J.Jill, Inc. Q3 FY2025 earnings call

• Positive response to new assortment in jackets, bottoms, including fashion denim, faux suede, and faux leather outerwear.
• Tested and rebalanced marketing mix, pulling back on catalog circulation and leaning into digital channels, with success in prospecting new-to-brand customers.
• Refreshed imagery in store windows, digital, and catalog leading to positive customer responses.
• Opened two new stores in Q3, with early positive results.
• Noted change in trend post-October with competitive promotion, price sensitivity, and holiday assortments not resonating.
• Three strategic priorities: evolving product assortment, enhancing customer journey, improving how we work.
• Merchandising and design teams working to eliminate redundancy, incorporate new styles, and test localized merchandising.
• Testing marketing mix adjustments, including small national linear and streaming broadcast pilots.
• Plan to launch non-tender loyalty program by end of fiscal year.
• Took cost actions to rightsize organization and improve operational efficiencies; hired Viv Redke as chief growth officer for AI and e-commerce initiatives.

Total company sales for the third quarter were about $151 million, in line with the higher end of expectations, down 0.5% versus Q3 2024. Direct sales were up 2% compared to the prior year, while store sales were down 2.6% compared to the prior year. Total company gross profit was about $107 million, down about $1 million compared to Q3 2024. Q3 gross margin was 70.9%, down 50 basis points versus Q3 2024 and included approximately $2.5 million of net tariff pressure. SG&A expenses for the quarter were about $92 million compared to approximately $89 million last year. Adjusted EBITDA was $24.3 million in the quarter, compared to $26.8 million in Q3 2024.

• Q4 sales expected to be down approximately 5% to 7% and total comparable sales down 6.5% to 8.5%.
• Q4 adjusted EBITDA expected in the range of $3 million and $5 million.
• Full year sales expected down about 3% and comparable sales down about 4% compared to fiscal 2024; adjusted EBITDA between $80 million and $82 million.
• Plan to open 7 new stores in Q4, resulting in 4 net new stores for fiscal year 2025.
• Expect to spend about $20 million in reported CapEx during fiscal 2025.

• Competitive market became very promotional very early.
• Customer demonstrated increasing price sensitivity.
• Holiday product assortments did not resonate as well as planned.
• Macroeconomic factors impacting consumer behavior.

Q: Just curious on how you are thinking about next year as you think about merchandising and also marketing, how you are prioritizing some of your initiatives there. And then just how would you characterize the softness that you saw in the fourth quarter? Is that more macro-driven in your view? I know you also mentioned the holiday products did not resonate. But what changes you could have made potentially to have better resonance with the consumer there?

A: As we had mentioned earlier, entering Q2, we knew that we could not influence much with respect to the product. So we are very pleased at how the team navigated and delivered Q3. That being said, towards the end of the quarter, and moving into Q4, we have seen a soft start particularly in response to the assortments. But there is very heavy promotion out there, which started much earlier and deeper than usual. And the customer is demonstrating increased price sensitivity. So I think that, in conjunction with the softer assortment, led to the results that we are seeing today. What we are very encouraged by as we think about 2026 are the learnings that we have had coming out of this quarter. And, you know, to your question about product and marketing, we will be able to influence product assortments as we get toward the end of Q1, and those will be continuing to evolve as we go through the year. We have also done some marketing tests, as we mentioned in the script, about really evaluating digital, rebalancing, and seeing some of those successes. We believe we are poised to make adjustments to our marketing mix next year that will really resonate, bringing in new-to-brand customers, but also maintaining our loyal customer base, which is so critical for us and increasing retention and spend on that front.

Q: Just curious on how you are thinking about next year as you think about merchandising and also marketing, how you are prioritizing some of your initiatives there. And then just how would you characterize the softness that you saw in the fourth quarter? Is that more macro-driven in your view? I know you also mentioned the holiday products did not resonate. But what changes you could have made potentially to have better resonance with the consumer there?

A: And, Jonna, I would just add on to Mary Ellen's comments regarding Q3 into Q4. That Q4 is really never our favorite quarter here. It is different than many other retailers in that our holiday is not our biggest quarter. It is always promotional, and it is the least sort of aligned with our full-price model just given that level of promotion. The sort of macro versus our own product, I think it is both. To the points that Mary Ellen just made. And, really, coming into November, a quarter that is heavily front-loaded right up until the holidays and Christmas and then becomes very sale-focused in smaller weeks for the rest of the quarter sort of leads us to the guidance to really put out there our expectation that it appears that, you know, with those macro factors in November, with the fact that the competitive environment is very promotional, we expect that that promotional level will continue. And we will do what is necessary to manage through this Q4, like we kind of always do, but manage through this Q4 to then enter 2026 clean and really start to see what we are all excited about, what Mary Ellen just talked about with respect to the product and the marketing adjustments that we are making along the way.

