J.Jill, Inc. (NYSE:JILL) Q4 2024 Earnings Conference Call March 19, 2025 8:00 AM ET Company Participants Claire Spofford - President and Chief Executive Officer Mark Webb - Executive Vice President, Chief Financial and Operating Officer Conference Call Participants Janine Stichter - BTIG Ryan Meyers - Lake Street Capital Markets Jonna Kim - TD Cowen Marni Shapiro - The Retail Tracker Dana Telsey - Telsey Group Corey Tarlowe - Jefferies Operator Thank you for standing by. My name is Pam and I will be your co ...

Financial Data and Key Metrics Changes - For the full year 2024, total sales were approximately $611 million, with comparable sales growth of 1.5% and gross margin of 70.4% [18][26] - Adjusted EBITDA for the year was $107 million, while adjusted net income per diluted share was $3.47, reflecting a 4% increase [26][27] - Free cash flow for the year was $47 million, with cash from operations generating $65 million [27][28] Business Line Data and Key Metrics Changes - In Q4, total company sales were $143 million, down approximately 5% compared to the previous year [21] - Direct sales accounted for 50.5% of total sales in Q4, down 6.8% year-over-year due to a shift into markdown selling [24] - The strongest categories in Q4 included bottoms, outerwear, knit tops, and sleepwear, supported by marketing campaigns [9][80] Market Data and Key Metrics Changes - The retail channel saw a 1.9% increase in comparable sales for Q4, driven by strong conversion and average unit retail (AUR) [22] - Store sales for Q4 were down 3% due to calendar impacts, but new stores contributed approximately $1.1 million in revenue [22][23] - The company ended the year with a total of 252 stores, reflecting a net increase of eight stores [30] Company Strategy and Development Direction - The company plans to continue investing in new store growth, with expectations to open 20 to 25 net new stores by the end of 2026 [34] - The implementation of a new order management system (OMS) is expected to enhance omni-channel capabilities and improve customer experience [31][32] - Marketing strategies are being diversified, including geo-targeted efforts to drive customer engagement and store traffic [12][56] Management's Comments on Operating Environment and Future Outlook - The management noted that fiscal 2025 has started slowly, with consumer sentiment and adverse weather impacting performance [14][15] - The company is taking a prudent approach to its outlook for Q1 and the remainder of the year, considering macroeconomic uncertainties [15][19] - Management expressed confidence in the brand's potential for growth, emphasizing the importance of disciplined operating principles [16][36] Other Important Information - The company initiated a quarterly dividend and share buyback program, marking the first such actions since its IPO in 2017 [10][18] - Total reported inventories were up about 15% compared to the previous year, but normalized inventories were only up about 3% [29][84] - The company expects to spend approximately $25 million in capital expenditures for fiscal 2025, focusing on new stores and OMS rollout [35] Q&A Session Summary Question: Can you elaborate on the Q1 headwinds? - Management identified three main headwinds: adverse weather, consumer sentiment concerns, and the OMS implementation [40][41] Question: What benefits do you expect from the OMS? - The OMS is expected to provide operational efficiencies and enhance omni-channel capabilities, starting to yield benefits in the back half of the year [43][45] Question: How do you view gross margin trends for the year? - Management indicated that Q1 will be the most challenging comparison, with expectations for flat gross margins overall [50][52] Question: What are the traffic trends and how are you driving digital customers to stores? - Traffic has been challenged, but the company is testing geo-targeted marketing to drive store traffic [54][56] Question: How are promotions being managed in the current environment? - The company aims to maintain a disciplined promotional approach while responding to consumer price sensitivity [66][70] Question: What differences are observed between stores and digital channels? - Stores are more full-price oriented, while digital channels have shifted more towards markdowns [74]

