J.Jill(US:JILL)2023-03-30 19:46Part I Business J.Jill is a national omnichannel lifestyle brand offering apparel, footwear, and accessories for affluent women aged 45 and older - J.Jill is a national lifestyle brand providing apparel, footwear, and accessories, targeting women aged 45 and older with a median annual household income of approximately $150,0002022 Fiscal Year 2022 Channel Sales Mix | Channel | Percentage of Net Sales | | :--- | :--- | | Retail | 53% | | Direct (Ecommerce/Catalog) | 47% | Store Fleet Optimization (Fiscal Years 2019-2022) | Fiscal Year | Stores Opened | Stores Closed | Total Stores at Year-End | | :--- | :--- | :--- | :--- | | 2019 | 11 | (6) | 287 | | 2020 | — | (20) | 267 | | 2021 | — | (14) | 253 | | 2022 | 1 | (11) | 243 | - The company's growth strategy focuses on growing the value of its customer base, increasing direct sales, strengthening omnichannel capabilities, and enhancing its product assortment, including inclusive sizing454647 - In Fiscal Year 2022, approximately 80% of products were sourced through agents and 20% directly from suppliers, with merchandise sourced globally from 11 countries No single supplier accounts for more than 20% of merchandise purchased by volume5456 - As of January 28, 2023, the company employed 1,115 full-time and 1,869 part-time associates63 Risk Factors The company faces significant risks including macroeconomic sensitivity, intense competition, operational complexities, substantial debt, and information security threats - Business & Industry Risks: The business is sensitive to economic downturns, consumer discretionary spending, and the COVID-19 pandemic It faces intense competition and must continually respond to changing fashion trends and maintain its brand image75777983 - Indebtedness Risks: The company has a substantial amount of debt under its Credit Facilities, which contain restrictive covenants that limit operational and financial flexibility The Priming Facility and ABL Facility mature in May 2024, and the Subordinated Term Loan Facility matures in November 2024, creating refinancing risk115117122 - Operational & Sourcing Risks: The company relies on independent third-party suppliers, primarily outside the U.S., exposing it to risks of production and shipment disruptions It also depends on a single distribution center in Tilton, New Hampshire, making it vulnerable to operational interruptions102104113 - Corporate & Governance Risks: As a 'controlled company' by TowerBrook Capital Partners LP, J.Jill is exempt from certain NYSE corporate governance requirements, such as having a majority of independent directors TowerBrook's interests may conflict with those of other stockholders130131 - Information Security Risks: The business depends on information systems for all aspects of its operations and is exposed to risks from security breaches, data loss, and evolving data privacy regulations154157159 Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - None176 Properties J.Jill leases all its properties, including its corporate headquarters, a 520,000 square foot distribution center, and 243 retail stores across 42 states - The company leases its principal executive offices in Quincy, MA, and its 520,000 square foot distribution and customer contact center in Tilton, New Hampshire177 - As of January 28, 2023, the company operated 243 retail stores in 42 states, all of which are leased The average store size is approximately 3,700 square feet178 Store Lease Expiration Schedule | Fiscal Years Lease Terms Expire | Number of Stores | | :--- | :--- | | 2023 – 2025 | 138 | | 2026 – 2028 | 86 | | 2029 – 2031 | 17 | | 2032 and later | 2 | Legal Proceedings The company is not currently party to any legal proceedings that it believes would have a material adverse effect on its business or financial condition - The company is not presently party to any material legal proceedings181 Mine Safety Disclosures This item is not applicable to the company - Not applicable182 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the NYSE under 'JILL', underwent a 1-for-5 reverse stock split, and has paid one special cash dividend, with future dividends restricted by debt agreements - The company's common stock began trading on the NYSE under the symbol "JILL" on March 9, 2017184 - A 1-for-5 reverse stock split was effective on November 9, 2020 All share and per-share amounts have been retroactively adjusted186 - The company paid one special cash dividend of approximately $50.2 million on April 1, 2019 Future dividends are restricted by the company's credit agreements187188 Management's Discussion and Analysis of Financial Condition and Results of Operations For Fiscal Year 2022, J.Jill reported increased net sales and gross margin, a significant turnaround to net income, and solid liquidity, with debt maturities approaching Results of Operations For Fiscal Year 2022, net sales increased by 5.1% to $615.3 million, gross profit rose 7.0%, and the company achieved a net income of $42.2 million Consolidated Results of Operations (FY 2022 vs. FY 2021) | (in thousands) | FY 2022 | FY 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net sales | $615,268 | $585,206 | $30,062 | 5.1% | | Gross profit | $422,050 | $394,436 | $27,614 | 7.0% | | Operating income | $78,734 | $58,720 | $20,014 | 34.1% | | Net income (loss) | $42,175 | $(28,143) | $70,318 | 249.9% | - The 5.1% increase in net sales was driven by a total company comparable sales increase of 6.5%, benefiting from higher full-price sales215 - Gross margin improved to 68.6% from 67.4%, largely due to favorable