J Jill (JILL), a women's apparel brand, jumped when it reported Q1 (Apr) earnings last week. With so many retailers struggling, we thought this would be a good opportunity to take a closer look at JILL and see how they are a bit different than some other brands. Also, it's a recent IPO, having just made its return to the public markets on March 9. As such, we think it'd be good to refresh Briefing.com subscribers on what's been going on at JILL.
This J Jill company may sound familiar to some investors. That's because it used to trade publicly more than a decade ago. It 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 its 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 276 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.
Let's quickly turn to the Q1 (Apr) results which were reported on May 31. Non-GAAP EPS rose 50% YoY to $0.24, well above prior guidance of $0.17-0.19. Revenue rose 12.5% year/year to $166.1 mln, which was better than market expectations. Total company comparable sales, which includes comparable store sales and direct to consumer (mostly online) comparable sales, increased by +9.9% vs prior guidance of high single digits. Direct to consumer sales represented 42.6% of total sales, up from 40.7% in the prior year period. Looking ahead to Q2 (Jul), JILL expects non-GAAP EPS of $0.27-0.29 and total comps in the high single digits.
In sum, the stock jumped on its AprQ report last week. The +9.9% comps were quite impressive. A big part of that is that JILL has a huge online exposure with more than 40% of its total revenue coming from online sales. It has really made an effort to build up its own online presence to ward off online competition. Also, JILL's customers tend to be affluent which makes them more resilient even in weak retail environments. JILL also seems to get its fashion right and it knows what its customers want. Overall, JILL seems to be navigating a difficult retail environment quite well. Its small store base is effective and its omni-channel efforts are paying off.