J.Jill, Inc. Q4 FY2026 earnings call

2025 marked the start of a strategic evolution for J.Jill. They tested and learned to build a strong business foundation. Key strategic pillars include evolving the product (testing categories, piloting localized merchandising, planning summer 2026 assortment with newness and accessory expansion), enhancing the customer journey (rebalancing marketing investments to address top of funnel), and operational improvements (implementing new OMS system, creating Chief Growth Officer role, starting implementation of new merchandise planning and allocation tool). In 2025, they generated $23.2 million in free cash flow, maintained a 68.7% gross margin, opened 4 net new stores, upgraded OMS, and had adjusted EBITDA of $84.3 million on sales of $596.5 million. They strengthened leadership bench by recruiting new executives.

Total company sales for the quarter were $138.4 million, down 3.1% compared to Q4 2024. Total company comparable sales decreased 4.8% in Q4, driven by the retail channel. Store sales for Q4 were down 9% versus Q4 2024. Direct sales as a percentage of total sales were 53.5% in the quarter. Q4 total company gross profit was $87.3 million, with a gross margin of 63.1%, down 320 basis points versus Q4 2024. SG&A expenses for the quarter were about $87 million. Adjusted EBITDA was $7.2 million in Q4 compared to $14.5 million in Q4 2024. Interest expense was $2.2 million in Q4. Adjusted net income per diluted share in Q4 2025 was a loss of $0.02 per share. End of Q4 inventory was up 14% compared to end of Q4 2024. Opened 7 stores in Q4 with no closures, ending the year with 256 stores, a net increase of 4 for the year.

For fiscal 2026, expect sales down 5% - 7% in Q1 with total company comp sales down 7% - 9%, adjusted EBITDA $15M - $17M. Full year sales down 2% to flat, total company comp sales down 3% to down 1%, adjusted EBITDA $70M - $75M. Inventory unit purchases down mid-single digits. Expect to grow net store count by about 5 stores by end of fiscal 2026. Capital expenditures expected to be about $25 million. Free cash flow expected to be about $20 million. Board approved a $0.09 dividend, with $14 million remaining on share repurchase program.

Consumer environment is uncertain, geopolitical environment is turbulent, trade policy landscape is uncertain, tariffs could impact costs, consumer price sensitivity could affect sales, macroeconomic factors could continue to impact business performance.

Q: Your customers are more sensitive to macro, how would you assess how much of the softness you're seeing in the first quarter is due to macro versus other factors? And then second question, how will this year's Mother's Day differ from last year? What are key product and marketing changes ahead of the Mother's Day.

A: Good morning Jonna, thanks for your question. So we are at the start of a very deliberate evolution. That being said, we do believe that Q1 had a challenging start was a midst of very tough macro backdrop, and we've talked about this consumer being impacted by that. We absolutely see that more in our direct channel, which is a continuation from what we saw in Q4. What is very encouraging to us is what we are seeing in stores with our talented store teams able to engage to have convert new customers and existing customers. But we do believe that the macro environment had an impact in this quarter for sure. With respect to Mother's Day, the marketing team has exciting initiatives in play. We are really focused on the timing of when we're launching our catalog when we are launching digital marketing. There is a whole program around it that we're super excited about, all backed up by product drop that is coming in the 10 days before.

Q: A lot of work underway. As you think about the product assortment and the test and learn that is put in place, what is changing bottoms, tops, sweaters, style, look, print patterns, what is changing? And what do you expect to see and when will the new full assortment be there? And then with the customer acquisition strategies, who do you want to capture now that's different than your old customer? And as you think of the balance of the business, how much should be new versus existing customers go forward? And then lastly, Mark, just on the components of margins. What are you seeing from energy prices and the impact of freight costs.

A: Good morning Dana. I'll start with the first question, which is what is changing in the assortment. So we are taking this time to really test and learn coming out of Q4 going into Q1. And what we are focused on is both new and existing customers achieving more of her wardrobe. We are moving with what we are calling a more modern aesthetic, which is really addressing her lifestyle, and that lifestyle will be built with core things that she has known and loved from the J.Jill brand for years. accentuated by newness, and we see her really responding to newness, but it's how we give her versatile wardrobing pieces that take her through every aspect of her day and her life. We see it being a very balanced approach, both in product and in marketing with everything we do, really benefiting the 3 customer segments that you referred to, right? So as we think about customers, we are focused on retaining the customers we have, we are focused on attracting new, and we are focused on reactivating people who have not shopped the brand recently. When we think about this customer segment, -- we love this customer segment. She's loyal. She's responsive. She is -- has money and time to spend on herself. When we look at the segment today, we -- 45 to 65 is our target audience. Today, our customer sits at the higher end of that and we know we have tremendous opportunity to target the middle of that range and bring very qualified women into this audience. Great. And with respect to the gross margin, Dana, as we discussed on the last question, the macro environment is obviously very volatile right now and evolving quite real time. what we've included in our guidance is anything that we have seen concrete as of now with respect to gas or oil prices, et cetera. What that means is that in sort of the ocean container rate environment, we've seen some momentary spikes here and there, but it seems to be normalizing itself fairly quickly. And so right now, what we're seeing is more flat ocean container rates maybe up a tiny bit that we would have factored in that I mentioned in Q4 was the first quarter in a while where we actually had great -- small freight savings. And now, as I mentioned, more flat, maybe a little bit of pressure, but still watching it closely and it's evolving real time. In the expenses, we've seen some of the carriers, including the USPS pass-through fuel charge surcharges and we've reflected that in our SG&A included in our guidance going forward. Yes. And I just want to circle back for 1 minute, Dana and just reiterate, while we know we have a great customer, we also are now the #1 priority for us is to appeal to a broader audience, and we're excited about some of the testing that we've done with performance indicators that are encouraging as we move forward.