Core Viewpoint - J.Jill reported quarterly earnings of $0.32 per share, exceeding the Zacks Consensus Estimate of $0.22 per share, and showing an increase from $0.23 per share a year ago, indicating a 45.45% earnings surprise [1] Financial Performance - The company achieved revenues of $142.84 million for the quarter ended January 2025, surpassing the Zacks Consensus Estimate by 0.88%, although this represents a decline from $149.45 million in the same quarter last year [2] - Over the last four quarters, J.Jill has exceeded consensus EPS estimates four times and topped revenue estimates three times [2] Stock Performance - J.Jill shares have declined approximately 32.6% since the beginning of the year, contrasting with the S&P 500's decline of 4.5% [3] - The current Zacks Rank for J.Jill is 3 (Hold), indicating that the shares are expected to perform in line with the market in the near future [6] Earnings Outlook - The consensus EPS estimate for the upcoming quarter is $1.32 on revenues of $166.05 million, and for the current fiscal year, it is $3.62 on revenues of $630.7 million [7] - The trend of estimate revisions for J.Jill is mixed, which could change following the recent earnings report [6] Industry Context - The Retail - Apparel and Shoes industry, to which J.Jill belongs, is currently ranked in the bottom 40% of over 250 Zacks industries, suggesting potential challenges ahead [8]

Financial Data and Key Metrics Changes - For the full year 2024, total sales were approximately $611 million, with comparable sales growth of 1.5% and a gross margin of 70.4% [18][26] - Adjusted EBITDA for the year was $107 million, while adjusted net income per diluted share was $3.47, reflecting a 4% increase [26][27] - Free cash flow for the year was $47 million, with a cash position of $35.4 million at the end of Q4 [27][28] Business Line Data and Key Metrics Changes - In Q4, total company sales were $143 million, down approximately 5% compared to the previous year [21] - Direct sales accounted for 50.5% of total sales in Q4, down 6.8% year-over-year due to a shift into markdown selling [24] - The company saw strength in bottoms, outerwear, knit tops, and sleepwear during the quarter, supported by marketing campaigns [9][10] Market Data and Key Metrics Changes - The retail channel drove a 1.9% increase in comparable sales for Q4, while store sales were down 3% due to calendar impacts [22] - The best customer cohort continued to show consistent growth, contributing to overall performance despite traffic headwinds [10][11] - The company experienced challenges in traffic, particularly in Q4 and early Q1, attributed to broader macroeconomic conditions and consumer sentiment [40][72] Company Strategy and Development Direction - The company plans to continue investing in new store growth, with a target of opening 20 to 25 net new stores by the end of 2026 [34] - The implementation of a new order management system (OMS) is expected to enhance omnichannel capabilities and improve customer experience [31][32] - Marketing efforts are being diversified, including geo-targeted campaigns to drive store traffic and customer engagement [12][55] Management's Comments on Operating Environment and Future Outlook - Management noted that fiscal 2025 has started slowly, with consumer sentiment and adverse weather impacting performance [14][15] - The company is taking a prudent approach to its outlook for Q1 and the remainder of the year, considering the ongoing macroeconomic uncertainties [15][19] - Despite challenges, management remains confident in the brand's potential for growth and the effectiveness of its operating model [16][35] Other Important Information - The company ended the year with a healthy cash position and announced a quarterly dividend increase [10][28] - Inventory levels were reported to be elevated due to strategic shipping decisions, but are expected to normalize in the coming quarters [29][82] - The company has initiated a share buyback program, with $24.5 million remaining under the authorization as of the end of Q4 [28][74] Q&A Session Summary Question: Can you elaborate on the Q1 headwinds? - Management identified three main headwinds: adverse weather, consumer sentiment concerns, and the OMS implementation [40][41] Question: What benefits do you expect from the OMS implementation? - The OMS is expected to provide operational efficiencies and enhance sales through new omnichannel capabilities, starting in the back half of the year [43][45] Question: How do you view gross margin trends for the year? - Management expects gross margins to be flat, with Q1 facing the most difficult comparisons due to prior strong performance [50][52] Question: What are the trends in store versus digital sales? - Stores are performing better in full-price sales compared to digital, which has shifted more towards markdowns [72] Question: How are you managing promotions in the current environment? - The company is focused on maintaining a disciplined promotional strategy while responding to consumer price sensitivity [65][68]

