J.Jill, Inc. Q1 FY2025 earnings call

Mary Ellen Coyne joined as the new CEO, bringing 3 decades of retail experience, particularly in women's apparel. She has been immersing herself in the business to assess strengths, opportunities, and areas for improvement. Mark Webb reviewed first quarter performance, noting challenges such as adverse weather in February, OMS system cutover in March, assortment issues, and macroeconomic volatility. Despite these challenges, EBITDA was above the guided range due to disciplined expense management. The OMS system is operational, though the cutover impacted Q1 performance more than expected. Discussion included cash flow, inventory levels, store count changes, plans to reduce inventory investments, review marketing mix, and evaluate capital spend, while maintaining the dividend and share repurchase program.

Total company sales for the quarter were approximately $154 million, a 4.9% decline compared to Q1 2024. Comparable sales dropped 5.7%, partially offset by sales from new stores opened in the prior year. Store sales decreased by about 4.4% year-over-year. Direct sales, making up around 47% of total sales, fell 5.4%. Q1 total company gross profit was roughly $110 million, a $7 million decrease from Q1 2024. Gross margin was 71.8%, down 110 basis points. SG&A expenses were $91 million, an increase from $89 million the previous year. Adjusted EBITDA was $27.3 million, down from $35.6 million. Interest expense was $2.8 million, a decrease from $6.4 million. Adjusted net income per diluted share was $0.88, lower than the $1.22 in Q1 2024. Cash from operations totaled $5.3 million. Inventories ended the quarter up about 14%, with normalized inventory up approximately 5%. Capital expenditures were $2.7 million. Three stores were closed, resulting in an end-of-quarter store count of 249.

Prior full-year guidance was withdrawn, and most forward guidance was temporarily suspended due to macroeconomic uncertainty and CEO transition. Expect to spend between $20 million and $25 million on capital this year, a decrease from the prior guide of approximately $25 million. Now anticipate opening between 1 and 5 net new stores this year, down from the prior guide of net 5 to 10 new stores due to new deals pushing to 2026. Assumed tariffs will remain at 10% on all countries and 30% on China, with plans to mitigate costs via vendor negotiations and strategic price increases.

Macro environment volatility, including uncertainty in global trade policy affecting customer behavior. Larger-than-anticipated impact of the OMS cutover on Q1 performance. Inventory levels up, which may put margin pressure if not managed properly. Potential additional margin headwinds if tariff rates increase.

Q: Welcome Mary Ellen to J.Jill. As you coming from Jay McGloughlin and Ralph Lauren, you've had experience with this customer. Given the current macro environment, what did you put in place at Jay McLaughlin, for example, during cash, and what do you see the opportunity for J.Jill? And then lastly, you mentioned certain underperforming parts of the assortment. What are those? And how do you see the merchandise mix evolving for the upcoming holiday season? And lastly, Mark, on the OMS cutover that you had, are there any other costs that go into the second or third quarter that we should be mindful of? And what magnitude of price increases are you talking? And how promotional is it compared to where it could be?

A: Mary Ellen emphasized creating meaningful customer relationships, similar to her experience at Ralph Lauren and Jay McLaughlin. She noted J.Jill has an underserved valued customer segment. Underperforming assortment areas need more newness. For the holiday season, product is bought through the end of the year, but focus on improving presentation, marketing, etc. Mark discussed OMS cutover costs, with extra $500k beyond initial guidance, and plans to mitigate tariff impacts via vendor negotiations and strategic price increases.

Q: Just curious on the unit comment how are you thinking about rolling out units in the second half and struggling that with also scale the tariff dynamics are, and how do you feel about the inventory position in the fall and also the holiday season? Again, I would love any color around ticket and traffic during the quarter, if you can provide any details?

A: Mary Ellen said newness will be a focus moving forward, with impact seen in 2026. Mark mentioned Q3 orders are down in line with demand trends, inventories up 5% normalized, and plans to clear inventories in summer sales. Traffic in stores was impacted by weather, OMS cutover, and macro uncertainty, with conversion impacts in direct channel.

Q: Great. Mary Ellen, could you maybe talk a little bit about what's driven to J.Jill, some of the characteristics that you see of strength that you think are likely to continue going forward for the business? Any categories where maybe you see some opportunities or green shoots? And then, Mark, just on the quarter-to-date momentum, is there any way to put into context kind of some of the drivers or maybe how that compared relative to what you saw in the first quarter?

A: Mary Ellen highlighted J.Jill's strong brand and loyal customer base, with opportunity for multi-channel expansion, product assortment elevation, and new category introduction. Mark noted Q1 was choppy due to weather, OMS cutover, and macro uncertainty, with May trend down mid-single digits continuing the April trend.

Q: Welcome, Mary Ellen. I feel terrible that you have to start and then tariffs happen, not a fun way welcome award. We're excited to have you. I'm just curious, just a follow-up on the conversation about trends and what's happening out there. May was not a great weather month in the Midwest and the Northeast as well. The stock market was all over the place. I know your customer pays attention to those kinds of things. Have you seen any improvements in areas where the weather was more seasonal? Were the trends different in those areas? Or any improvement as we got towards a little bit away from that noise? Or was May down across the board? And then just one other quick question. I know you you're talking about ramping up ship from stores, very exciting. But will you be careful, I guess, about split shipments, which other retailers have called out as being very costly and prohibitive? Is that something that's already on your mind?

A: Mark said weather in February was widespread, but May weather didn't have major impacts. Political landscape didn't show major differences. Regarding ship from store, aware of shipping costs and applying learnings to manage it appropriately.

Q: I want to get your thoughts on new store openings. I saw you lowered the number this year. It seems mostly due to timing, but is there any change in the view for plants to add stores over the next few years? And then just curious how the newer stores are performing?

A: Mark said store openings this year were lowered due to store closures pushing to 2026 and uncertainties with planning commissions. Newer stores are performing in line with expectations, with some learnings in smaller markets. Mary Ellen added excitement about store growth opportunity, valuing brick-and-mortar for brand story and customer connections.

Q: Mary Ellen, you alluded to some white space or potential new categories. Anything more you can share there? Or is that something we'll hear more about in September?

A: Mary Ellen stated they are working on new categories and will share more in September.