J.Jill is back in the black after fourth-quarter net sales improved 15.3 percent, and comp sales climbed 19.7 percent, reversing a net loss in the year-ago quarter.
In a Nutshell: The women’s specialty retailer has come a long way from the brink of bankruptcy in 2020. After financially restructuring, the Quincy, Mass. company is now operating with a new model, and worked to clean up inventory and ditch the nonstop promotions.
The 2021 fiscal year marked a period of “significant recovery” for J.Jill, Claire Spofford, former senior vice president and chief marketing officer who returned to the company as CEO in February 2021, said in a statement.
“Our new operating model is hallmarked by a much more disciplined approach to inventory,” Spofford said in a telephone interview, meaning fewer markdowns, more attention on new product, and higher full-price sell-throughs.
“It used to be a big reveal once a month, [so] you’d have strong selling out of the gate, although we didn’t ever let it sell at full price. We’d come out of the gate and it would be 25 percent or 30 percent off, which isn’t what we’re doing now,” she added.
Now the new assortments are followed by a few capsule collections of one or two sub-brands. Those steady follow-up drops a few times a month are the “new things that we can point our customer to and get her excited again and keep her engaged,” Spofford said.
Core basics such as knits, denim and linen continue to resonate with customers, while novelties including embroidered holiday sweaters balance the mix in case certain styles are too fashion forward, she said.
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Spofford expects dresses, denim and knits to perform well this spring. Some prices are higher thanks to rising supply and transportation costs. Instead of just raising prices across the board, J.Jill focused on the items customers can’t find elsewhere.
“We’ve purchased well into 2022 [and] have taken some strategic price increases again where we feel like it’s warranted,” she said.
J.Jill’s well educated and relatively affluent customer typically isn’t bothered when prices go up, particularly if “we give her something really special that [she] can’t find somewhere else,” Spofford said.
The company ended the year with 253 stores after closing seven in the fourth quarter. It’s considering opening new stores. “We will be looking at [criteria] for markets that have sort of risen in potential based on the fact that people have moved around a bit the last couple of years,” she said.
Spofford believes J.Jill is in a good position to deal with inflation. “We don’t know what the world is going to throw at us this year,” she said. “It’s certainly been tumultuous the last couple [of years], but we feel like we’re in the best place we can to navigate whatever happens.”
Chief financial officer Mark Webb, who helped steer the company through 2020’s darkest days, told Sourcing Journal that cost-per-unit in ocean and air freight doesn’t seem to be getting any worse. J.Jill has pulled forward some orders, and in some cases split purchase orders to stay nimble with shipping.
During last year’s Covid outbreak in Vietnam, suppliers there “manage[d] production out of Vietnam to sister factories or other factories,” Webb said. India and Indonesia are other big sourcing hubs for the company.
J.Jill has “very good long-standing relationships with our vendor base,” but the company is exploring other countries of origin to see if there are any benefits to diversifying further, Webb said.
Net Sales: For the fourth quarter ended Jan. 29, net sales rose 15 percent to $145.2 million from $125.9 million. The reported three months included an extra week for the quarter’s selling period.
The retail said company comparable sales, including store and direct-to-consumer (DTC), rose 19.7 percent. DTC net sales fell 8.8 percent over 2020, driven by lower markdown sales and represented 52.1 percent of total net sales. Gross margin for the quarter was 63.9 percent, up from 56.7 percent in the year-ago period. The increase was driven by “strong full price selling and reduced promotion, which “more than offset” about 300 basis points of freight expense because of supply chain disruption.
For the year, net sales rose 37 percent to $585.2 million from $426.7 million in 2020.
Earnings: The company reported net income of $3.6 million, or 25 cents a diluted share, against a net loss of $26.9 million, or $2.80, in the year-ago quarter.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the quarter was $15.2 million, versus a loss of $3.8 million in the same 2020 quarter.
For the first quarter of fiscal 2022, J.Jill guided revenues growth between 11.0 percent to 14.0 percent from a year ago, and for Adjusted EBITDA in the range of $20.0 million to $22.0 million.
For Fiscal 2022, the company expects total capital spend at between $15.0 million and $18.0 million, and up to 10 net store closures.
For the year, the net loss narrowed to $28.1 million, or $2.26 a diluted share, from a net loss of $139.4 million, or $15.22, in 2020. Adjusted EBITDA for the year ended Jan. 29 was $91.8 million against a loss of $37.7 million in 2020.
CEO’s Take: “Looking ahead, our focus will remain on driving profitable growth while introducing new customers to our relevant and compelling brand and products,” Spofford said.