Core Viewpoint - The article emphasizes the importance of value investing and highlights J.Jill (JILL) as a strong value stock based on its financial metrics and rankings [2][4][7] Company Analysis - J.Jill currently holds a Zacks Rank of 2 (Buy) and has a Value grade of A, indicating strong potential for value investors [4][7] - The stock has a Forward P/E ratio of 6.99, significantly lower than the industry average of 19.64, suggesting it may be undervalued [4] - J.Jill's Forward P/E has fluctuated between a high of 11.07 and a low of 6.69 over the past 52 weeks, with a median of 7.69 [4] - The company has a P/B ratio of 3.77, which is attractive compared to the industry's average P/B of 6.23, indicating a favorable valuation [5] - J.Jill's P/B has ranged from a high of 9.27 to a low of 3.49 in the past year, with a median of 5.67 [5] - The P/CF ratio for J.Jill is 6.13, well below the industry average of 16.31, further supporting the notion of undervaluation [6] - Over the past 12 months, J.Jill's P/CF has varied between a high of 9.08 and a low of 5.02, with a median of 6.45 [6] - These financial metrics collectively suggest that J.Jill is likely undervalued and presents a strong investment opportunity for value-focused investors [7]

Executive Appointment - Jill Kelly appointed as North America CEO of Assembly, effective February 3, 2025, succeeding Valerie Davis [1] - Kelly will report to Assembly's Global CEO, Rick Acampora, and focus on amplifying capabilities, delivering breakthrough solutions, and fostering innovation and collaboration [2] - Kelly brings extensive experience from roles including CEO of EssenceMediacom, global CMO at GroupM, and leadership positions within Publicis Groupe [3] Strategic Vision and Leadership - Kelly emphasizes Assembly's commitment to "Find the Change that Fuels Growth," leveraging new technologies and client relationships to create durable campaigns [4] - Assembly's recent launch of STAGE AI, an advanced proprietary technology, highlights the agency's focus on AI-driven media strategies [4] - Rick Acampora, Global CEO, highlights Kelly's track record in driving growth, fostering talent, and leading transformative initiatives as key to elevating North American operations [5] Company Overview - Assembly is a global omnichannel media agency with over 2,300 professionals across 35 offices worldwide, powered by its proprietary STAGE operating system [6] - The agency integrates data, talent, and technology to drive growth for esteemed brands, with a focus on social and environmental impact [6] - Assembly is part of Stagwell, a challenger network aimed at revolutionizing marketing [6]

Company Overview - J.Jill, Inc. (NYSE: JILL) reported Q3 2024 results, indicating a challenging quarter similar to other apparel retailers, primarily due to promotions and mild fall weather [1] - Comparable sales decreased slightly by 0.8%, attributed partly to external market conditions [1] Industry Context - The apparel retail sector is experiencing difficulties, with companies facing challenges related to promotional strategies and seasonal weather impacts [1]

Core Insights - J.Jill, Inc. reported third-quarter fiscal 2024 results with net sales in line with estimates and earnings per share exceeding expectations, both showing year-over-year growth [1][3][4] Financial Performance - Quarterly earnings were 89 cents per share, surpassing the Zacks Consensus Estimate of 80 cents, and increased by 7.2% from 83 cents in the prior year [3] - Net sales reached $151.3 million, a 0.3% increase from $150.9 million in the same quarter last year, aligning with the Zacks Consensus Estimate [4] - Total comparable sales declined by 0.8%, impacted by approximately 50 basis points due to hurricane disruptions [5] - Gross profit decreased by 0.6% to $108 million, with gross margin contracting by 60 basis points to 71.4% due to increased promotional activities and higher freight costs [6] - SG&A expenses rose by 2.5% year over year to $88.6 million, with SG&A as a percentage of net sales increasing by 70 basis points to 58.4% [7] - Adjusted EBITDA totaled $26.8 million, down from $28.6 million in the prior year, indicating a decline of 6.1% [8] Operational Updates - The company ended the quarter with 247 stores, opening three new stores and temporarily closing one due to hurricane damage [9] - Cash and cash equivalents stood at $38.8 million, with long-term debt at $69.1 million and total shareholders' equity at $103.3 million [10] - Net cash flow from operations was $19.1 million, compared to $21.1 million in the prior year, with free cash flow totaling $13.6 million [11] Future Outlook - For the fiscal fourth quarter, management anticipates net sales to decline by 4% to 6% compared to the same quarter last year, with total comparable sales expected to increase by 1% to 3% [13] - For fiscal 2024, J.Jill forecasts net sales growth to be flat to up 1%, with adjusted EBITDA projected between $105 million and $107 million, reflecting a year-over-year decrease of 5-7% [14] - Excluding the impact of the 53rd week and OMS project expenses, net sales growth is estimated at 1-2% with adjusted EBITDA decline of 2-4% [15] Shareholder Returns - The company announced a quarterly dividend of 7 cents per share, payable on January 9, 2025 [12] - A new share repurchase program was authorized, allowing the company to buy back up to $25 million of shares over the next two years, indicating management's confidence in the business [2][11]

