Sign in

You're signed outSign in or to get full access.

JI

J.Jill, Inc. (JILL)·Q3 2019 Earnings Summary

Executive Summary

  • Q3 net sales were $166.0M (-4.6% YoY), comps declined 7%, and diluted EPS was $0.05; direct channel mix rose to 43% as gross margin recovered sequentially to 64.4% .
  • Significant miss versus prior guidance: EPS was guided to $0.10–$0.12 and comps -1% to -3% in Q2, but delivered $0.05 EPS and -7% comps in Q3; gross margin fell ~190 bps YoY despite sequential improvement from Q2’s clearance-driven trough .
  • Guidance cut: management now expects FY19 adjusted diluted EPS to a loss of $0.02–$0.04 (prior +$0.20–$0.24), comps -5% to -6% (prior -2% to -4%), and net sales -3% to -4% (prior flat to -2%); Q4 comps guided to -8% to -10% .
  • Leadership change is a key near-term catalyst: Jim Scully appointed Interim CEO with focus on stabilizing assortment quality, inventory discipline, and omni-channel alignment; cost actions and inventory progress noted, but Q4 expected to remain highly promotional .

What Went Well and What Went Wrong

What Went Well

  • Sequential margin and profitability improvement: gross margin recovered to 64.4% (from 58.3% in Q2) aided by better-than-expected recoveries on liquidated inventory; SG&A fell to $98M on cost savings; adjusted EBITDA improved to $19.6M (11.8% margin) .
  • Direct channel strength: direct sales rose to 43% of total, supported by digital marketing and capsule collaborations driving traffic; management highlighted mobile conversion initiatives as a focus area .
  • Operational discipline: teams advanced inventory management discipline and positioned late Q4 receipts more conservatively, aiming to stabilize gross profit before re-accelerating top line .

Management quotes:

  • “Our third quarter results fell short…particularly in our store channel…our direct channel…grew to 43% of total sales.” – Interim CEO Jim Scully .
  • “Gross margin was 64.4%…partially offset by ~120 bps benefit from better-than-expected recoveries on liquidated inventory.” – CFO Mark Webb .

What Went Wrong

  • Assortment and quality issues pressured store performance: challenges in Pure Jill and Wearever, including color/quality miscues and late-summer warmth affecting heavier assortments, drove weaker resonation and lower AUR .
  • EPS and comps fell short of prior guidance: Q3 diluted EPS came in at $0.05 (vs guided $0.10–$0.12) and comps -7% (vs guided -1% to -3%) as September floor set underperformed .
  • Inventory remained elevated into Q3 ($81.4M), with Q4 guided to be “highly promotional”; FY19 guidance cut across revenue, comps, margins, and EPS; Q3 tax rate elevated to 42.5% .

Financial Results

Quarterly Performance (oldest → newest)

MetricQ1 2019Q2 2019Q3 2019
Revenue ($USD Millions)$176.5 $180.7 $166.0
Diluted EPS (GAAP) ($)$0.10 -$2.21 (impairment-driven) $0.05
Adjusted Diluted EPS (Non-GAAP) ($)N/A-$0.05 N/A
Gross Margin (%)65.9% 58.3% 64.4%
Adjusted EBITDA ($USD Millions)$21.5 $12.6 $19.6
Adjusted EBITDA Margin (%)12.2% 7.0% 11.8%
GAAP Operating Margin (%)6.1% N/A5.4%
SG&A ($USD Millions)$105.4 $103.4 (ex one-times) $98.0
Comp Sales Change (%)-3.3% -1.2% -7.0%

Notes: Q2 GAAP results include a $95.4M non-cash impairment; Q1 adjusted EPS not provided; Q3 adjusted EPS not provided .

Q3 YoY Comparison (Q3 2019 vs Q3 2018)

MetricQ3 2018Q3 2019
Revenue ($USD Millions)$174.0 $166.0
Diluted EPS (GAAP) ($)$0.15 $0.05
Gross Margin (%)66.3% 64.4%
Adjusted EBITDA ($USD Millions)$24.2 $19.6

KPIs and Balance Sheet

KPIQ1 2019Q2 2019Q3 2019
Inventory ($USD Millions)$85.4 $70.0 $81.4
Cash ($USD Millions)$14.3 $29.1 $17.0
Store Count (units)283 286 290
Capital Expenditures ($USD Millions)N/A (transcript states “$4.1 billion,” likely a typographical error) $3.8 $5.6
Direct Channel Mix (% of sales)N/A (“just under 42%”) N/A43.0%

