Counsel shall be selected bythe Board of the  applicable Company. Indemnitee may, within ten (10) days after such written notice of selection shall have been given to Indemnitee,deliver to the applicable Company a written objection to such selection; provided, however, that such objection may be asserted onlyon the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined inSection 13 of this Agreement, and the objection shall set forth in reasonable detail the factual basis of such assertion. Absent a properand timely objection, the person so selected shall act as Independent Counsel. If a written objection is made, the Independent Counselselected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that suchobjection is without merit. If, within twenty (20) days after submission by Indemnitee of a written request for indemnification pursuantto Section 6(a) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee maypetition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection whichshall have been made by Indemnitee to the applicable Company’s selection of Independent Counsel and/or for the appointment asIndependent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respectto whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 6(b) hereof. Theapplicable Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such IndependentCounsel in connection with acting pursuant to Section 6(b) hereof, and such Company shall pay all reasonable fees and expensesincident to the procedures of this Section 6(c), regardless of the manner in which such Independent Counsel was selected or appointed.(d)In making a determination with respect to entitlement to indemnification hereunder, the person or persons orentity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement. Anyone seekingto overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence. Neitherthe failure of the applicable Company (including by its directors or Independent Counsel) to have made a determination prior to thecommencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee hasmet the applicable standard of conduct, nor an actual determination by such Company (including by its directors or IndependentCounsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption thatIndemnitee has not met the applicable standard of conduct.(e)Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or booksof account of the Enterprise (as defined below), including financial statements, or on information supplied to Indemnitee by the officersof the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given orreports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonablecare by the Enterprise or Indemnitee. In addition, the knowledge and/or actions, or failure to act, of any director, officer, agent oremployee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under thisAgreement. Whether or not the foregoing provisions of this Section 6(e) are satisfied, it shall in any event be presumed that Indemniteehas at all times acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the applicableCompany. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear andconvincing evidence.  (f)If the person, persons or entity empowered or selected under Section 6 to determine whether Indemnitee isentitled to indemnification shall not have made a determination within sixty (60) days after receipt by the applicable Company of therequest therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shallbe entitled to such indemnification absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material factnecessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification; (ii) the personor persons empowered under Section 6 to make the determination on indemnification did not receive actual or timely notice of therequest for determination, and such failure to receive actual or timely notice prejudices the ability of such person or persons to makesuch determination, or (iii) a prohibition of such indemnification under applicable law; provided, however, that such sixty (60) dayperiod may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making suchdetermination with respect to entitlement to indemnification in good faith requires such additional time to obtain or evaluatedocumentation and/or information relating thereto; and provided further, that the foregoing provisions of this Section 6(f) shall notapply if the determination of entitlement to indemnification is to be made by the stockholders of the applicable Company pursuant toSection 6(b) of this Agreement and if (A) within fifteen (15) days after receipt by such Company of the request for such determination,the Board of such Company or the Disinterested Directors of such Company, if appropriate, resolve to submit such determination tothe stockholders of such Company for their consideration at an annual meeting thereof to be held within seventy five (75) days aftersuch receipt and such determination is made thereat, or (B) a special meeting of stockholders of such Company is called within fifteen(15) days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) daysafter having been so called and such determination is made thereat.