Financial Data and Key Metrics Changes - The company reported total sales for Q3 2024 of approximately $151 million, which is up 0.3% compared to Q3 2023 [26] - Total company comparable sales decreased by 0.8% compared to a positive 1.9% last year, with a negative impact of approximately $800,000 from storm activity [26][29] - Gross margin for Q3 was 71.4%, down 60 basis points from Q3 2023, influenced by elevated markdowns and ocean freight costs [29][30] - Adjusted EBITDA for the quarter was $26.8 million, representing 17.7% of sales, compared to $28.6 million in Q3 2023 [32] Business Line Data and Key Metrics Changes - Retail sales were up 0.2% compared to Q3 2023, primarily driven by a calendar shift, while direct sales as a percentage of total sales were about 46% [26][28] - The company saw growth in orders per customer, supporting spend per customer results, despite a slight decline in the overall customer file [13][70] - The strength in the bottoms assortment helped offset ongoing softness in dresses, with a noted increase in engagement from marketing campaigns [17][102] Market Data and Key Metrics Changes - The company experienced a mixed consumer behavior, with direct consumers being more price-sensitive compared to retail consumers [51][80] - The impact of weather was noted, with cooler temperatures aiding sales in sweaters and outerwear as the season progressed [60] Company Strategy and Development Direction - The company is focused on modernizing the brand and enhancing omnichannel capabilities, with plans for new store growth and a new order management system coming online in 2025 [8][18] - A new share repurchase program has been authorized, reflecting confidence in the business model and growth opportunities [10][44] - The company aims to open up to 50 net new stores over the next five years, with a robust pipeline of potential locations [36][74] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing challenges in the consumer environment, particularly the lack of robust full-price selling seen earlier in the year [24][37] - For Q4, the company expects sales to decline by 4% to 6% compared to the previous year, with total comparable sales growth projected to increase by 1% to 3% [38][40] - The company remains committed to maintaining operational discipline and managing controllables amidst market uncertainties [43][44] Other Important Information - The company has reduced debt levels to approximately $76 million and initiated its first ordinary dividend program [44] - Capital expenditures for the quarter were $5.5 million, focused on store openings and the OMS project [34] Q&A Session Summary Question: Can you elaborate on the cadence of trends in the quarter? - Management noted that August was a soft month, but there was sequential improvement as the quarter progressed, aided by colder weather and marketing efforts [50] Question: Have you seen any changes in the broader promotional environment? - Management confirmed that Q4 tends to be promotional, with adjustments made to the timing of promotions [54] Question: What impact did weather have on sales? - Management acknowledged that weather was a headwind early in the season but improved as temperatures dropped [60] Question: Can you provide insights on customer file trends? - The overall customer file contracted slightly, but the best customer cohort continued to perform well [70] Question: What are the plans for store openings in 2025? - Management indicated a robust pipeline for store openings, with expectations to ramp up from the current year [74] Question: How is the company addressing direct consumer price sensitivity? - Management noted that the direct consumer has historically been more price-sensitive, but efforts are being made to maintain a healthy margin profile [80] Question: What is the potential impact of tariffs on the supply chain? - Management stated that tariffs are being monitored, but the impact is minimal as China accounts for less than 5% of finished goods production [87]

