J. Jill is escaping the retail mire.
While most retailers grapple with bloated inventories, succumb to massive markdowns, and feel increasingly nervous about Christmas, J. Jill is keeping its cool.
The specialty retailer catering to middle-aged and older women has inventories above last year, though under relative control, and moved into the black last quarter when it posted record adjusted EBITDA and higher margins.
J. Jill isn’t about to be lured into what’s bound to be another promotionally charged holiday season. Having a business with a pretty even balance of sales volume quarter to quarter makes for a “less stressful” holiday season, executives contend. The focus remains on selling at full-price “premium” casual merchandise appropriate for on the job and after-hours. It’s a segment of the apparel business that’s sprung into popularity, post-pandemic, as people return to working in their offices and want to feel comfortable there in what they wear. The publicly-traded J. Jill, selling merchandise entirely under its own private label, sees a big opportunity to increase its popularity and raise its profile.
In August. J. Jill launched its “Welcome Everybody” campaign, touting inclusivity and an expanded size range. It appears on store windows, signs, in catalogues, digital ads and direct mail, and is seen as ongoing, not just for a season or two. Rochelle Johnson, a beauty, style and plus-size influencer with a blog, “Beauticurve,” is part of the campaign, along with other influencers.
“We feel like we are a too well-kept secret,” J. Jill’s president and chief executive officer, Claire Spofford, said during an exclusive interview with WWD.
“‘Welcome Everybody'” is an enterprise-wide approach. It’s about communicating in a more effective and relevant way to the consumer,” to generate greater traffic to the website and stores, Spofford said.
“We have an opportunity to modernize the brand. We are not changing the heart and soul of the brand.”
In conjunction with the campaign, J. Jill stores have been reset so the missy and women’s size presentations are contained in one, size-integrated shopping area. Also in the stores, styles were extended to include size 2X, which is size 20. The range begins at extra small. Online, styles in sizes XS to 4X continue to be offered. For J. Jill, extra small through 4X is considered “a regular size run.”
Last Thursday, Spofford was inside The Well, a wellness center on East 15th Street in Manhattan, and a fitting setting to showcase the first Pure Jill Elements collection, the latest iteration of the Pure Jill subbrand, priced roughly 30 percent higher and emphasizing organic shapes, nature-inspired colors, indigos, soft fabrics and relaxed silhouettes.
“It’s an amplified, version of Pure Jill with a zen, artisanal, peaceful aesthetic,” with much hand-stitching, 25 fashion styles, and 10 accessories, explained Elliot Staples, J. Jill’s senior vice president of design, who was also on the scene.
Pure Jill Elements shops-in shop, from 150 to 500 square feet in size, began being tested in seven J. Jill stores earlier this month, marking the first brick-and-mortar presence for the capsule collection, which continues to be sold on JJill.com. More broadly, the tactic reflects new efforts by J. Jill to raise its profile and come out of its shell.
“We do consumer insight work,” at least quarterly, said Spofford. “We do benchmarking and we look at the opportunity. We have relatively low awareness as a brand. We have way fewer stores than some of the competition and that’s part of it. We have 247 stores. But when we get a customer, there is really strong loyalty.
“There is an opportunity for another 20 to 25 stores over the next few years,” said the CEO. That would still make for a relatively small brick-and-mortar footprint, but the idea is to keep growth manageable enough to navigate through fast-changing consumer shopping behavior. J. Jill’s clientele, generally professionals, at least college-educated, and with an average household income of $150,000, is getting more cautious on spending yet not holding back to the degree that those with fewer discretionary dollars are.
“We are very focused on profitable growth,” said Spofford. “The last thing we want to do is undermine the progress we have made here.” J. Jill stores average 3,400 square feet in size, and are divided into two areas for the regular-size run and petites.
“I have been in this business a long time,” said Spofford, who had more than 20 years of retail experience before becoming J. Jill CEO in February 2021 after serving as president of Cornerstone Brands, and earlier, chief marketing officer of J. Jill. “The J. Jill customer is the most loyal customer I have ever seen. Our average customer tenure is 10 years with the brand. Our retention rates are very high. Our net promoter scores are very high. We just need to get more people into the brand.”
For the second quarter ended July 30, J. Jill’s net income was $17.8 million compared to a net loss of $24.6 million in the year-ago period. There was record adjusted EBITDA of $35.6 million, versus $32.7 million a year ago; net sales were up 0.7 percent to $160.3 million, and gross margin was 70.1 percent compared to 68.7 percent in the second quarter of fiscal 2021.
For the first half of 2022, sales rose 10.1 percent to $317.4 million; adjusted EBITDA was $66.9 million compared to $49.6 million in 2021, and gross margin was 69.9 percent compared to 68.4 percent in last year’s half. J. Jill ended trading Friday priced at $16.69, and over the last 52 weeks has ranged from a high of $20.89 to a low of $12.47.