(g)Indemnitee shall act in good faith and cooperate, upon reasonable request and subject to such reasonableconditions as Indemnitee may reasonably establish, with the person, persons or entity making such determination with respect toIndemnitee’s entitlement to indemnification, including providing to such person, persons or entity, upon reasonable request and subjectto such reasonable conditions as Indemnitee may reasonably establish, any documentation or information which is not privileged orotherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to suchdetermination. Any Independent Counsel, member of the Board of the applicable Company or stockholder of the applicable Companyshall act reasonably and in good faith in making a determination regarding Indemnitee’s entitlement to indemnification under thisAgreement. Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with theperson, persons or entity making such determination shall be borne by the applicable Company (irrespective of the determination as toIndemnitee’s entitlement to indemnification) and such Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.(h)Each Company acknowledges that a settlement or other disposition short of final judgment may be successful ifit permits a party to avoid expense, delay, distraction, disruption and uncertainty. In the event that any action, claim or proceeding towhich Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, withoutlimitation, settlement of such action, claim or proceeding with or without payment of money or other consideration) it shall bepresumed that Indemnitee has been successful on the merits or otherwise in such action, suit or proceeding. Anyone seeking to  overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.(i)The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement orconviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) ofitself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and ina manner which he reasonably believed to be in or not opposed to the best interests of the applicable Company or, with respect to anycriminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful.7.Remedies of Indemnitee.(a)In the event that (i) a determination is made pursuant to Section 6 of this Agreement that Indemnitee is notentitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 5 of thisAgreement, (iii) no determination of entitlement to indemnification is made pursuant to Section 6(b) of this Agreement within ninety(90) days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to thisAgreement within ten (10) days after receipt by the applicable Company of a written request therefor, or (v) payment ofindemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification orsuch determination is deemed to have been made pursuant to Section 6 of this Agreement, Indemnitee shall be entitled to anadjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of Indemnitee’sentitlement to such indemnification. Indemnitee shall commence such proceeding seeking an adjudication within one hundred eighty(180) days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 7(a). NoCompany shall oppose Indemnitee’s right to seek any such adjudication.(b)In the event that a determination shall have been made pursuant to Section 6(b) of this Agreement thatIndemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section 7 shall be conducted in allrespects as a de novo trial on the merits, and Indemnitee shall not be prejudiced by reason of the adverse determination under Section6(b).(c)If a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is entitled toindemnification, the applicable Company shall be bound by such determination in any judicial proceeding commenced pursuant to thisSection 7, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’smisstatement not materially misleading in connection with the application for indemnification, or (ii) a prohibition of suchindemnification under applicable law.(d)In the event that Indemnitee, pursuant to this Section 7, seeks a judicial adjudication of his rights under, or torecover damages for breach of, this Agreement, or to recover under any directors’ and officers’ liability insurance policies maintainedby the applicable Company or its affiliates, such Company shall pay on his behalf, in advance, any and all expenses (of the typesdescribed in the definition of Expenses in Section 13 of this Agreement) actually and reasonably incurred by him in such judicialadjudication or attempt to  receive under any such insurance, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification,advancement of expenses or insurance recovery.(e)Each Company shall be precluded from asserting in any judicial proceeding commenced pursuant to thisSection 7 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any suchcourt that the applicable Company is bound by all the provisions of this Agreement. The applicable Company shall indemnifyIndemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten (10) days after receipt by such Company ofa written request therefore) advance, to the extent not prohibited by law, such expenses to Indemnitee, which are incurred byIndemnitee in connection with any action brought by Indemnitee for indemnification or advance of Expenses from such Companyunder this Agreement or under any directors' and officers' liability insurance policies maintained by such Company, regardless ofwhether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of Expenses or insurance recovery, asthe case may be.(f)Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement toindemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.8.Non-Exclusivity; Survival of Rights; Insurance; Primacy of Indemnification; Subrogation.