Financial Performance - Net income for the thirteen weeks ended October 28, 2023, was $12.348 million, compared to $11.616 million for the same period in 2022, representing a year-over-year increase of 6.3%[86] - Adjusted EBITDA for the thirteen weeks ended October 28, 2023, was $26.808 million, down from $28.552 million in the prior year, reflecting a decrease of 6.1%[86] - Net sales for the thirteen weeks ended October 28, 2023, were $151.260 million, slightly up from $150.881 million in the same period last year, indicating a growth of 0.3%[86] - Adjusted EBITDA margin for the thirteen weeks ended October 28, 2023, was 17.7%, compared to 18.9% for the same period in 2022, showing a decline of 1.2 percentage points[86] - Operating income for the thirteen weeks ended November 2, 2024, was $19.2 million, a decrease of $2.9 million, or 13.1%, from $22.1 million in the prior year[88] - Net income for the thirteen weeks ended November 2, 2024, was $12.3 million, an increase of $0.7 million, or 6.3%, from $11.6 million for the same period in 2023[88] - For the thirty-nine weeks ended November 2, 2024, net sales increased by $10.3 million, or 2.2%, to $468.0 million compared to $457.8 million in the prior year[97] - Gross profit for the thirty-nine weeks ended November 2, 2024, increased by $5.8 million, or 1.8%, to $335.1 million, with a gross margin of 71.6% compared to 71.9% in the prior year[99] Expenses and Costs - SG&A expenses for the thirteen weeks ended November 2, 2024, increased by $2.2 million, or 2.5%, to $88.6 million, representing 58.6% of net sales[91] - SG&A expenses for the thirty-nine weeks ended November 2, 2024, increased by $10.4 million, or 4.1%, to $264.1 million, representing 56.4% of net sales[100] - The company incurs pre-opening costs for new stores, which include payroll, travel, training, and initial inventory costs, impacting short-term financial performance[83] Cash Flow and Debt - Interest expense for the thirty-nine weeks ended November 2, 2024, was $13.0 million, a decrease of $5.7 million, or 30.6%, from $18.8 million in the prior year[103] - The company recorded a loss on extinguishment of debt of $8.6 million for the thirty-nine weeks ended November 2, 2024, related to the voluntary prepayment of a portion of the Term Loan Credit Agreement[101] - The income tax provision was $13.8 million for the thirty-nine weeks ended November 2, 2024, compared to $13.3 million for the same period in 2023, with effective tax rates of 27.1% and 29.8% respectively[107] - As of November 2, 2024, the company had $38.8 million in cash and $35.7 million of total availability under its ABL Facility[108] - Net cash provided by operating activities increased to $56.9 million for the thirty-nine weeks ended November 2, 2024, compared to $56.7 million for the same period in 2023[113] - Net cash used in investing activities was $10.0 million for the thirty-nine weeks ended November 2, 2024, down from $10.8 million in the same period in 2023[115] - Net cash used in financing activities was $70.3 million for the thirty-nine weeks ended November 2, 2024, compared to $68.9 million for the same period in 2023[116] - The company made voluntary principal prepayments of $58.2 million and $27.2 million on its Term Loan Credit Agreement during Fiscal Year 2024[111] - As of November 2, 2024, the remaining Term Loan Facility principal balance was $76.5 million, with a scheduled repayment of $2.2 million prior to January 31, 2025[111] Dividends and Stock Repurchase - The company declared a quarterly cash dividend of $0.07 per share, resulting in total dividend payments of $1.0 million for the thirteen weeks and $1.8 million for the thirty-nine weeks ended November 2, 2024[117] - The company is authorized to repurchase up to $25.0 million of its common stock over the next two years under a newly approved Share Repurchase Program[108] Market and Strategic Initiatives - The ongoing implementation of strategic initiatives, including enhancements to the ecommerce platform and information systems, is expected to impact future operating results positively[81] - The company faces challenges from overall economic trends, including inflationary pressures and reduced consumer confidence, which may affect demand for merchandise[81] - The retail industry remains highly competitive, with the company needing to anticipate fashion trends to maintain customer appeal and attract new customers[81] - The total company comparable sales calculation is based on a 52-week period, which may not be comparable to sales data from other companies due to different calculation methods[83] - The company operates over 200 stores nationwide and has a robust ecommerce platform, contributing to its customer experience strategy[80]