Q: Hi, and good morning. Mary Ellen, I was just wondering if you could talk about from a high level what worked well in the third quarter and maybe quarter to date as well where you have seen some green shoots and from a product perspective, that would be good to get an understanding of so much.

A: Sure. Thanks, Corey. Yes. In Q3, we saw particular strength in product categories, bottoms, and jackets and outerwear. And we are encouraged as we have seen jackets and outerwear continue to perform in Q4. What we are most encouraged about are some of the categories where we have done some testing. We have seen newness work in Q3, which is very exciting. Again, particularly sort of leather, faux leather, faux suede. And the percent of newness really outpacing sales outpacing inventory was very encouraging. As we look forward, some of the tests that we have done where we mentioned where we put cashmere back into the business in a very small way, the test has won. Where we have leaned into sleep has won. So we are excited about those things as we move forward.

Q: That is really helpful. And then just for Mark, it sounds like you have really kind of taken cost out of the business. Mary Ellen, I think you mentioned that you also made a new hire in AI and technology. So I am curious about how you see the role of technology evolving the business going forward and where you see opportunities for leverage and further efficiencies. Thanks so much.

A: Yeah. Corey, hi. Let me start, and Mary Ellen can fill in on some of the exciting news around the new appointment. What I would say is a lot of the heavy lifting on systems that we have done to date, which are large foundational systems, help prepare the tech stack to be ready to take advantage of the new technology AI, just by getting cleaner data, getting cleaner and easier, and easier is maybe not the word, but more modern interfaces and integration layers with our system. So we get excited about capabilities that that presents for us as we go forward. And definitely do view having that sort of foundation wave the opportunity to now continue to push into more front-end business type systems enabled with the newest technologies that we can start to test and get efficiencies from as we go forward.

A: Yeah. And I will just jump in and say we are very excited to have Viv join the team and lead our AI and technology initiatives specifically focused on AI. As you know, you know, and as Mark just mentioned, there is so much out there that we can really incorporate into our business process. That will just make us more operationally efficient. It will allow us to move faster. It will allow us to test and learn. So we are very excited about the roadmap that we are building with Viv that incorporates both larger scale projects and then small platforms that we can plug in to see some quick wins. And it is for us, it is very important to have someone here day to day really leading that championing that effort as we are all working on so many different things.

Q: Hey, guys. Congrats on the quarter, and I know it is tough out there, but I have to say, I think your stores have looked very good. And cleaner, I guess, is the best way. Easier to shop. I do not know. They look a little bit more modern, so kudos for that because I think it does look different in there. Can you talk a little bit? Because now I am wondering, have I been in some of the stores in the localized strategy? Can you talk a little bit about the test you are around in the localized strategy?

A: Sure. Thanks, Marni. The test that we did in the New York store is interesting. We went in very strategically and thought about the customer and the end use and have really made the assortment more relevant for her lifestyle. So it starts with the products we put in there. Obviously, in New York, we are going to do more black, a little bit more put together. We have taken some of the print mix out. And then really set the store up in a way that we find it very easy for her to shop and shop for outfits. We have changed the window graphics and the mannequins, and we have gotten street traffic based on that. So very encouraging and, you know, with the caveat that this is a test of one to work. This is what we truly believe, though, is that we can have categories of stores that are we are doing allocations by climate, by end use. And so we think that there is a lot more to come in 2026 as we dive into this. Important too, though, local strategies around marketing. So the first one was our broadcast television pilot, which was in three markets where we saw a lift obviously, engagement, but a lift in new-to-brand customers and traffic overall to the site and to the stores. Again, a test of three markets. So we have rolled out a broader test we will be evaluating shortly, and I am encouraged by that. We also in our Chicago market, where we opened a store in Orland Park and went in and did a heavy up where we really leaned into digital social advertising in those markets and saw a really strong return in Q3 as we did that. So again, all of these tests are important as we move into 2026 and really think through how we have a greater impact with these efforts? Both on the product and the marketing side.

Q: That is great. And can I also do one quick follow-up just on some of the product? You said you had put cashmere in there. You mentioned that some of what I would call the novelty denim sold out. I have noticed certain things that have sold out, your shirts are sold down very quickly. It seems to be the items that are new, novel, they are not just wardrobe updates. They are kind of something fresh and new. Is your customer passing right now on just a wardrobe update and looking for what is new? And are you able to shift the assortment for the first half of 2026, or is it too late? Like, how are you thinking about all of that?

