J.Jill(US:JILL)2025-04-01 20:05Part I Business J.Jill is a national lifestyle brand targeting affluent women aged 45 and older, operating a balanced omnichannel model with retail stores and direct-to-consumer channels - J.Jill is a national lifestyle brand targeting affluent women aged 45 and older with a median household income of approximately $150,0002224 FY2024 Sales Channel Distribution | Channel | Percentage of Net Sales | | :--- | :--- | | Retail | ~52% | | Direct (Ecommerce/Catalog) | ~48% | - The company operates 252 stores across 42 states as of February 1, 2025, and returned to net store growth in Fiscal Year 20243337 - Growth strategy includes attracting new customers, increasing direct sales, and strategically adding a net of 50 new stores over the next three to five years464748 - In Fiscal Year 2024, approximately 81% of products were sourced through agents and 19% directly from suppliers, with India, Indonesia, and Vietnam being the top three sourcing countries by volume5657 - As of February 1, 2025, the company employed 1,123 full-time and 2,126 part-time associates65 Risk Factors The company faces significant risks from macroeconomic conditions, intense competition, supply chain dependencies, and financial leverage - Business is sensitive to macroeconomic conditions, consumer discretionary spending, and economic downturns, which can negatively impact sales and profitability75 - The women's apparel industry is highly competitive, with pressure on pricing, brand recognition, and merchandise assortment from a variety of retailers87 - The Direct channel, accounting for 48% of net sales, is dependent on the effective operation of the e-commerce platform, making the business vulnerable to system failures, cyber-attacks, and changes in digital marketing effectiveness8892 - Dependence on third-party, foreign sourcing (81% through agents in FY2024) creates risks related to production disruptions, shipping delays, quality control, and compliance with labor laws111 - The company's Term Loan and ABL Credit Agreements contain restrictive covenants that limit operational and financial flexibility, including restrictions on incurring debt, making investments, and paying dividends124 - As of February 2, 2025, the company is no longer a "smaller reporting company," which increases compliance costs and requires an audit of its internal controls over financial reporting129 - Material damage to or interruptions in information systems, including security breaches of customer or employee data, could expose the company to data loss, fines, litigation, and reputational harm147151 Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - None175 Cybersecurity Cybersecurity risk management is overseen by the Audit Committee and CIO, with no material incidents reported as of the filing date - Cybersecurity governance is managed by a team led by the Chief Information Officer (CIO) with oversight from the Audit Committee of the Board178 - The company utilizes third-party vendors for enhanced monitoring, penetration testing, and other security assessments179 - As of the filing date, the company is not aware of any cybersecurity threats or incidents that have materially affected or are reasonably likely to materially affect its business, operations, or financial condition181 Properties J.Jill leases its corporate headquarters, distribution center, and 252 retail stores across 42 states, with most store leases expiring by 2029 - The company operates 252 retail stores in 42 states, all of which are leased. The average store size is approximately 3,700 square feet183 Lease Expiration Schedule for Retail Stores | Fiscal Years Lease Terms Expire | Number of Stores | | :--- | :--- | | 2024 – 2026 | 112 | | 2027 – 2029 | 115 | | 2030 – 2032 | 10 | | 2033 and later | 15 | - The principal executive offices are in Quincy, MA (lease expires Dec 2027), and the 520,000 sq. ft. distribution center is in Tilton, NH (lease expires Sep 2030)182 Legal Proceedings A class action regarding a stock repurchase program was dismissed after the board amended the program, with the company paying $450,000 in fees - A class action complaint was filed in December 2024 alleging breach of fiduciary duties related to a stock repurchase program approved in December 2024186 - To resolve the litigation, the board amended the repurchase program to prevent it from causing TowerBrook's ownership to exceed 49.9% of outstanding voting stock187 - The action was dismissed, and the company agreed to pay $450,000 in attorneys' fees and expenses to the plaintiff188 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities J.Jill's common stock trades on NYSE; the company paid $2.9 million in dividends and initiated a $25.0 million share