(a)The rights of indemnification as provided by this Agreement shall not be deemed exclusive of any other rightsto which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation of any entity, the By-laws of anyentity, any agreement, a vote of stockholders, a resolution of directors of the applicable Company, or otherwise. No amendment,alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement inrespect of any action taken or omitted by such Indemnitee in his or her Corporate Status prior to such amendment, alteration orrepeal. To the extent that a change in the DGCL, whether by statute or judicial decision, permits greater indemnification than wouldbe afforded currently under the Certificate of Incorporation, By-laws or this Agreement, it is the intent of the parties hereto thatIndemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred isintended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to everyother right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment ofany right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.(b)Each Company or its affiliates (including, without limitation, Chinos Holdings) will maintain, with coverageterms and limits substantially the same or better than the Insurance, an insurance policy or policies providing liability insurance fordirectors, officers, employees, or agents or fiduciaries of the applicable Company, its affiliates or of any other corporation, partnership,joint venture, trust, employee benefit plan or other enterprise that such person serves at the request of the applicable Company, andIndemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverageavailable for any director, officer, employee, agent or fiduciary under such policy or policies. If, at the time of the receipt of a notice ofa claim pursuant to the terms hereof, the applicable  Company has directors' and officers' liability insurance in effect, such Company shall give prompt notice of the commencement of suchproceeding to the insurers in accordance with the procedures set forth in the respective policies. The applicable Company shallthereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result ofsuch proceeding in accordance with the terms of such policies.(c)In the event of any payment under this Agreement, the applicable Company shall be subrogated to the extent ofsuch payment to all of the rights of recovery of Indemnitee, who shall, upon reasonable request and subject to such reasonableconditions as Indemnitee may reasonably establish, execute all papers required and take all action necessary to secure such rights,including execution of such documents as are necessary to enable such Company to bring suit to enforce such rights.(d)No Company shall be liable under this Agreement to make any payment of amounts otherwise indemnifiablehereunder if and to the extent that Indemnitee has otherwise actually received, and retained, such payment under any insurance policy,contract, agreement or otherwise.(e)Each Company's obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was servingat the request of the applicable Company as a director, officer, employee or agent of any other corporation, partnership, joint venture,trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received, and retained, asindemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, employee benefit plan orother enterprise.9.Exception to Right of Indemnification. Notwithstanding any provision in this Agreement, no Company shall be obligatedunder this Agreement to make any indemnity in connection with any claim made against Indemnitee:(a)for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or otherindemnity provision, except with respect to any excess beyond the amount paid under any insurance policy or other indemnityprovision;(b)for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securitiesof either Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions ofstate statutory law or common law; or(c)in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including anyProceeding (or any part of any Proceeding) initiated by Indemnitee against the applicable Company or its directors, officers, employeesor other indemnitees, unless: (i) the Board of such Company authorized the Proceeding (or any part of any Proceeding) prior to itsinitiation; (ii) such Company provides the indemnification, in its sole discretion, pursuant to the powers vested in such Company underapplicable law; or (iii) the Proceeding is one to enforce Indemnitee's rights under this Agreement.10.Sponsor Parties. Each Company further agrees that to the extent Indemnitee is employed, retained or otherwise associatedwith, or appointed or nominated by, TPG Capital or Leonard Green and Partners (each, a “Sponsor”) or any of their respectiveaffiliates, that the  applicable Company shall be primarily liable for all indemnification, reimbursements, advancements or similar payments (the“Indemnity Obligations”) afforded to the Indemnitee acting in his or her capacity as director on behalf or at the request of suchCompany, whether the Indemnity Obligations are created by law, organizational or constituent documents, contract (including thisAgreement) or otherwise. Notwithstanding the fact that either a Sponsor and/or any of its affiliates, other than the applicable Company(such persons, together with its and their heirs, successors and assigns, the “Sponsor Parties”), may have concurrent liability to theIndemnitee with respect to the Indemnity Obligations, the applicable Company hereby agrees that in no event shall such Companyhave any right or claim against any of the Sponsor Parties for contribution or have