J.Jill(JILL) - 2024 Q4 - Annual Report

Cautionary Note Regarding Forward-Looking Statements This section advises that the report contains forward-looking statements subject to risks and uncertainties, with no obligation to update - This Annual Report contains forward-looking statements, identified by terms like "anticipate," "believe," "expect," etc., primarily in "Item 1. Business," "Item 1A. Risk Factors," and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations"[13] - Actual results may differ materially from forward-looking statements due to known and unknown risks, uncertainties, and important factors, including those detailed in "Item 1A. Risk Factors"[13] - The company undertakes no obligation to update or review publicly any forward-looking statements, except as required by law[13] Risk Factor Summary This section summarizes key risks related to business, debt, governance, information security, labor, intellectual property, and compliance Risks Related to Our Business, Industry and Strategy This section outlines key risks related to J.Jill's business, industry, and strategic operations - The business is sensitive to macroeconomic conditions and consumer discretionary spending, which can be adversely affected by economic downturns, pandemics, and other public health crises[15][17] - Key risks include the ability to identify and respond to new and changing customer preferences, maintain and enhance a strong brand image, and acquire new customers cost-effectively[17] - Operational challenges involve successfully optimizing omnichannel operations, increasing customer traffic to the website, and profitably managing the opening and closing of retail stores, especially given reductions in mall traffic[17] Risks Related to Our Indebtedness This section highlights risks associated with the company's debt, including restrictions, cash generation, and debt maturity dates - The company's level of indebtedness and the terms of its credit agreements restrict operational and financial flexibility, potentially affecting the ability to respond to business changes and fund obligations[19] - Dependence on long-term leases, which are subject to future increases in occupancy costs, and the ability to renew leases on favorable terms or at all, pose financial risks[19] Risks Related to Our Operations Governance Structure and Common Stock This section covers risks related to the company's governance structure and common stock, including NYSE compliance and stock price volatility - Risks include maintaining compliance with NYSE listing requirements, the implications of being a controlled company, and potential conflicts of interest arising from the relationship with TowerBrook Capital Partners LP[19] - The volatility of the company's stock price and the potential impact of future sales of common stock are significant concerns[19] Risks Related to Information Security This section addresses risks concerning information security, including securing personal data and IT system failures - The ability to secure the personal information of customers and employees and comply with applicable security standards is a critical risk[19] - Privacy breaches at service providers or failure of information technology systems to support the growing business could damage reputation and operations[19] Risks Related to Labor Force This section outlines risks related to the labor force, including dependence on key management, talent retention, and increased labor costs - Dependence upon key executive management and the inability to hire or retain required talent could harm the business[19] - Labor organizing activities and increased labor costs, including wages, may negatively impact financial results[19] Risks Related to Intellectual Property This section details risks associated with intellectual property, including trademark protection and potential infringement - The ability to protect trademarks and other intellectual property rights is crucial for the business[19] - There is a risk of infringement on the intellectual property of third parties, which could lead to legal challenges[19] Risks Related to Legal, Regulatory, Accounting and Compliance Matters This section covers risks related to legal, regulatory, accounting, and compliance matters, including impairment charges and internal controls - Potential impairment charges for goodwill, indefinite-lived intangible assets, or other long-lived assets could adversely affect operating results[19] - Maintaining adequate internal controls over financial and management systems is essential[19] - The business is impacted by governmental laws and regulations and the outcomes of legal proceedings[19] PART I Business Overview J.Jill is a national lifestyle brand offering apparel, footwear, and accessories, primarily targeting women 45 and older - J.Jill is a national lifestyle brand providing apparel, footwear, and accessories, operating on a 52- or 53-week fiscal year; Fiscal Year 2023 comprised 53 weeks[21][22] - The brand targets women typically 45 years and older, college-educated, with an approximate median annual household income of $150,000, and an industry-leading average tenure of 10+ years[24] - Omnichannel customers comprised approximately 23% of J.Jill's active customer base for Fiscal Year 2023, up from 22% in Fiscal Years 2022 and 2021, and tend to spend three times more than single-channel customers[25][196] - Products are marketed under the J.Jill brand name and sold through its ecommerce platform and catalog ("Direct") and retail stores ("Retail"), available in Regular, Petite, Tall, and extended sizes (XS to 2X in-store, 4X online)[26] - J.Jill offers three sub-brands: Pure Jill (understated ease, fabric-first), Wearever (refined dressing for work/travel/home), and Fit (performance-inspired apparel for wellness/loungewear)[27][28][29] - Substantially all merchandise is designed in-house, with newness introduced through nine separate seasons, different fabrics, colors, patterns, silhouettes, and staggered deliveries from sub-brands[31] | Channel | % of Total Net Sales (FY2023) | | :------ | :---------------------------- | | Retail | 53% | | Direct | 47% | - As of February 3, 2024, J.Jill operated 244 stores across 42 states, with approximately half in lifestyle centers and half in premium malls, averaging 3,700 square feet[33] | Store Open Year | Stores Opened | Stores Closed | Total Stores at the End of the Fiscal Year | | :-------------- | :------------ | :------------ | :----------------------------------------- | | Fiscal Year 2019 | 11 | (6) | 287 | | Fiscal Year 2020 | — | (20) | 267 | | Fiscal Year 2021 | — | (14) | 253 | | Fiscal Year 2022 | 1 | (11) | 243 | | Fiscal Year 2023 | 2 | (1) | 244 | - The Direct channel consists of the website (approximately 95% of Direct net sales) and catalog orders (5%), offering a broader range of colors and sizes online[38][39] - Competitive strengths include a distinct, well-recognized brand, an omnichannel business model, a data-centric approach (matching ~97% of transactions to identifiable customers), an affluent and loyal customer base, a customer-focused product assortment, and a highly experienced leadership team[40][41][42][43][44][45] - Key growth strategies include growing the value of the customer base (attracting new, reactivating lapsed, retaining existing), increasing Direct sales through website enhancements, profitably expanding the store base (target net 20-25 new stores in 3-5 years), strengthening omnichannel capabilities, and enhancing product assortment (including sub-brands and inclusive sizing)[46][47][48][49][50][51] - Marketing and advertising leverage print mailings, email, digital ads, and public relations, optimized using a customer database; catalogs remain an integral part of the business[52][54] - A private label credit card program, in agreement with Comenity Capital Bank, drives customer loyalty and encourages shopping, with 46% of gross sales in Fiscal Year 20