J. Jill IPOs Despite Brutal Retail Industry

On March 9, women’s apparel retailer and mall staple J. Jill JILL began its life as a publicly traded entity despite volatility and uncertainty rocking the retail industry. Its initial public offering, however, received a lukewarm response from Wall Street, but in Friday morning trading, JILL stock is up almost 3% to $13.02 per share.

11.67 million shares of JILL, priced at $13 per share, opened trading on the New York Stock Exchange at its launch, which was below the expected range of $14 to $16 per share. The retailer is receiving no proceeds from its IPO since its owner, private-equity firm TowerBrook, is unloading shares during the offering but will keep over 50% of J. Jill’s common stock.

This is actually not J. Jill’s first IPO. It originally went public back in 1993, and was acquired by Talbot’s for $157 million in 2006 after they beat out Liz Claiborne in a bidding war. Talbot’s then sold J. Jill to private-equity firm Golden Gate Capital for just $75 million only three years later, and was sold again to TowerBrook in 2015 for a reported $400 million.

What is J. Jill?

J. Jill is a women’s apparel brand that has been around since 1959; its core customer base are affluent women between the ages of 40 and 65, and it has a heavy reliance on catalog and online sales. J. Jill’s clothes are, according to its website, “a relaxed approach to style. Never complicated, always easy. The perfect balance of comfort and fashion, designed for real life.” Most importantly, its product is on trend, but never too trendy.

What’s most impressive about J. Jill is its unique business model. 43% of its total revenue comes from sales driven by its popular catalog and website, and the company circulated 57 million copies of its catalogs back in 2015 alone. J. Jill’s strong direct-to-consumer model has helped foster a loyal customer base, and the company believes that these direct channel relationships will help fuel sales at its 275 brick-and-mortar stores.

J. Jill has grown its net income from a loss of $3.6 million in fiscal 2012 to $14.3 million in pro forma in fiscal 2015, to $23.5 million for the 12 months ended in October 29, 2016. And since 2014, the retailer has $483 million in total sales, with that number growing to $562 million in 2015 and to $617 million in 2016 (through the last 12 months as of Q3). J. Jill’s comparable store sales are gaining just as well, rising 5.4% in 2014, 12.4% in 2015, and 10.05% in 2016 (through the last 12 months as of Q3).

But…Why Now?

There is no doubt it’s a questionable time for an apparel company to go public. Consumers are spending more and more online, and while J. Jill has somewhat tackled this shift in shopping preference, it still must contend with an incredibly tough retail environment. Competitors like Gap GPS, J. Crew, Ascena Retail ASNA, which owns Ann Taylor, The Limited, and Express EXPR, among many others, have already fell victim to the negative headwinds facing the industry.

CEO Paula Bennet, talking to The Street on the day of J. Jill’s IPO, tried to shed some light on her company’s somewhat surprising decision. "Why now?" Bennet said. "Because we have been delivering tremendous profitable growth and we have great momentum in terms of building the size and value of our customer file and we have great momentum in our e-commerce business. So, we're confident that we've got the strategies in place to continue to grow very profitably."

Even with the threat of Amazon AMZN, and the effect falling mall traffic may have on its future sales—the company does have plans to open an additional 10 to 15 new stores in fiscal 2017, with hopes of opening 100 new stores over the long term—J. Jill and its optimistic CEO seem ready to take on whatever is next. They may operate in malls, known as that store that your mom likes, but J. Jill is not your average mall retailer.

J. Jill’s customer loyalty, appealing and on-trend product, and unique business model should help them thrive in a landscape that is none too friendly to retailers.

Interested in other retail news? Check out the latest episode of Zacks Shopping for Stocks, where hose Maddy Johnson takes a look at what could be one of the biggest apparel IPOs in years:

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