J.Jill, Inc. Q2 FY2025 earnings call

Key Points

• Mary Ellen Coyne thanked the team for their dedication, noted sales trends improved sequentially, and emphasized focusing on expanding customer file, evolving product assortment, enhancing customer journey, and improving work methods.
• Mark Webb discussed sales trends stabilizing and improving into June and July, disciplined inventory management leading to improved end-of-quarter inventory levels, rollout of ship-from-store, generated $17 million of free cash flow, ended Q2 with $46 million cash, and provided details on financial results including sales, gross profit, SG&A, adjusted EBITDA, cash flow, inventory, and store count.
• Focus on product assortment evolution, enhancing customer journey through marketing mix adjustments and store openings, and improving work methods with technology like AI and Order Management System (OMS).

Total company sales for the second quarter were about $154 million, down 0.8% compared to Q2 2024. Store sales for Q2 were up 0.4% compared to Q2 2024, driven by three net new stores. Direct sales, representing about 46% of total sales in the quarter, were down about 2% compared to Q2 2024. Q2 total company gross profit was about $105 million, down about $4 million compared to Q2 2024. Gross margin was 68.4%, down about 210 basis points versus Q2 2024, driven primarily by higher markdown sales and promotional rates. SG&A expenses for the quarter were about $89 million compared to approximately $86 million last year. Adjusted EBITDA was $25.6 million in the quarter compared to $30.2 million in Q2 2024. Inventory ended the second quarter with inventories about flat to last year, excluding incremental costs associated with tariffs.

Guidance

• For the third quarter of fiscal 2025, adjusted EBITDA is expected to be in the range of $18 to $22 million, assuming sales are flat to down low single digits and comps are down in the low to mid-single digits.
• Tariffs are expected to have an incremental impact of approximately $5 million in Q3, with a similar level likely rolling forward if current tariff policies remain in place.
• Capital expenditures for the year are expected to be between $20 and $25 million.
• Plan to open between 1 and 5 net new stores this year, with 2 new stores planned to open toward the end of the third quarter.
• Remaining $20 million on the $25 million share repurchase authorization and quarterly dividend of $0.08 per share payable on October 1.

Risks

• Dynamic and uncertain environment, particularly related to inflation and tariffs, which impact cost of goods sold and consumer spending.
• Uncertainty around how industry actions will impact the U.S. consumer, affecting sales and margins.

Q: Would love additional color around what drove the improvement in June and July. Mark, on tariffs, how should we think about sort of the annualized tariff impact next year as you mitigate some of the impact that you have this year?

A: Mark Webb said performance in Q2 was driven by clearance activities and good customer response to the July sale. On tariffs, net of vendor-negotiated offsets, $5 million is expected in Q3 with a similar level likely rolling forward, annualizing closer to $20 million.

Q: In the second half, do you expect promotional level to be in line or elevated versus last year?

A: Mark Webb said it depends on consumer receptivity to pricing actions, with the guidance range reflecting different outcomes based on customer acceptance of price increases.

Q: Mary Ellen, could you maybe talk a little bit about kind of 100 days into the business at this point, where you see opportunity for change, where you see opportunity to accelerate innovation, what's working in the business?

A: Mary Coyne mentioned cultural shifts, ship-from-store success, focus on growing customer file with product, customer journey, and work method improvements, and excitement about marketing mix to attract more customers.

Q: Janine Stichter asked about the state of the consumer and back half promotional levels. Mary Ellen responded that the consumer is slowly returning, and promotional levels depend on consumer acceptance of price increases.

Q: Marni Shapiro asked about inspired rewards and social media content. Mary Coyne said the team is working on a non-tender reward program and will focus on changing marketing mix including social media and real-life events to engage new customers.