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J.Jill Expects to Close 20 Stores This Year

Women’s apparel retailer J.Jill is closing approximately 20 stores in 2021, seeking to rebound with a smaller footprint and a focus on full-price sales. The retailer saw first-quarter sales jump 41.9 percent to $129.1 million, but sales remain 26.9 percent behind the $176.5 million it generated in the period two years ago.

In a Nutshell: J.Jill already closed two stores in the first quarter, ending the period with 265 locations, the company said. But the retailer has a long way to go to complete a successful turnaround.

Earlier this month, S&P Global Markets Intelligence gave J.Jill a “CCC” implied credit score rating, tagging it likely to default on its “debt within a year.”

The retailer, which financially restructured to close 2020 and stay out of bankruptcy, is hoping that disciplined inventory management and product newness can help drive more full-price sales. Inventory at the end of the first quarter decreased 21 percent to $59.3 million compared to $75.5 million in the year-ago period. In an earnings call, chief financial officer Mark Webb said the dip is “in line with our goal to manage inventory tightly to support full-price selling.”

Gross profit was $87.8 million, with gross margin reaching 68 percent, up almost 1,290 basis points (12.9 percentage points) from 55.1 percent from 2020 first-quarter levels, and up 220 basis points (2.2 percentage points) from 2019 first-quarter margins. The year-over-year gross margin increase was driven primarily by lower promotional offers and stronger full-price selling in both channels.

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“With respect to gross margin, we, like many of our peers in the industry have reported, have and expect to continue to experience supply chain disruption,” said Webb. “To date, any impact has been negligible and we will continue to work with our supplier base and logistics providers to mitigate as much as possible going forward.”

J.Jill ended the quarter with $10.7 million in cash and $14.1 million of total availability under its revolving credit agreement. The company’s 2020 restructuring extended 98 percent of its long-term debt to 2024.

Capital expenditures in the quarter were approximately $500,000 versus $1.8 million last year. Total capital spend in fiscal 2021 is expected to be approximately $10 million.

The women’s apparel retailer is not providing any financial guidance for the second quarter or for 2021. In the call, Webb said J.Jill expects second-quarter revenues to continue to rebound due to last year’s store closures and recovering store traffic levels in lifestyle centers and malls.

Net Sales: J.Jill’s net sales were up 41.9 percent to $129.1 million compared to $91 million in the first quarter of 2020. On a two-year basis, net sales declined 26.9 percent from $176.5 million.

Direct-to-consumer net sales grew 32.7 percent over 2020 and represented 57.5 percent of total net sales, compared to 61.4 percent in the year-ago period. These sales now represent a substantially larger portion of the J.Jill business than the 2019 first quarter, when DTC was 41.9 percent of total net sales.

Net Earnings: Net losses totaled $18.3 million for J.Jill in the first quarter, compared to a loss of $70.3 million in 2020’s first quarter.

Net loss per share was $1.89 compared to a net loss of $7.91 including the impact of one-time items. Excluding the impact of non-recurring items, adjusted first-quarter net income per diluted share was 20 cents, compared to a loss of $3.24 in the first quarter of 2020.

Adjusted EBITDA for the quarter was $16.9 million, compared to last year’s loss of $25.8 million.

Adjusted income from operations, which excludes non-recurring Covid-related costs and impairment charges, was $8.8 million compared to adjusted operating losses of $35.6 million in the year-ago period. While J.Jill had $52 million of impairment charges in the first quarter of 2020, the apparel retailer had no impairment charges in the most recent period.

CEO’s Take: “While traffic continues to recover, our customer is showing us she’s really excited to shop with us in stores and online,” J.Jill CEO Claire Spofford said. “We saw a great response to our product assortments this spring. Customers, both existing and new, are really engaging with us and are reacting to our great wear-now offering. From our comfortable knits to our beautiful dresses and inspiring Pure Jill collection, she’s gravitating toward novelty and newness both online and in-store with a sense of urgency to purchase not reliant on promotion.”