“Everyone has acknowledged that last year there was a tailwind in the recovery and we certainly benefited from that as well. But we feel the disciplines we have put in for planning the business and making sure our inventories are tightly managed helps to support full-price selling and that’s what we were able to continue to enjoy in Q2,” said Spofford.
“Q2 was actually a record quarter for us, in terms of EBITDA,” said Spofford. Inventory in Q2 was up 12 percent. “We were up marginally in terms of inventory total but it was all in transit. Our on-hand units and costs were actually down on a year-over-year basis. Our inventory was way lower than we have seen in the marketplace.”
Sales growth was minimal last quarter, though bottom-line growth came through gross margin expansion. Asked about the pattern of sales, Spofford said, “We had a strong start to the quarter. May and into June was very, very strong. We did see a softening in traffic and sales in the latter half of the quarter. We heard from our sales teams in the stores that [the customer] had shopped early and went away on vacation and was wearing those clothes she bought earlier in the quarter.” With J. Jill’s customer base, Spofford said, “We like to say she’s relatively resilient but not impervious,” to inflation and macro economic issues.
Spofford said J. Jill has been working to stop carrying as much markdown inventory, season to season, as in the past. “When we don’t have to work through all those markdowns we can focus on the full-price business and tell our customer what is so beautiful about the product and the brand story.”
The stores are less crammed with merchandise, she said. “The inventory levels are very purposeful and that gave us the room to add size 2X to the stores very easily, and that takes us all the way up to size 20 in the stores, which is the vast majority of the market. We haven’t talked about that, really at all,” until now.
Recently, J. Jill created “price parity.” So regardless of its size, a particular style is priced the same. Asked if the higher costs of creating plus sizes means there is some margin loss by charging the same for a style regardless of its size, Spofford said, “We plan for it and we are managing it…For me, the customer has to be at the center of everything we do and for me, price parity is just the right thing to do. Since August, we took that up charge as well and we added 2X to the stores as well. Welcome Everybody is really our first campaign talking about inclusive sizing. This is our intention going forward,” meaning it’s the messaging that will be around for more than just a season or two.
For the third quarter, the company expects revenues to be flat to down 3 percent compared to the third quarter of fiscal 2021. Adjusted EBITDA is expected to be in the range of $21 million and $23 million.
Asked for her outlook on the fourth quarter, Spofford answered, “We anticipate early shopping may happen again this year. But we are very balanced from a seasonal standpoint. Our first half is just as strong as our back half from a sales standpoint. It’s unusual,” in retailing. “Mother’s Day is like Christmas for us. It’s great. I’ve been in businesses that are very Q4-driven and it is stressful.
“It’s hard to predict what the macro environment is going to be,” Spofford added. “The Fed rate just went up again yesterday. But we are sticking to our strategy. We believe we have beautiful assortments coming down the pike for the holiday season. We did see some impact from omicron last year in Q4. Omicron sort of hit on Black Friday, so we are hopeful we will anniversary that timeframe. There is some opportunity there. We are just sticking by our guns in terms of tightly managing the business and staying focused on our customers and experience.”
She stressed not being overinventoried, and that the company is “very determined to continue our full-price message and full-price selling. We know the fourth quarter is more promotional than other quarters. It always is for everybody. We are not naive about that. But we don’t feel we are in a position of having to be overly aggressive. We think the best defense from a promotional environment is strong product.”
Considering the character of its merchandise and its audience, J. Jill is more about self-purchasing rather than gifts. “She’s very interested in finding her outfits for holiday parties,” Spofford observed. “That is a big part of our business during that timeframe.”
With its fashion, J. Jill never gets edgy or too trendy, nor tailored or tight-fitting. But don’t call it safe. The sweet spot, said Spofford, is “sophisticated premium casual.”
“We don’t go out there, because she doesn’t want us to go out there. We try to fast-follow on the trends,” Spofford explained. “This premium casual, versatile product that you can dress up or dress down is really where we sit and that is what she is looking for. It’s suitable for back-to-office or whatever you do during your day. You can dress it up or dress it down.
“One of the things we have been doing better in the last couple of years is having a little bit more sophisticated color palette and she [the customer] really responds to it. She loves the color and the beautiful neutrals.”
The last couple of years J. Jill has been working on its fit across all size ranges. “It’s pretty complicated and technical to make sure proportions are right. We have spent a lot of time perfecting that. We’ve been working hard with our source base and our design and technical design team on it.”
Novelty, linens and prints are selling well, as well as innovative fabric techniques for Pure Jill, she noted. “It’s those things that are a little different, that she can’t find anywhere else. Dresses have been strong all year.
“We are not tailored, and not tight. We talk about the flow of the fabric, we focus on beautiful fabrics that flow and drape, and move with you. That is very much a core piece of our design philosophy.”
In a world and a fashion industry preoccupied with youth, J. Jill isn’t changing its demographic. “It’s still very much at 45-plus; we feel like there is a lot of opportunity in that space. We feel we have a lot of growth potential in this core business that we haven’t tapped yet,” said Spofford. “There are a lot of women out there who would love J. Jill and just don’t know us.”