repurchase program in FY2024 - The company's common stock trades on the New York Stock Exchange (NYSE) under the symbol "JILL"192 - In Fiscal Year 2024, the Board declared a quarterly cash dividend of $0.07 per share, with total dividend payments amounting to $2.9 million194 - A share repurchase program of up to $25.0 million was authorized on December 6, 2024. As of February 1, 2025, the company had repurchased 19,831 shares and had $24.5 million remaining under the authorization199 Management's Discussion and Analysis of Financial Condition and Results of Operations FY2024 net sales increased 0.5% to $610.9 million, with net income rising 9.1% to $39.5 million, supported by significant debt reduction and strong liquidity Results of Operations FY2024 net sales increased 0.5% to $610.9 million, driven by comparable sales growth, while gross margin declined to 70.4% and net income rose 9.1% to $39.5 million Consolidated Results of Operations (FY2024 vs. FY2023) | (in thousands) | FY 2024 | FY 2023 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $610,857 | $608,043 | 0.5% | | Gross profit | $429,856 | $430,782 | (0.2)% | | Operating income | $75,702 | $86,050 | (12.0)% | | Net income | $39,483 | $36,201 | 9.1% | - The increase in net sales was due to a total company comparable sales increase of 1.5%, partially offset by the loss of the 53rd week included in Fiscal Year 2023225 - Gross margin decreased from 70.8% in FY2023 to 70.4% in FY2024, driven by an increase in promotional activities and increased freight costs227 - SG&A expenses increased by $8.8 million (2.6%), primarily due to higher professional fees, stock-based compensation, shipping, and marketing costs228 Liquidity and Capital Resources As of February 1, 2025, J.Jill maintained strong liquidity with $35.4 million cash and $35.7 million ABL availability, having repaid $94.2 million of Term Loan principal in FY2024 Liquidity Position as of Feb 1, 2025 | Metric | Amount (in millions) | | :--- | :--- | | Cash and cash equivalents | $35.4 | | ABL Facility Availability | $35.7 | | Term Loan Principal Balance | $74.3 | - In Fiscal Year 2024, the company repaid $94.2 million in principal under the Term Loan Credit Agreement, including voluntary prepayments totaling $85.4 million251 FY2024 Cash Flow Summary | (in thousands) | Amount | | :--- | :--- | | Net cash provided by operating activities | $65,036 | | Net cash used in investing activities | ($17,755) | | Net cash used in financing activities | ($74,026) | - In June 2024, the company completed an equity offering, selling 1,000,000 shares and raising net proceeds of $29.5 million, which were used for debt repayment and general corporate purposes239514515 Critical Accounting Policies and Significant Estimates Critical accounting policies involve significant estimates for revenue recognition, inventory valuation, and annual impairment assessments of long-lived assets, goodwill, and intangible assets - Critical accounting estimates include revenue recognition (sales returns, gift card breakage), inventory valuation, and impairment assessments for goodwill, intangible assets, and long-lived assets271 - The company evaluates goodwill and its indefinite-lived trade name for impairment annually. A quantitative analysis is performed every three years, with a qualitative assessment in other years. The FY2024 qualitative test indicated no impairment277285448 - In FY2024, the company recorded noncash impairment charges of $0.8 million, primarily related to leasehold improvements and a right-of-use asset for its corporate headquarters168291292 - In January 2025, the company transitioned to a self-insured group health insurance program and accrues for costs based on known claims and estimates of incurred but not reported (IBNR) claims294 Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate risk from $74.3 million in variable-rate Term Loan borrowings, with a 10% rate change impacting FY2024 net income by $5.8 million - The company is subject to interest rate risk from variable-rate borrowings under its Credit Facilities, with $74.3 million outstanding under the Term Loan Facility as of February 1, 2025296 - A 10% change in the current interest rate would have affected net income by $5.8 million during Fiscal Year 2024296 Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of February 1, 2025, with an unqualified audit opinion - Management concluded that as of February 1, 2025, the company's disclosure controls and procedures were effective at a reasonable assurance level300 - Management assessed internal control over financial reporting using the COSO framework and concluded it was effective as of February 1, 2025303 - The independent registered public accounting firm, Grant