promotional rates and strong full-price sales in the Retail channel217 - Selling, general and administrative (SG&A) expenses increased by 1.8% to $341.9 million, driven by higher costs in marketing, compensation, and shipping218 Liquidity and Capital Resources The company's liquidity is supported by cash from operations and its ABL facility, with $87.1 million in cash and $30.0 million ABL availability, and plans to refinance its Priming Credit Agreement maturing in May 2024 - As of January 28, 2023, the company had $87.1 million in cash and cash equivalents and $30.0 million of total availability under its $40.0 million ABL Facility223 Cash Flow Summary (in thousands) | | FY 2022 | FY 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $74,425 | $74,999 | | Net cash used in investing activities | $(15,067) | $(5,474) | | Net cash used in financing activities | $(8,262) | $(37,975) | Long-Term Debt as of January 28, 2023 (Carrying Value, in thousands) | Facility | Carrying Value | | :--- | :--- | | Priming Facility | $198,941 | | Subordinated Term Loan Facility | $9,719 | | Net long-term debt | $205,236 | - The Priming Credit Agreement matures on May 8, 2024, and the company intends to refinance this debt238 Critical Accounting Policies and Significant Estimates Critical accounting policies involve significant estimates for revenue recognition, inventory valuation, and impairment assessments for goodwill, trade name, and other long-lived assets - Key critical accounting policies involve significant estimates for revenue recognition (sales returns, gift card breakage), inventory valuation (obsolescence reserves), and asset impairment assessments247 - Goodwill and the company's trade name are tested for impairment annually or more frequently if indicators exist The company uses qualitative and quantitative (discounted cash flow) approaches for these tests255257261 - Long-lived assets, such as property, equipment, and operating lease assets, are assessed for impairment whenever events indicate their carrying value may not be recoverable264265 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on variable-rate borrowings, with a 10% rate change impacting net income by approximately $1.6 million - The company is subject to interest rate risk from its variable-rate borrowings under the Priming Facility and Subordinated Term Loan Facility271 - Based on outstanding borrowings as of January 28, 2023, a 10% change in the interest rate would have affected net income by $1.6 million during Fiscal Year 2022271 Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for fiscal years ended January 28, 2023, and January 29, 2022, including balance sheets, income statements, equity, and cash flows Consolidated Balance Sheet Data (in thousands) | | Jan 28, 2023 | Jan 29, 2022 | | :--- | :--- | :--- | | Total Current Assets | $160,820 | $123,248 | | Total Assets | $466,417 | $451,849 | | Total Current Liabilities | $126,987 | $138,745 | | Total Liabilities | $466,636 | $496,503 | | Total Shareholders' Deficit | $(219) | $(44,654) | Net Income (Loss) Per Share | | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Basic | $3.03 | $(2.26) | $(15.22) | | Diluted | $2.95 | $(2.26) | $(15.22) | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None273 Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of January 28, 2023, affirmed by an unqualified audit opinion - Management concluded that the company's disclosure controls and procedures were effective as of January 28, 2023275 - Management assessed the company's internal control over financial reporting as effective as of January 28, 2023, based on the COSO framework278 - The independent registered public accounting firm, Grant Thornton LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting279 Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the company's definitive proxy statement - The information required by this item is incorporated by reference from the Registrant's definitive proxy statement285 Executive Compensation Information regarding executive compensation is incorporated by reference from the company's definitive proxy statement - The information required by this item is incorporated by reference from the Registrant's definitive proxy statement287 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership of beneficial owners, management, and related stockholder matters is incorporated by reference from the company's definitive proxy statement - The information required by this item is incorporated by reference from the Registrant's definitive proxy statement288 Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related transactions, and director independence is incorporated by reference from the company's definitive proxy statement - The information required by this item is incorporated by reference from the Registrant's definitive proxy statement289 Principal Accounting Fees and Services Information regarding principal accounting fees and services is incorporated by reference from the company's definitive proxy statement - The information required by this item is incorporated by reference from the Registrant's definitive proxy statement290 Part IV Exhibits, Financial Statement Schedules This section provides an index of all financial statements, schedules, and exhibits filed with or incorporated by reference into the Form 10-K - This section provides an index of all financial statements, schedules, and exhibits filed with or incorporated by reference into the Form 10-K291292293 Form 10-K Summary The company has not provided a Form 10-K summary - None297