After The Q2 2024 Drop, J.Jill's Price Is More Reasonable, But The Stock Is Not An Opportunity Yet.

Core Viewpoint - J.Jill's stock fell nearly 40% following a reduction in guidance despite a slight growth in comparable sales, indicating concerns about future traffic trends and overall revenue performance [2][3]. Group 1: 2Q24 Results and Guidance - J.Jill reported a 0.9% year-over-year decline in revenues, but a 1.7% growth on a comparable basis, which is relatively positive in the current apparel market context [3]. - The company experienced a deceleration in growth from 3% in Q1 to 1.7% in Q2, with management warning of worsening traffic trends in July and August [3]. - Guidance for Q3 comparables has been reduced to a decline of 0.5%, with adjusted EBITDA expectations now down between 3% and 9% [3]. - Gross margins are expected to be challenged in the second half of 2024 due to declining sales and increased inventory levels, which rose 15% year-over-year [3]. - SG&A expenses increased by $2 million in Q2 due to wage inflation and other costs, with a total impact of $3.4 million for the year [3]. Group 2: Capital Structure and Financial Health - The company issued 1 million shares at $31 each to repay debts, reducing net debt from $94 million to $44.5 million [3][4]. - Despite reducing financial risk, the company still maintains leverage at high interest rates, with a term loan yielding 13% [4][5]. - The decision to implement a $0.07 quarterly dividend while holding debt has raised questions about capital allocation strategies [3][4]. Group 3: Valuation and Market Position - J.Jill's market capitalization is approximately $365 million, with an enterprise value of around $410 million, reflecting a decrease due to debt repayments [4]. - Expected adjusted EBITDA for the year is projected to be between $101 million and $108 million, leading to a net income range of $47 million to $52 million [4][5]. - The current EV/NOPAT is about 7.2x and P/E is approximately 7.3x, indicating a current earnings yield of 14%, which is considered reasonable but reflects the company's reliance on revenue growth [4][5].