rights of subrogation against any Sponsor Partiesthrough the Indemnitee for any payment made by such Company with respect to any Indemnity Obligation. In addition, eachCompany hereby agrees that in the event that any Sponsor Parties pay or advance the Indemnitee any amount with respect to anIndemnity Obligation, the applicable Company will, or will cause its subsidiaries to, as applicable, promptly reimburse such SponsorParties for such payment or advance upon request. Each Company and the Indemnitee agree that the Sponsor Parties are express thirdparty beneficiaries of the terms hereof.11.Duration of Agreement. All agreements and obligations of the applicable Company contained herein shall continueduring the period Indemnitee is an officer or director of such Company (or is or was serving at the request of such Company as adirector, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) and shall continuethereafter so long as Indemnitee shall be subject to any Proceeding (or any proceeding commenced under Section 7 hereof) by reasonof his or her Corporate Status, whether or not he is acting or serving in any such capacity at the time any liability or expense is incurredfor which indemnification can be provided under this Agreement. This Agreement shall be binding upon and inure to the benefit ofand be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger,consolidation or otherwise to all or substantially all of the business or assets of the applicable Company), assigns, spouses, heirs,executors and personal and legal representatives.12.Security. To the extent requested by Indemnitee and approved by the Board of the applicable Company, such Companymay at any time and from time to time provide security to Indemnitee for such Company’s obligations hereunder through anirrevocable bank line of credit, funded trust or other collateral. Any such security, once provided to Indemnitee, may not be revoked orreleased without the prior written consent of Indemnitee.13.Enforcement.(a)Each Company expressly confirms and agrees that it has entered into this Agreement and assumes theobligations imposed on it hereby in order to induce Indemnitee to serve as an officer or director of the applicable Company, and eachCompany acknowledges that Indemnitee is relying upon this Agreement in serving as an officer or director of the applicable Company.(b)No Company shall seek from a court, or agree to, a "bar order" which would have the effect of prohibiting orlimiting Indemnitee's rights to receive advancement of expenses under this Agreement.  14.Definitions. For purposes of this Agreement:(a)“Corporate Status” describes the status of a person who is or was a director, officer, employee, agent orfiduciary of the applicable Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or otherenterprise that such person is or was serving at the express written request of the applicable Company. Any election or appointment ofan Indemnitee as a director of the applicable Company or of any corporation, partnership or joint venture which is a subsidiary oraffiliate of such Company, or of a trust or employee benefit plan of such Company or any such subsidiary or affiliate, shallconclusively evidence that such Indemnitee’s service in such capacity was at the request of such Company.(b)“Disinterested Director” means a director of the applicable Company who is not and was not a party to theProceeding in respect of which indemnification is sought by Indemnitee.(c)“Enterprise” shall mean the applicable Company any other corporation, partnership, joint venture, trust,employee benefit plan or other enterprise that Indemnitee is or was serving at the request of such Company as a director, officer,employee, agent or fiduciary.(d)“Expenses” shall include all attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees,travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all otherdisbursements or other expenses incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating,participating, or being or preparing to be a witness in a Proceeding, or responding to, or objecting to, any request to provide discoveryor information in any Proceeding. Expenses also shall include Expenses incurred in connection with any appeal resulting from anyProceeding and any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of anypayments under this Agreement, including without limitation the premium, security for, and other costs relating to any cost bond,supersede as bond, or other appeal bond or its equivalent. Expenses, however, shall not include amounts paid in settlement byIndemnitee or the amount of judgments or fines against Indemnitee.(e)“Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters ofcorporation law and neither presently is, nor in the past five years has been, retained to represent (i) the applicable Company (or anyaffiliate thereof) or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemniteeunder this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceedinggiving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not includeany person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest inrepresenting either the applicable Company (or any affiliate thereof) or Indemnitee in an action to determine Indemnitee’s rights underthis Agreement. The applicable Company agrees to pay the reasonable fees and other charges and expenses of the IndependentCounsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising outof or relating to this Agreement or its engagement pursuant hereto.  (f)“Proceeding” includes any threatened, pending or completed action, claim, suit, indictment, informationrequest, arbitration, alternate dispute resolution mechanism, investigation, inquiry, congressional, regulatory or administrative hearingor any other actual, threatened, reasonably anticipated, or completed proceeding, whether brought by or in the right of the applicableCompany or otherwise and whether civil, criminal, regulatory, administrative or investigative, in which Indemnitee was, is or maybecome involved as a party or otherwise, by reason of his or her Corporate Status, by reason of any action taken by him or of anyinaction on his part while acting in his or her Corporate Status; in each case whether or not he is acting or serving in any such capacityat the time any liability or expense is incurred for which indemnification can be provided under this Agreement; including one pendingon or before the date of this Agreement, and one initiated by an Indemnitee to enforce his rights under this Agreement. For purposesof this definition, any of the foregoing Proceedings initiated by Indemnitee against the applicable Company or its directors, officers,agents, employees or other indemnitees inside or outside a Proceeding shall be considered a separate and distinct Proceeding.15.Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity orenforceability of any other provision. Without limiting the generality of the foregoing, this Agreement is intended to confer uponIndemnitee indemnification rights to the fullest extent permitted by applicable laws. In the event any provision hereof conflicts withany applicable law, such provision shall be deemed modified, consistent with the aforementioned intent, to the extent necessary toresolve such conflict. 16.Modification and Waiver. No supplement, modification, termination or amendment of this Agreement shall be bindingunless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shallconstitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.17.Notice By Indemnitee. Indemnitee agrees promptly to notify the applicable Company in writing upon being served withor otherwise receiving any summons, citation, subpoena, complaint, indictment, information or other document relating to anyProceeding or matter which may be subject to indemnification covered hereunder. The failure to so notify the applicable Companyshall not relieve such Company of any obligation which it may have to Indemnitee under this Agreement or otherwise unless and onlyto the extent that such failure or delay materially prejudices such Company.18.Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall bedeemed effectively given (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimileif sent during normal business hours of the recipient, and if not so confirmed, then on the next business day, (c) five (5) days afterhaving been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with anationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall besent: (a)To Indemnitee at the address set forth below Indemnitee signature hereto.(b)To each Company at:  J.Crew770 BroadwayNew York, New York 10003Attention: General Counsel or to such other address as may have been furnished to Indemnitee by the applicable Company or to such Company byIndemnitee, as the case may be.19.Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed anoriginal, but all of which together shall constitute one and the same the same instrument. Counterparts may be delivered via facsimile,electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g.,www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validlydelivered and be valid and effective for all purposes. 20.Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemedto constitute part of this Agreement or to affect the construction thereof.21.Governing Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governedby, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. EachCompany and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connectionwith this Agreement shall be brought only in the Chancery Court of the State of Delaware (the “Delaware Court”), and not in anyother state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusivejurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii)appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, irrevocably Intertrust CorporateServices Delaware Ltd., 200 Bellevue Parkway, Suite 210, Wilmington, Delaware 19808, as its agent in the State of Delaware as suchparty's agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legalforce and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venueof any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any suchaction or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.SIGNATURE PAGE FOLLOWS  IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written.CHINOS HOLDINGS, INC.By:Name: Title:CHINOS INTERMEDIATE HOLDINGS A, INC.By:Name: Title:CHINOS INTERMEDIATE HOLDINGS B, INC.By:Name: Title:J. CREW GROUP, INC.By:Name: Title:INDEMNITEEName: Exhibit 21.1Subsidiaries of J.Crew Group, Inc. Name of Subsidiary Jurisdiction of Incorporation Name under which SubsidiaryDoes BusinessJ.Crew Operating Corp. Delaware J.Crew Operating Corp.J.Crew Inc. Delaware J.Crew Inc.Grace Holmes, Inc. Delaware J.Crew Retail StoresH.F.D. No. 55, Inc. Delaware J.Crew Factory StoresMadewell, Inc. Delaware Madewell Retail StoresJ.Crew Virginia, Inc. Virginia J.Crew Virginia, Inc.J.Crew International, Inc. Delaware J.Crew International, Inc.J.Crew