J.Jill (JILL 5.91, +0.91, +18.20%), a women's apparel brand, is trading sharply
higher today (+13%) after the company reported Q3 (Oct) earnings this morning.
This result is made particularly interesting by noting JILL’s company among morning
earnings reporters: J.Jill and Chicos's (CHS) are both women's apparel brands
focused on affluent customers, but JILL shares have moved sharply higher today,
propelled by strong results, while CHS shares have sold off even more sharply.
JILL’s core demographic consists of women in the 40 to 65 age category. Its typical customer is college educated and has an annual household income in the range of $150,000. Its product assortment is marketed under the J.Jill brand name and sold exclusively through its direct and retail channels. The company’s merchandise catalog includes knit and woven tops, bottoms, and dresses as well as sweaters, outerwear, and accessories across a full range of sizes. JILL turns over its merchandise frequently to keeps its selection fresh and keep customers coming back for new opportunities.
Relative to peer retailers, JILL is a bit ahead of the curve in terms of online sales. JILL operates an omni-channel platform, meaning it has brick-and-mortar stores (with more than 270 stores currently operating, mostly in high-end boutique and premium malls) and a large online channel. More than 40% of revenue comes from its direct segment (online and catalog), and JILL eyes that contribution growing to more than 50% of sales in the long-term. With such a strong online presence, JILL seems a bit more insulated from online competitors than other apparel retailers. What helps is that JILL's products are not sold outside via wholesale to department stores, so customers must shop at JILL's stores or on its website to access its apparel.
Turning to the Q3 (Oct) results, non-GAAP EPS rose 15% year/year to $0.15, which was much better than market expectations. Revenue rose 7.5% year/year to $174.1 mln, which was well above prior guidance of $165.2-168.5 mln. Adjusted EBITDA margin declined slightly to 13.9% from 14.2% in the prior year period. Total company comps, which includes comparable store and direct to consumer sales, increased by +1.0%. Direct to consumer sales represented 39.8% of total sales vs 39.5% last year.
Looking ahead to the all-important Q4 (Jan) holiday season, JILL expects total comps to decrease 4% to 2%. However, JILL will be lapping a robust +8.9% comp last year that included elevated levels of clearance sales. Total sales are expected to decrease 10% to 12%. GAAP EPS is expected to be in the range of $0.00-0.02.
JILL, which has struggled in recent years, freshened its management team in April of this year by bringing on Linda Heasley, formerly CEO of both The Honey Baked Ham Company and of Lane Bryant, to succeed Paula Bennett as CEO upon Ms. Bennett’s retirement. Ms. Heasley said on the call this morning that she has been focused on addressing a number of operational areas at the company, such as the performance of the company’s e-commerce platform, the level and mix of inventory, and parts of the brand projection. JILL is also in the process of adding management depth.
Ms. Heasley sees a transition at J.Jill as having two essential phases. The first phase involves completing actions required to secure consistent performance in the near to mid-term. This includes listening to customers in a focused and actionable manner, providing products that are relevant and trend right, and improving imagery and messaging to better reflect the brand. JILL is improving agility and discipline in its overall planning, merchandising, and marketing; and heightening its focus on its extended size women's business; testing various merchandising options in its stores; and improving messaging and search on its digital platforms.
The second phase will manifest over the longer term. A primary area of longer-term focus is transitioning to an even more customer-centric, holistic, omni-channel model. JILL has valuable and loyal customers, and is the company identifies significant opportunities in which to grow that base. The brand’s premise is solid and appeals to demographics that have been largely overlooked by the marketplace.
In addition to presenting earnings news, JILL also announced that its CFO, Dave Biese, will be leaving the company in April. A search for his successor is underway.
Investors are quite pleased with JILL's OctQ results/guidance today. They understand that JILL is in a turnaround mode and that getting the brand back on track will take time. The new CEO seems to be taking steps to do just that. JILL concedes that it needs to shake up its product offering and offer more newness. Improving trend merchandise and customer experiences on the company’s online platform are key points of focus. We will see if the company can improve results heading into 2019. This OctQ result was a good start.
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