J.Jill, Inc. (JILL) Earnings

Management highlights

### Strategic Transformation Overview - The company is in the early stages of a brand and business transformation focused on expanding the customer file, with three core strategic priorities: evolving product assortment, enhancing the cross-channel customer journey, and advancing internal operational capabilities. The company is executing the transformation with disciplined, gradual change to retain existing loyal customers while attracting new customers. ### Product Assortment Evolution - Q1 2026 assortment was still dominated by legacy products, with an initial introduction of new styles and silhouettes aligned with the brand's future direction. Notable strong performers included jackets and accessories; accessories, while still a small share of revenue, delivered strong growth and acts as an entry point for new customers and a reactivation tool for lapsed customers. - Key Q1 learnings: the tops assortment over-indexed on shorter lengths and lacked sufficient breadth of printed/colored options, which has been corrected for back-half assortments. Bottoms was a weaker performing category, aligned with broader industry trends, while the dress category improved as the quarter progressed. - Early customer reaction to the Q2 2026 summer assortment has been positive, with improved alignment between merchandising and design teams representing a meaningful step forward in product evolution. ### Customer Growth & Journey Enhancements - New-to-brand customer acquisition delivered slight YoY growth, driven primarily by the retail channel. New customers are younger than the company's existing average customer age and have higher average order value, which the company views as a key positive driver of long-term growth. - Q1 2026 saw growth in the company's SMS customer marketing file. In March 2026, the company launched a pilot of its new non-tender loyalty program, J. Jill Collective, to a small subset of customers, with initial engagement results very positive. A broader rollout will occur later in 2026. - A new Chief Marketing Officer with deep brand evolution and customer acquisition experience joined the company at the end of April 2026 to lead all customer and marketing strategies. E-commerce site enhancements including fabric guides, lookbooks, product storytelling and video have been added to better educate online customers on product changes, matching the in-store experience provided by sales associates. ### Operational Capability Improvements - The executive leadership team has been updated to balance institutional knowledge with new transformation experience to deliver on the strategic plan. - A new automated merchandise planning and allocation system is scheduled to launch in late 2026, replacing manual, time-intensive forecasting. The new system will enable data-driven demand planning and more effective inventory allocation, expected to drive higher full-price sell-through and greater markdown yield starting in 2027. ### Financial Performance Overview - Total Q1 2026 company sales were $144 million, down 6% YoY, with a comparable sales decline of 8.7% partially offset by contributions from new stores opened in 2025. Gross profit was $98.7 million, with a gross margin rate of 68.3%, down 350 basis points YoY, driven by $4.7 million in net tariff costs and a higher markdown mix, primarily in the direct channel. SG&A was $90 million, down $1 million YoY. Adjusted EBITDA was $16.7 million, down from $27.3 million YoY. Adjusted diluted net income per share was 45 cents, down from 88 cents YoY. - Inventories (excluding tariffs) were down 3.5% YoY at quarter-end. 2 stores were closed and 1 new store opened in Q1, leaving a total ending store count of 255, up from 249 at the end of Q1 2025. The company repurchased 68,500 shares for ~$790,000 in Q1, with ~$13 million remaining on the current $25 million share repurchase authorization.

Guidance

Management reaffirmed all prior full-year 2026 core financial guidance: - Full-year total sales are expected to be flat to down 2% YoY - Full-year comparable sales are expected to decline 1% to 3% YoY - Full-year gross margin is expected to decline approximately 50 basis points YoY - Adjusted EBITDA is expected to land between $70 million and $75 million - Full-year free cash flow is expected to be approximately $20 million - Net tariff costs for full-year 2026 are expected to be $14.5 million, a slight decrease from the prior expectation, with the small benefit offset by higher fuel and other input costs Updated guidance for capital expenditures and net new store count: - Capital expenditures are now expected to be between $20 million and $25 million, down from the prior guidance of ~$25 million - Net new store openings are now expected to be between 1 and 5, down from the prior guidance of ~5 net new stores. This reflects a plan to open 6 to 8 new stores, offset by planned store closures Q2 2026 specific guidance: - Total sales are expected to decline 1% to 3% YoY - Comparable sales are expected to decline 2% to 4% YoY - Gross margin is expected to decline approximately 100 basis points YoY, primarily driven by ~$4 million in net tariff costs - Adjusted EBITDA is expected to be between $18 million and $20 million Management expects gradual sequential improvement in performance through the year, with traction building in Q3 and further momentum in Q4, aligned with the rollout of corrected product assortments and the impact of marketing and operational changes. No tariff refund benefits have been included in guidance, given uncertainty around timing and amounts of remaining IEEPA tariff claim reimbursements.

Segment performance

J. Jael, Inc. reports two core sales segments for Q1 2026: 1. **Retail segment**: Total retail sales were ~$77.76 million, down 4% year-over-year (YoY). The decline was driven by soft customer conversion, which was partially offset by higher average unit retail and net additions of 6 new stores compared to Q1 2025. This segment contributed 54% of total company revenue. 2. **Direct (e-commerce) segment**: Total direct sales were ~$66.24 million, down 8% YoY. This segment represented 46% of total company revenue. Sales declines were driven by lower customer conversion and a higher mix of markdown sales, as consumers demonstrated continued price sensitivity in the direct channel.

Risks & headwinds

- Persistent macroeconomic uncertainty has driven ongoing consumer caution and price sensitivity, particularly in the direct e-commerce channel, leading to higher markdown activity and pressure on conversion and margins - Ongoing uncertainty around the timing and amount of remaining IEEPA tariff refunds creates uncertainty for gross margin outcomes - Uncertainty around mall landscape developments, including re-merchandising and shifts to luxury-focused offerings, creates uncertainty around in-store customer traffic trends - Product assortment changes require iterative testing and learning, with missteps (such as the Q1 over-reliance on shorter top lengths and neutral color palettes) able to impact near-term sales performance - The brand transformation is in early stages, and success requires long-term execution and patience, with gradual improvement rather than an immediate inflection expected

Analyst Q&A

• Q: How did macro conditions and ongoing product evolution impact Q1 performance, how did Mother's Day trend, and what gives management confidence in a second half inflection? /

  A: Consumers remain cautious and more choiceful, but respond positively to the new product collections. Mother's Day 2026 had stronger in-store performance than direct, supported by more coordinated marketing than prior years, with positive early results for the pre-Mother's Day Q2 floor set. Management confidence comes from learnings from Q1 testing that have been used to correct product missteps (more tunic options, more color/print breadth), improved alignment between merchandising and design teams, better inventory positioning, and the 60% core/20% legacy/20% new product mix that balances existing and new customer needs.