J.Jill, Inc. ((JILL)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call for J.Jill, Inc. reflected a sense of cautious optimism. Despite facing significant challenges such as the impact of tariffs and decreased gross margins, the company demonstrated resilience through successful strategic implementations and improved sales trends. The focus on customer growth and operational improvements provides a solid foundation for future growth.
Sequential Improvement in Sales Trends
Sales trends at J.Jill showed sequential improvement, with total sales down by less than 1% and an adjusted EBITDA of $25.6 million. Notably, store sales for the second quarter were up by 0.4% compared to the same period in 2024, driven by the addition of three net new stores.
Successful Implementation of Ship-from-Store Capabilities
J.Jill successfully launched its ship-from-store capabilities ahead of schedule, extending this initiative to the entire fleet by July. This strategic move has been instrumental in driving sales growth and supporting gross margins.
Strong Free Cash Flow Generation
The company reported strong free cash flow generation, amounting to $17 million for the quarter. This resulted in an end-of-quarter cash balance of $46 million, highlighting J.Jill’s robust financial position.
Positive Customer Response to Promotions
J.Jill experienced a positive customer response to its summer sale in July, which helped clear markdown goods and allowed the company to end the quarter with clean inventories.
Decrease in Gross Margin
The gross margin for the second quarter was 68.4%, a decrease of 210 basis points compared to Q2 2024. This decline was primarily due to a higher mix of markdown sales and increased full-price promotional rates.
Impact of Tariffs
Tariffs exerted pressure on the gross margin rate, contributing approximately 50 basis points to the decline. Rates for the largest sourcing countries averaged around 20%, with India at 50%.
Challenges in Direct Sales
Direct sales, which accounted for about 46% of total sales in the quarter, were down approximately 2% compared to the second quarter of fiscal 2024, indicating challenges in this segment.
Higher SG&A Expenses
SG&A expenses for the quarter increased to about $89 million from $86 million last year. This rise was driven by higher store expenses, occupancy costs, and marketing expenses.
Forward-Looking Guidance
Looking ahead, J.Jill provided guidance for the third quarter, anticipating adjusted EBITDA in the range of $18 to $22 million. The company expects sales to remain flat or decrease by low single digits, with comparable sales expected to decline in the low to mid-single digits. Gross margins are projected to decrease further due to tariff pressures, with an estimated $5 million incremental tariff impact for Q3. Capital expenditures for the year are projected between $20 and $25 million, with plans to open one to five net new stores.
In summary, J.Jill’s earnings call conveyed a cautiously optimistic outlook. Despite challenges such as tariff impacts and decreased gross margins, the company is making strategic moves to drive growth and maintain financial stability. The successful implementation of initiatives like ship-from-store capabilities and positive customer responses to promotions are promising signs for the future.