J. Jill refinances long-term debt, plans new POS

Dive Brief:

Despite newness flowing regularly to its assortment, women’s apparel retailer J. Jill said in a Wednesday earnings announcement that its customers remain “increasingly discerning” with spending decisions. That contributed to first quarter net sales falling 4.9% to $149.4 million versus $157.1 million a year ago. Total company comparable sales — which include comparable store and direct-to-consumer sales — fell by 2.7%.
J. Jill’s DTC sales, which represent 45% of company sales, were down 7.7% during Q1. The retailer’s net income fell to $4.6 million from $14.4 million a year ago. J. Jill also said it refinanced its long-term debt, reducing the principal outstanding by about $50 million.
J. Jill’s inventory was down nearly 14.9% to $53.8 million compared to $63.2 million at the same time last year. The retailer said it expects to end the year with the same number of stores.

Dive Insight:

J. Jill joins a growing list of retailers who say that inflation is reshaping shopping and spending.

CEO Claire Spofford said that reality played out in spending behavior in units per transaction and frequency, as well as consumers “opting more into the markdown inventory a little bit,” according to an earnings call transcript.

J. Jill’s total gross profit for Q1 fell $1.9 million to $108 million but the company’s gross margin rose to 72%. Adjusted EBITDA for the quarter was $32 million, up 2% from $31 million a year ago.

Mark Webb, J. Jill’s chief financial and operating officer, said the company’s updated full-year guidance reflects “a more cautious view of the consumer based on current trends as well as a wider range of scenarios with respect to our promotional cadence given the ongoing uncertainty around the macroeconomic environment.” Webb said the company now expects EBITDA to be in the mid-single digits as a percent compared to last year.

J. Jill flirted with bankruptcy during the pandemic’s early months. But a deal with lenders gave the company some liquidity and enabled the retailer to get back on track.

Now, the company is focused on investments, like the rollout of a new point-of-sale system. J. Jill expects to complete the new POS launch by the end of fiscal 2023. The new POS system will enable “more seamless transactions across channels and positions us to further enhance our omnichannel capabilities over time,” Spofford said.

The company also opened two new stores during the quarter, bringing its total store count to 245.

“We've been thrilled with the initial response to these openings," Spofford said. "As we welcome back many prior customers to J.Jill, approximately half of the customers we've seen in the initial weeks at our South Windsor and Mashpee stores are reactivated customers. As we look forward, we're excited to continue to explore opportunities to expand our footprint over time as the economics make sense.”

But Webb said J. Jill expects to end the year with a flat store count with any openings offset by closures. For the full year, J. Jill anticipates $18 million in capital expenditures, focused on technology and the completion of the POS update project.

In response to an analyst’s question regarding inventory, Spofford said J. Jill this year has “leaned into those more fashion categories like dresses that continue to have strength. So we feel good coming into Q2 about the balance in the inventory and I think, with regard to [average unit retail] it's at a pretty high level and dollars per customer at a very high level.”