J Jill (JILL), a women's apparel brand, reported Q3 (Oct) earnings this morning. In terms of JILL's history, the company has changed quite a few hands in recent years. In 2006, J Jill was acquired by Talbots who later sold it to private equity firm Golden Gate Capital in 2009. Arcapita then took a stake in 2011. Then, a private equity firm based in London, TowerBrook Capital Partners, acquired the company in 2015. It then returned to the public markets once again with an IPO in March 2017.
Before getting into the quarter, a little background would help. J.Jill is a women's apparel brand focused on affluent customers in the 40-65 age segment. Its typical customer is college educated and has an annual household income above $150,000. JILL enjoys a loyal customer base as 70% of its sales come from customers that have been shopping with J.Jill for at least five years.
Its product assortment is marketed under the J.Jill brand name, sold exclusively through its direct and retail channels, and includes knit and woven tops, bottoms and dresses as well as sweaters, outerwear and accessories across a full range of sizes, including Misses, Petites, Women's and Tall. It also offers most of these products across its two sub-brands, Pure Jill and Wearever. JILL turns over its merchandise frequently, about once a month so that keeps its selection fresh and keeps customers coming back. Approximately 40% new styles are delivered in each monthly collection so that motivates customers to visit more frequently.
JILL operates an omni-channel platform, meaning it has brick-and-mortar stores (currently operates 270+ stores mostly in high-end boutique and premium malls), but it also has a large online channel as 43% of its FY16 revenue came from its direct segment (online and catalog).
Online makes up 88% of direct sales, so when we do the calculation, 38% of total revenue comes from online sales which is a lot. Plus, JILL thinks it can get its direct channel up to 50% of sales from the current 43%. With such a strong online presence, JILL seems a bit more insulated from online competitors than most other apparel retailers. What helps is that JILL's products are not sold outside via wholesale to department stores so you need to shop at JILL's stores or its website to get its apparel.
Turning to the Q3 (Oct) results, non-GAAP EPS fell to $0.13, from $0.18 in the prior year period. Of note, on October 11, JILL guided to OctQ non-GAAP EPS of $0.08-0.10, which was well below market expectations at the time and caused the stock to gap lower at the time. So the actual result of $0.13 came in a good amount better than that prior guidance. Revenue rose 1.6% year/year to $162.0 mln, which was better than market expectations.
Total same store comps, which includes comparable store sales and direct to consumer (mostly online) comparable sales, decreased by -0.6%, which was a good bit better than the October 11 guidance of -5% to -3%. Direct to consumer sales represented 39.5% of total sales, down from 40.4% in the prior year period. Looking ahead to Q4 (Jan), JILL expects non-GAAP EPS of $0.06-0.08, which is basically in-line with market expectations, and total comps to grow +2-4%.
In sum, it's good that the OctQ results turned out to not be as bad as management had been expecting with its October 11 guidance. However, investors may still be nervous about holding JILL after that significant guide-down in October. The stock fell around 50% that day. It may take another quarter or two before investors feel comfortable getting back in. But this quarter was a good start.