Segment Breakdown

SegmentQ3 2019 Revenue
Not disclosed (company reports total only)N/A

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted Diluted EPSFY 2019$0.20–$0.24 Loss of $0.02–$0.04 Lowered
GAAP EPSFY 2019Loss of $1.86–$1.90 Loss of $2.18–$2.20 Lowered
Total Comparable SalesFY 2019-2% to -4% -5% to -6% Lowered
Total Net SalesFY 2019Flat to -2% -3% to -4% Lowered
Gross Margin YoYFY 2019-~300 bps -~350 bps Lowered
Interest ExpenseFY 2019+~$1M vs 2018 About flat to 2018 Improved
Tax RateFY 2019About -3% (ex impairment ~27%) About 2% (impairment-related differences) Revised
CapexFY 2019$22–$25M $15–$18M Lowered
Store Count (end of year)FY 2019~288 stores ~287 stores (open 1, close 4 in Q4) Lowered
CompsQ4 2019N/A-8% to -10% New
Net SalesQ4 2019N/A-5% to -7% New
Gross Margin YoYQ4 2019N/A-~400 bps New
EPS (GAAP)Q4 2019N/ALoss of $0.14–$0.16 New
Interest ExpenseQ4 2019N/A~$4.5M New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Inventory Management DisciplineQ1: Elevated inventory, need faster in-season actions; plan to start back half clean . Q2: On-hand inventory up 2% YoY; improving weekly metrics, meetings; progress despite long lead times .Progress in discipline; inventories still too high at $81.4M but sequentially improved; late-Q4 receipts more in line and positioned conservatively .Improving but still high .
Product Assortment QualityQ1: Color/novelty miscues; seasonal palette adjustments planned for back half . Q2: Course corrections aiding conversion; Pure Jill/Wearever refining .Assortment underperformed, with quality/color issues particularly in Pure Jill/Wearever; plan to stabilize gross profit and improve AUR via right-sized buys .Mixed; still challenged .
Direct/Digital & Marketing MixQ1: E-commerce bright spot; social/digital investment; catalog mix to be measured . Q2: Direct sales +170 bps mix; catalog circulation refined; prospecting drives digital traffic .Direct mix increased to 43%; focus on mobile conversion and social/digital; capsules drive traffic/new-to-brand .Positive momentum .
Tariffs/MacroQ2: Below 20% China sourcing; tariff list impacts nominally; included in guidance .Macro/promotional Q4 expected; tariffs not a central Q3 driver; outlook cautious .Ongoing headwind .
Technology InitiativeQ1/Q2: Project paused; CIO/CDO hired; reassessing capabilities and capital .Not a focus in Q3; emphasis on cost savings and operational fundamentals .De-emphasized .
Leadership/OperationsQ1/Q2: Team additions; cost review .Interim CEO Jim Scully appointed; priority to stabilize operations, align channels, and instill financial discipline .Transition underway .

Management Commentary

  • “First priority is to stabilize the business…focus on our customer, marketing, product, operating fundamentals and financial discipline…simplify processes, drive inventory discipline, improve quality and lead times.” – Jim Scully, Interim CEO .
  • “Total net sales were $166M…gross margin 64.4%…SG&A $98M…adjusted EBITDA $19.6M (11.8% margin)…EPS $0.05.” – Mark Webb, CFO .
  • “We are revising guidance…Q4 comps -8% to -10%…gross margin down about 400 bps YoY…FY comps -5% to -6%, net sales -3% to -4%, adjusted EPS loss $0.02 to $0.04 (prior $0.20 to $0.24).” – Mark Webb .

Q&A Highlights

  • Assortment fixes and timing: Quality/color challenges centered in Pure Jill/Wearever; September drop skewed too heavy vs weather; subsequent receipts better aligned; initial focus on stabilizing gross profit before top-line reacceleration .
  • Customer behavior: Customer count positive YTD but spending less per transaction; management does not believe core customer is alienated, expects improved assortments and right-sized buys to help .
  • Inventory/lead times: Progress on in-season and pre-season processes despite long lead times; new weekly metrics and meeting cadence to improve decisions; more flexibility to chase winners .
  • Marketing efficiency: Catalog circulation refined to target most responsive customers; mix shifting to social/digital while protecting strategic differentiators (store payroll, marketing) .
  • Omni dynamics: Digital penetration rising; mobile conversion remains area of lowest conversion and focus; stores challenged, omni alignment needed .

Estimates Context

  • S&P Global Wall Street consensus estimates were unavailable via tool during this request; therefore, comparisons to consensus could not be completed. S&P Global consensus data unavailable for Q3 2019 at time of retrieval.
  • Versus prior company guidance from Q2: Q3 EPS delivered $0.05 vs guided $0.10–$0.12; comps -7% vs guided -1% to -3%; net sales down 4.6% YoY vs guided -1% to +1% (misses on EPS/comps; sales below range) .
MetricQ3 2019 ActualQ3 2019 Consensus (S&P Global)
Revenue ($USD Millions)$166.0 N/A (unavailable)
Diluted EPS (GAAP) ($)$0.05 N/A (unavailable)

Key Takeaways for Investors

  • The quarter missed prior guidance materially on EPS and comps, reflecting assortment/quality issues and store channel pressure despite healthier direct mix; sequential margin recovery is a silver lining but YoY still down .
  • Guidance reset is significant: FY19 adjusted EPS cut to a small loss and Q4 guided sharply negative on comps/margins, signaling a highly promotional holiday and limited near-term earnings power .
  • Operational playbook is clear under new interim CEO: stabilize, tighten inventory discipline, improve quality/lead times, and better omni-channel alignment; near-term focus is on gross profit stabilization before growth .
  • Digital remains a relative strength with 43% mix and ongoing mobile conversion improvements; capsules/collaborations are driving traffic, providing a lever to support top-line when assortments normalize .
  • Inventory remains elevated at $81.4M; while progress is noted, managing buys conservatively and increasing flexibility to chase winners are critical to avoid margin leakage in a promotional environment .
  • Cost actions are flowing through SG&A ($98M in Q3 vs $102M LY), partially offsetting topline/margin pressures; further efficiency opportunities remain, but management intends to protect customer-facing investments .
  • Tariffs/macro uncertainty persist, but sourcing from China <20% (as of Q2) mitigates some risk; outlook prudently embeds promotional headwinds into Q4 .

Research process notes:

  • Read Q3 2019 earnings call transcript in full (Document ID 1) .
  • Read prior two quarters’ transcripts in full (Document IDs 2 and 3) – –.
  • 8-K 2.02 press release and other Q3 press releases were not found in the document catalog for the specified date ranges, so analysis relies on transcripts [functions.ListDocuments output; functions.SearchDocuments date ranges used].