J.Jill Customers Are Becoming More Mindful on Spending Decisions
The J.Jill customer is spending on fashion newness, but isn’t buying as often as she becomes a bit more cautious in her spending.
In a Nutshell: “We are well positioned to navigate the current environment and remain focused on positioning [the] company] for long term success. During the quarter, we continued to stay close to our customer and remain agile to react and respond to her evolving spending behavior,” Claire Spofford, president and CEO, told investors during a company conference call.
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She said that a customer insights study indicates that concerns around inflationary pressures remained high. “We saw that play out in Q1 in her spending behavior in terms of both units per transaction and frequency. We continue to see strength in the newness we delivered and in categories like dresses and within our Pure Jill and Wearever sub-brands,” Spofford said, adding that categories such as basics didn’t perform well.
Spofford said that consumers are becoming “more discerning with their purchases” and noted a “higher level of returns” in the direct business, which came in part from strong sales of dresses, where returns are common.
Spofford said shoppers are more conservative in their purchases and favoring markdowns, “choosing to spend in categories where there was more uniqueness, more fashion, more differentiation.” Jackets sold well while bottoms lagged a bit, Spofford said.
“As part of our commitment to responding in season to manage our inventory balances, we took select actions where appropriate and maintained the controlled approach to the breadth and depth of promotion,” she said.
She also said the Wearever Collection of wrinkle-resistant stretch-knit options is resonating with younger customers adding to their work wardrobe. “As we look ahead, we will continue to leverage our portfolio of sub brands to lean into areas that are resonating with both new and existing customers,” she said.
The company began implementing a new POS system, which should be completed by the end of Fiscal 2023.
Gross margin for the year was 72.0 percent, up from 69.7 percent a year ago on more favorable freight costs. Supply chain improvements helped J.Jill lower inventory holdings by 14.9 percent versus a year ago.
Net Sales: For the three months ended April 29, net sales fell 4.9 percent to $149.4 million from $157.1 million. Comparable sales, including store and direct-to-consumer, decreased by 2.7 percent. Direct-to-consumer net sales, representing 45.0 percent of sales, was down 7.7 percent in the quarter.
Earnings: Net income for the quarter fell 68.1 percent to $4.6 million, or 32 cents a diluted share, from $14.4 million, or $1.02, a year ago. The bulk of the decline was a $12.7 million loss connected to debt refinancing as part of the refinance of its term loan. Excluding certain items including the debt refinancing loss, adjusted diluted earnings per share (EPS) was 96 cents.
Wall Street was looking for adjusted diluted EPS of 78 cents on revenue of $149.5 million.
For the second quarter, the company guided revenues down mid-single digits. For Fiscal 2023, J.Jill projected annual adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) down mid-single digits versus fiscal 2022, even including the $2 million benefit from the 53rd week.
CEO’s Take: “We’re pleased with how we’ve continued to execute against our model and our strategic initiatives, particularly in light of the evolving consumer backdrop,” Spofford said. “We remain focused on operating the business with the same discipline around inventory and expense management that have supported our progress to date.”