Q: Can you talk a little bit about trends by month? And any color on what you're seeing quarter-to-date?

A: Yes, Corey, it's Mark. With respect to Q4, we mentioned, overall, it was a pretty promotional quarter it was markdown driven, particularly in the direct channel. The month themselves, January was the strongest, and it was sequentially better than December, better than November. I think we messaged some of that in some of our inter-quarter remarks that we've made around the guidance. The January performance was heavily sale. It's a sale period. It was heavily markdown driven as well. So the cadence was, as I mentioned, but with a deepening markdown support later in the quarter. And then I would say quarter-to-date, we've seen a challenging start. We mentioned that in our remarks. It's very much in line with how we've guided the quarter overall. -- and are committed as we exit all of these quarters through this learning period to manage our inventory as necessary during the quarter to exit as clean as we can entering the new quarter.

Q: I mean, Corey, I'll start just by saying we are so excited about the MP&A project through out of plan. It will allow us to take what is today a very manual Excel-based system and move it to predictive AI forecasting, which will allow us to have inventory optimized in the right location, in the right step at the right time. So we're very excited about what this means from a customer service -- customer experience because the inventory will be where they need it, but also from a revenue and margin driving initiative. Yes. And Corey, the one of the great advantages of the OMS project was taking a very old system and modernizing it, which then enables you to bolt in these newer technologies. So excited to be leveraging the newer platform to now start enhancing front-end systems, as Mary Ellen mentioned. With respect to the investments, I would say the investments this year continue to be new stores. We mentioned we're opening net 5. We also have some relocations in the plan in 2026. And then the Anaplan project is a more targeted projects than an OMS project would be an LMS project is far region, which allows us within the capital guide that we provided to also invest in other smaller systems enhancements, benefits. Mary Ellen mentioned a few of them in her remarks around driving direct -- the direct business, et cetera. So that's kind of what's behind the expectation of it being and investment here with respect to capital. And then in the SG&A side of things, the investments really start with marketing more in Q2 and forward. and then obviously, payroll and some of the investments we've made in talent.

Q: This is Ann bingo on for Dylan Carden. So the guide implies a softer first quarter with improvement as the year progresses, which I believe is a similar setup to this time last year. What would you say is different this year versus last year that gives you the confidence in the back half inflection? And how much of that outlook depends on macro stabilization or improvement?

A: So I'll start you for the question. as we're entering 2026, we are in a period of evolution, and we are testing and learning every day -- what I would say is we are sitting today with an incredibly talented team who are aligned on our vision and are committed to our journey. So as we move forward, we will see product improvements through Q2, 3, 4 we will see learnings from our marketing initiatives that we're attaching where we are rebalancing spend where we are trying new things. And moving forward, we'll see that growth as we lean into the things that are working and equally as we pull away from those tests that don't. Sorry, I was just going to add with respect to the Q4, as Marion mentioned, the product, obviously, it's -- we're still pre the new assortments in -- and we're also in that period of unanniversaried tariffs. So the first half of the year, currently, as we outlined in my remarks, carries $9 million of tariffs against less than $1 million last year. And then that tariff load actually evens and becomes again, assuming the assumptions that we laid out that the tariff rates for the rest of the year around 15% post the Q1 receipts. -- that Q4 would then turn to a small tailwind. So just with respect to the years over years, there's some elements of just that structural component of tariff that supports that as well.

Q: We will be taking a very measured approach to pricing. As we've said in our remarks, we have seen the overall consumer and specifically our direct channel be more price-sensitive. We're seeing incredible promotion out there in the market. So we will be very measured about any increases we take in price.

Q: You've got Eaton Sage on for Janine. Can you just provide some more color on which categories performed well and which may have lagged in Q4 and quarter-to-date?

A: Sure. So in Q4, what we saw was that newness and novelty were driving the business. So where we had repeat programs from a year prior or 2 years prior, they were very soft. We also saw success in some of the tests we had out there. We saw success in our travel capsule we saw success in expanded categories in outerwear, we saw the start of accessories, which has really moved into Q1 as a success story. -- and we tested some price points, particularly in sweaters with Casimir and soft success. As we moved into Q1, a we are seeing newness rebounding. We are -- but again, Q1 is not indicative of our 2 product evolution. -- where we really see that evolution is in Q2, where newness in fabric and silhouette and category mix really starts to evolve based on our learnings. Clearly, with the goal to drive full price selling in both channels because we know that we've really seen the retail channel working. We've seen things like our dress business turnaround. It's exciting to see what's happening there.