Canada Inc. Ontario, Canada J.Crew Canada Inc.J.Crew France SAS.. France J.Crew France SASJ.Crew U.K. Limited United Kingdom J.Crew U.K. LimitedJ.Crew Japan, Ltd. Japan J.Crew Japan, Ltd.J.Crew Global Holdings A, LLC Delaware J.Crew Global Holdings A, LLCJ.Crew Global Holdings Bermuda LP Bermuda J.Crew Global Holdings Bermuda LPJ.Crew Global Holdings B, LLC Delaware J.Crew Global Holdings B, LLCJ.Crew Netherlands C.V. Netherlands J.Crew Netherlands C.V.J.Crew Hong Kong Services, Limited Hong Kong J.Crew Hong Kong Services, LimitedJ.Crew Hong Kong Limited Hong Kong J.Crew Hong Kong LimitedJ.Crew Asia Limited Hong Kong J.Crew Asia LimitedJ.Crew Hong Kong Intermediate, Ltd. Hong Kong J.Crew Hong Kong Intermediate, Ltd.J.Crew Apparel Trading (Shenzhen) CompanyLimited China J.Crew Apparel Trading (Shenzhen) CompanyLimitedJ.Crew Commercial Trading (Shanghai) CompanyLimited China J.Crew Commercial Trading (Shanghai) CompanyLimitedJ.Crew Netherlands Coöperatief U.A. Netherlands J.Crew Netherlands Coöperatief U.A.J.Crew NL B.V. Netherlands J.Crew NL B.V.J.Crew Cayman Limited Cayman Islands J.Crew Cayman LimitedMadewell Cayman Limited Cayman Islands Madewell Cayman LimitedJ.Crew International Cayman Limited Cayman Islands J.Crew International Cayman LimitedJ.Crew Holdings A, LLC Delaware J.Crew Holdings A, LLCJ.Crew Holdings B, LLC Delaware J.Crew Holdings B, LLCMadewell Brand Holdings, LLC Delaware Madewell Brand Holdings, LLCMadewell Brand, LLC Delaware Madewell Brand, LLCJ.Crew Brand Holdings, LLC Delaware J.Crew Brand Holdings, LLCJ.Crew Brand Intermediate, LLC Delaware J.Crew Brand Intermediate, LLCJ.Crew Brand, LLC Delaware J.Crew Brand, LLCJ.Crew Domestic Brand, LLC Delaware J.Crew Domestic Brand, LLCJ.Crew International Brand, LLC Delaware J.Crew International Brand, LLCJ.Crew Brand Corp. Delaware J.Crew Brand Corp. Exhibit 24.1POWER OF ATTORNEYI hereby appoint Millard Drexler, Michael Nicholson, Jeremy Brooks and Maria Di Lorenzo my true and lawful attorneys-in-fact, each with full powerto act without the other and each with full power of substitution, to sign on my behalf, as an individual and in the capacity stated below, and to file theAnnual Report on Form 10-K of J.Crew Group, Inc. for its fiscal year ended January 28, 2017 and any amendment that such attorney-in-fact may deemappropriate or necessary. I further grant unto such attorneys and each of them full power and authority to perform each and every act necessary to be done inorder to accomplish the foregoing as fully as I might do.IN WITNESS WHEREOF, I have executed this power of attorney as of the 20th day of March, 2017. Signature: /S/ MILLARD DREXLER Print Name: Millard DrexlerTitle: Director Signature: /S/ JAMES COULTERPrint Name: James CoulterTitle: Director Signature: /S/ JOHN DANHAKL Print Name: John DanhaklTitle: Director Signature: /S/ JONATHAN SOKOLOFFPrint Name: Jonathan SokoloffTitle: Director Signature: /S/ STEPHEN SQUERIPrint Name: Stephen SqueriTitle: Director Signature: /S/ CARRIE WHEELERPrint Name: Carrie WheelerTitle: Director Signature: /S/ CHAD LEATPrint Name: Chad LeatTitle: Director Signature: /S/ RICHARD FEINTUCH Print Name: Richard FeintuchTitle: Director Exhibit 31.1CERTIFICATION PURSUANT TO SECTION 302OF THE SARBANES-OXLEY ACT OF 2002I, Millard Drexler, certify that: 1.I have reviewed this Annual Report on Form 10-K of J.Crew Group, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period coveredby this report; 3.Based on my knowledge, the financial statements and other financial information included in this report fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as definedin Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely to materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: March 21, 2017 /S/ MILLARD DREXLERMillard DrexlerChief Executive Officer Exhibit 31.2CERTIFICATION PURSUANT TO SECTION 302OF THE SARBANES-OXLEY ACT OF 2002I, Michael J. Nicholson, certify that: 1.I have reviewed this Annual Report on Form 10-K of J.Crew Group, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period coveredby this report; 3.Based on my knowledge, the financial statements and other financial information included in this report fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as definedin Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonablylikely to materially affect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting,to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: March 21, 2017 /S/ MICHAEL J. NICHOLSONMichael J. NicholsonPresident, Chief Operating Officer and Chief Financial Officer Exhibit 32.1CERTIFICATION PURSUANT TO SECTION 906OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of J.Crew Group, Inc. (the “Company”) on Form 10-K for the period ended January 28, 2017 as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), we, Millard Drexler, Chief Executive Officer of the Company, and Michael J.Nicholson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 2002, that: 1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany.Date: March 21, 2017 /S/ MILLARD DREXLERMillard DrexlerChief Executive Officer /S/ MICHAEL J. NICHOLSONMichael J. NicholsonChief Financial OfficerThe foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) and is notbeing filed as part of the Report or as a separate disclosure document.A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company andfurnished to the Securities and Exchange Commission or its staff upon request.

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