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Can J.Jill Figure Out How to Stimulate Sales?

J.Jill Inc. narrowed its fourth quarter loss, even as sales fell 28 percent, and it managed to end the year with cleaner inventory balances, $4.4 million in cash and $23.8 million in borrowing availability.

In a Nutshell: Last year, J.Jill underwent an out-of-court restructuring with lenders, emerging with $15 million in new capital and pushing loan due dates to May 2024. New CEO Claire Spofford succeeded James Scully, returning to the women’s specialty chain after serving as senior vice president and chief marketing officer from 2011 to 2013.

“Fiscal 2020 was an unprecedented year for retail given the impact of the Covid-19 pandemic. Despite these challenges, through deliberate and aggressive actions, the teams positioned us to end the year with enhanced financial stability, a more nimble cost structure, and cleaner inventory balances,” Spofford said. “Our fourth quarter results reflect these actions as well as continued progress as we again delivered sequential topline improvement compared to our prior quarter.”

The specialty chain worked on cleaning its inventory balances and realigning its store assortment versus online to better meet supply and demand. But it still needs to figure out how to grow its customer base so it can stimulate sales. And it has to fine-tune its cost structure so it can improve its bottom line.

Net Sales: Net sales for the quarter ended Jan. 30 fell 28 percent to $120.4 million from $168.1 million.

The company said direct-to-consumer net sales represented 64.8 percent of total net sales, versus 47.3 percent in the same year-ago quarter. That’s marginally better than the third quarter’s online net sales at 63.3 percent versus 43 percent in the comparable prior year period. Given that holiday typically represents the biggest selling season for most retailers, the women’s specialty chain didn’t see a big bump in sales, suggesting it might need to review its online strategy.

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Inventory at the end of the quarter was down 20.1 percent to $58 million, compared to $72.6 million for the same period a year-ago. Following the restructuring, the company in the third quarter canceled orders where possible and reallocated merchandise from stores to online to match supply with demand.

Gross profit totaled $68.7 million versus $100 million in the year-ago quarter. Gross margin for the same two periods was 57 percent and 59.5 percent, respectively, with the decline attributable to inventory markdowns.

J.Jill’s selling, general and administration expenses totaled $85.6 million for the quarter, versus $100.7 million in the year-ago period. The current reporting period’s SG&A included $1.7 million in expenses for pandemic costs and restructuring expenses, offset by $500,000 savings from store closures. But excluding the special items, SG&A as a percentage of total net sales rose to 70.1 percent from 58.5 percent in the fourth quarter of 2019..

For the year, net sales fell 39 percent to $421.3 million from $691.3 million.

The specialty chain operates 265 stores nationwide, plus an e-commerce platform. The company closed nine stores in the fourth quarter for a total count of 267 doors. It closed two more locations at the start of the first quarter.

Earnings:  The net loss narrowed to $29.0 million, or $3.01 a diluted share, from a net loss of $38.6 million, or $4.38, in the comparable year-ago quarter. On an adjusted basis, excluding one-time items, the loss per diluted share was $1.56 versus 25 cents in the fourth quarter of 2019.

J.Jill said it ended the quarter with $4.4 million in cash, and $23.8 million of total availability under its revolving credit agreement.

For the year, the net loss widened to $141.4 million, or $15.44 a diluted share, against net income of $128.6 million, or $14.69 cents, in 2019.

CEO’s Take: “As we look ahead, we will continue to take disciplined and strategic actions to strengthen the foundation of our operating model to better realize the potential of the J Jill brand and business,” Spofford said.