A: Yeah. So what I would say is what we saw particularly as we had ended Q3 and headed into Q4 is we did not have enough newness. That the customer really is looking for that at this moment in time, with the environment the way it is, in promotional with consumer sentiment where it is, she is being very choiceful. So what we are very encouraged by is when we have something new in front of her that she is excited by, she will respond. So as we head into the back half of Q1 and the balance of 2026, that is absolutely the way that we are moving forward, ensuring that we have enough newness for her. Protecting the core items that she has always loved from us, but really making sure we have enough新ness on the floor to keep her engaged.

Q: Good morning. Thanks for taking my question. Mary Ellen, you mentioned pricing sensitivity with the consumer. I think you took some price increases, small in August and I think a little bit more in September. I am curious what you learned when you took those price increases and how that impacts your thoughts on how much you can offset the $5 million tariff headwind?

A: Sure. Janine, we took very strategic and measured price increases in Q3, right? So rather than taking prices up across the board, we went in where we really thought the customer would respond and would not have an issue with it. What we saw was an overall AUR increase in Q3, so we are pleased that she has responded well, and she is going with us with those increases. And it was, as we mentioned earlier, you know, it was a single-digit percent that we took prices up. So far, we are pleased with the response.

Q: Okay. Great. And then maybe just as we think about kind of the right level of promotion for the business, and I know Q4 is a particularly weird time, but how do you think about what the right level of promotion is? And also, I am curious about how you are planning inventory for next year. It sounds like the goal is to end the year fully clean and be off to a fresh start in Q1. But how do you think about the first half purchases just given the volatility out there?

A: Janine, it is Mark. I will answer the inventory question first. We are going to plan inventory as conservative just knowing that we are evolving the product assortments and that we are exiting this sort of unknown end date of when the consumer sentiment stabilizes and hopefully starts to increase at some point. So we will be relatively conservative on the inventory buys going into the year.

A: Yeah. And, Janine, I would say on the promotional front, you know, Q4 is always the most promotional quarter. What we have seen is that our direct peer set started much earlier and much deeper starting back in October. So we are seeing elevated promotions this year across the board. You know? And we will manage our promotions to get out of the fourth quarter clean. As we look to 2026, we are obviously looking to be very measured in how and when we promote. And, obviously, response to product is key there. You know, when we see her respond to good products, we know we do not need to be promotional.

Q: Hi, this is Marcus Belanger. I am on for Dylan. Thank you for taking my question. I was just curious, can you talk a little bit about your pricing strategy going into 2026? Are you planning to be as conservative as you have been thus far? And can you talk a little bit about what you are seeing from your consumer? I know they are sort of at the higher income demo. So that has been the one that has been reported to be driving the economy. So can you provide a little color on that disconnect and just your overall read on the higher income shopper?

A: Hi, Marcus. It is Mark. I will take the first part on the pricing, and then Mary Ellen can jump in on the second part. Like, I would say that as Mary Ellen just answered in the previous question, we will continue to be very strategic with respect to pricing, and that means not going and spreading peanut butter price increases across the assortment. It means looking strategically with the merchant teams and identifying pockets of opportunity relative to the competitive sets and relative to what we feel is still a great value for money that you get. So that sort of approach that we have already launched with, which Mary Ellen said is in the low single digits, that approach continues.

A: Yeah. And what I would add to that, Marcus, is, you know, as we look forward and as assortments evolve, you know, our pricing strategy will be reflected in the assortment. So as we rebalance, we will take the appropriate actions as we move forward. As Mark said, we are going to be very strategic. We are going to be very targeted as to where we believe the consumer will pay the price. This is a brand that has always been known for value and for quality, and we will protect those. That being said, several of the styles that we have tested end of Q3 and into Q4 that are at higher tickets have worked in, you know, small test small product categories but they have worked. So we are encouraged as we move forward we will be very diligent about where we believe the price is worth the value.

Q: Thanks. I guess, on gross margin, if you add back the 2.5 tariff better than expected performance, you kind of get to what you previously guided to. Were there any other things embedded in the third quarter performance that surprised you?

A: Marcus, what I would say is that the offset to the tariff pressure of the 2.5 million, which is straight math, is largely the AUR benefit that we were able to see. And I would just build on what Mary Ellen just said that pricing strategic pricing increases we did see, a lot of that benefit come through can work all the way through the yield curve. And in Q3, in the markdown part of the yield curve with opportunity as we go forward with all the assortment and marketing evolutions we are putting in is to drive more at full price and yield, full price as well. So but in the quarter in Q3, the offset was largely the AUR that we realized in the quarter that helped offset that 2.5 million dollars worth of tariff partially. Then there was a little bit of freight upside in the quarter as well. But the lion's share was the AUR performance.