Thornton LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting304 Part III Directors, Executive Officers, Corporate Governance, Compensation, Security Ownership, and Principal Accountant Fees Information for Items 10-14, covering governance, compensation, and ownership, is incorporated by reference from the company's 2024 proxy statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's definitive proxy statement for its 2024 Annual Meeting of Stockholders, to be filed within 120 days of the fiscal year-end310312313314315 Part IV Exhibits, Financial Statement Schedules This section lists financial statements and an index of exhibits, including key corporate documents, filed or incorporated by reference - This section contains the index to the consolidated financial statements and a list of exhibits filed with or incorporated by reference into the Form 10-K317319 Consolidated Financial Statements Consolidated Balance Sheets As of February 1, 2025, total assets were $417.7 million, liabilities decreased to $311.9 million due to debt reduction, and shareholders' equity increased to $105.8 million Consolidated Balance Sheet Highlights (in thousands) | | Feb 1, 2025 | Feb 3, 2024 | | :--- | :--- | :--- | | Total Assets | $417,699 | $428,180 | | Cash and cash equivalents | $35,427 | $62,172 | | Inventories, net | $61,295 | $53,259 | | Total Liabilities | $311,930 | $390,962 | | Long-term debt, net | $69,419 | $120,595 | | Total Shareholders' Equity | $105,769 | $37,218 | Consolidated Statements of Operations and Comprehensive Income FY2024 net sales were $610.9 million, with a gross margin of 70.4% and net income of $39.5 million, or $2.61 per diluted share Consolidated Statement of Operations (in thousands, except per share data) | | FY 2024 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | | Net sales | $610,857 | $608,043 | $618,528 | | Gross profit | $429,856 | $430,782 | $425,310 | | Operating income | $75,702 | $86,050 | $78,734 | | Net income | $39,483 | $36,201 | $42,175 | | Diluted EPS | $2.61 | $2.51 | $2.95 | Consolidated Statements of Cash Flows FY2024 operating cash flow was $65.0 million, with $74.0 million used in financing activities, resulting in a $26.8 million net decrease in cash Consolidated Statement of Cash Flows (in thousands) | | FY 2024 | FY 2023 | | :--- | :--- | | Net cash provided by operating activities | $65,036 | $63,313 | | Net cash used in investing activities | ($17,755) | ($16,934) | | Net cash used in financing activities | ($74,026) | ($71,260) | | Net change in cash and cash equivalents | ($26,750) | ($24,881) | | Cash and cash equivalents, end of period | $35,790 | $62,540 | Notes to Consolidated Financial Statements These notes detail significant accounting policies, revenue disaggregation, debt facilities, fair value, leases, income taxes, and shareholders' equity transactions Note 9. Debt As of February 1, 2025, the Term Loan balance was $74.3 million after $94.2 million in FY2024 repayments, with $35.7 million available under the ABL facility - On April 5, 2023, the company entered into a new Term Loan Credit Agreement for $175.0 million, maturing May 8, 2028462 - In FY2024, the company made voluntary principal prepayments of $85.4 million on the Term Loan, resulting in a total principal repayment of $94.2 million for the year251468 - As of Feb 1, 2025, the remaining principal balance on the Term Loan was $74.3 million. The company had no borrowings under its ABL Facility and $35.7 million of availability468479 Note 15. Shareholders' Equity In FY2024, the company raised $29.5 million from an equity offering, initiated a $25.0 million share repurchase program, and paid $2.9 million in dividends - On June 14, 2024, the company completed an equity offering, selling 1,000,000 shares for net proceeds of $29.5 million after underwriting discounts and commissions513514 - A $25.0 million share repurchase program was approved on December 6, 2024. During FY2024, the company repurchased 19,831 shares for $0.5 million516517 - During FY2024, the company paid cash dividends of $0.21 per share, totaling $2.9 million519 Note 17. Share-Based Payment FY2024 share-based compensation expense was $6.9 million, with $6.9 million unrecognized for RSUs and $4.3 million for PSUs as of February 1, 2025 - Total share-based compensation expense was $6.9 million, $3.8 million, and $3.5 million for Fiscal Years 2024, 2023, and 2022, respectively526 - As of February 1, 2025, there was $6.9 million of total unrecognized compensation expense related to unvested RSUs and $4.3 million related to unvested PSUs533537 - On December 9, 2024, the Board awarded 100,000 liability-classified performance-based stock options to a consultant, Elm St Advisors, LLC417527