J.Jill (JILL) Q1 2025 Earnings Call Transcript

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Gross margin (GAAP) decreased by 110 basis points to 71. 8%, driven by “a higher mix of markdown sales, primarily in the direct channel, and higher full-price motional rates in both channels. ”Management stated, “should sales continue to decline at this level, we would expect to see significant SG&A deleverage as well as further pressure on gross margin. "TAKEAWAYSTotal Company Sales: $154 million, down 4. 9% compared to Q1 2024; included a $2 million negative impact from the order management system (OMS) cutover

Quarter-to-Date Sales Trend: “down mid-single digits quarter to date through May compared to the prior-year period” continuing the negative trajectory seen in April

The company implemented disciplined expense controls and moderated capital deployment, completing a strategic investment in core systems and initiating measures to better align inventory and store expansion with current demand trends

Elevated tariff exposures, changing consumer behavior, and a choppy sales environment have led management to halt most forward visibility in order to vide the new CEO, Claire Spofford, time for a comprehensive strategic review

Management noted the impact of macroeconomic volatility, “particularly in April and into May. ” in shaping both store and direct channel performance

Mark Webb stated, “Teams are diligently working to assess opportunities for imvement within the asment, and we have taken swift actions to reduce inventory investments in floor sets beginning in the third quarter. ”The OMS cutover duced a $2 million sales impact, with Mark Webb clarifying, “the extra $0. 5 million … came out of some customer-facing issues and glitches with checkout … quickly diagnosed, addressed, and fixed. ”Inventory normalization actions will continue, with heightened motional activity anticipated to seasonal and basic stock heading into summer and Q3

Jill remains committed to maintaining quarterly dividends and executing opportunistic repurchases, but will ceed “judiciously until trend visibility imves. ”Initiatives ship-from-store are being piloted and scheduled to ramp in the back half of the year, targeting omni-channel experience enhancements and operational efficiencies

INDUSTRY GLOSSARYOMS (Order Management System): A nology platform used to manage sales, inventory, order cessing, and fulfillment across channels

SG&A (Selling, General, and Administrative Expenses): Non-duction operating costs, including payroll, marketing, and store expenses

Ship from Store: An omnichannel fulfillment capability allowing online orders to be shipped directly from physical retail locations to customers

AUR (Average Unit Retail): The average selling price of an item, calculated by dividing total sales dollars by units sold, viding insight into pricing trends and motional activity

Full Conference Call TranscriptClaire Spofford: Good morning, and thank you for joining us

I'm very excited to be speaking with you today as the newest member of the J

Having spent the last three decades in retail, and specifically women's apparel and accessories, I understand what a special brand J

Jill is and the important role we play in serving a very loyal customer base, one that has grown over time and is often underserved but highly valuable

Throughout my career, I've learned that successful retail brands are built on authentic connections with customers, and J

Jill has that foundation in place

While we are navigating challenges today, stemming from the current environment, increased uncertainty affecting consumer spending, and certain underperforming areas of the asment, I strongly believe in this brand and the opportunities ahead

It was this belief and my passion for serving this customer that brought me to this role

I have a ven track record of building teams and growing es fitably

My background is rooted in duct and merchandising, having spent 16 years at Ralph Lauren, before moving on to my most recent role as the CEO of J

I not only have a deep understanding for the industry but strong admiration for the customer J

In my previous roles, I have scaled es through multichannel expansion, elevating duct offerings, and introducing new

I see opportunities across all those areas here while maintaining the brand's core identity which has supported such loyalty over the years

Over the past five weeks, I have immersed myself in the, engaging with our team, visiting stores, and talking with associates and customers

I am working diligently to assess all areas of the, where our strengths are, where there are opportunities, and how we can evolve and imve performance

This initial review will inform my views on our path forward

What is, however, is the inspiring dedication that I have seen across our organization to dering customers the experience they value from J

I am energized by the opportunities ahead and will be working with the team to leverage the investments that have been made in stores, marketing, and systems

The fundamentals of this are here

We have a loyal customer base, a lean operating model, and strengthening omnichannel capabilities

I look forward to viding more insights into our plans and initiatives on our September earnings call

Now I will hand the call over to Mark Webb to review our first quarter performance

Mark Webb: Thank you, Claire, and good morning, everyone

I'd to welcome Claire to our first earnings call

We are excited to have you leading J

Jill and are energized by your passion for this customer and ven track record driving growth in this industry

We look forward to sharing more on Claire's assessment of the and strategies on our second quarter earnings call in September

But for now, let me review our first quarter performance

We entered the first quarter with known challenges

We experienced adverse weather in February, and we cut over to our new OMS system in March

Overall, the OMS ject went very well

We are excited to now have a modern platform from which we can scale and grow

But the cutover did have a slightly larger impact on Q1 performance than anticipated

In addition to these known headwinds, we believe we had opportunities in the asment and the macroeconomic environment continued to be volatile with uncertainty related to global trade policy impacting our customers' behavior, particularly in April and into May

Despite these challenges, we dered EBITDA above the high end of our previously guided range, due primarily to disciplined expense management and continued to deploy cash to holders through our quarterly dividend and repurchase gram

While we remain confident in the long-term resiliency of our loyal customer base and the opportunities to grow this, we continue to navigate near-term uncertainty with respect to tariffs and the impact the volatility will have on our customer

Because of this and also to vide Claire with the necessary time to complete her assessment of the, we are withdrawing our prior full-year guidance and temporarily suspending our practice of viding forward guidance on most metrics

I will discuss more on this, but first, let me review more details on our first quarter performance

As mentioned, weather impacted store traffic earlier in the quarter, while the OMS cutover had an outsized impact in our direct channel in March

In addition, our customer became more discerning with her spend in April, which was most nounced in our direct channel as she primarily shopped markdowns, which put pressure on average unit retails and gross margin

Please refer to today's press release for reconciliations of non-GAAP financial measures to their most comparable GAAP financial measures

Adjusted EBITDA, adjusted net income, and adjusted net income per diluted to net income and free cash flow to cash from operations

Mark Webb: Turning to cash flow

Looking at inventory, total reported inventories were up 14% at the end of the first quarter compared to the end of the first quarter last year, primarily due to an extra week in the supply chain we initiated last year in Q3

In response to Red Sea disruption

Investments were focused primarily on stores, as well as the completion of the OMS ject, including the initiation of work to enable shift in-store capabilities in the back half of this year

Now for more on our outlook

As I mentioned, given the increased uncertainty with respect to the macroeconomic environment, along with our recent CEO transition, we are withdrawing our prior full-year guidance and temporarily suspending our practice of viding forward guidance on most metrics

That said, our teams are diligently working to assess opportunities for imvement within the asment, and we have taken swift actions to reduce inventory investments in floor sets beginning in the third quarter to better align with current demand trends

Mark Webb: Quarter to date through May, total company sales are down mid-single digits compared to the prior year period

While comparisons get easier as we move forward, should sales continue to decline at this level, we would expect to see significant SG&A deleverage as well as further pressure on gross margin driven by actions taken to ensu.