Exhibit 99.1
FOR IMMEDIATE RELEASE | Approved by: | Olga L. Conley |
| | Chief Financial Officer |
| | (617) 376-4300 |
| | www.jjill.com |
| | |
| Investor Relations: | Chad Jacobs |
| | Integrated Corporate Relations |
| | (203) 222-9013 |
THE J. JILL GROUP REPORTS SECOND QUARTER RESULTS
Quincy, MA, July 28, 2005 – The J. Jill Group, Inc. (Nasdaq: JILL) today reported financial results for the second quarter ended June 25, 2005. Net sales for the second quarter decreased by 2.6% to $117.4 million from $120.6 million reported in the prior year. Operating income for the quarter totaled $7.0 million or 5.9% of net sales compared to $11.3 million or 9.4% of net sales in the prior year. The company generated net income for the quarter of $3.9 million or $0.19 per diluted share versus $6.5 million or $0.32 per diluted share in the second quarter of the previous year.
Second quarter sales productivity declined in both segments as compared to the prior year. Retail segment net sales per weighted average square foot decreased by 2.1% and direct segment net sales per 1,000 square inches circulated decreased by 6.0%. Comparable store sales for stores open at least one full fiscal year were flat for the second quarter of 2005 as compared to the second quarter of 2004.
For the six months ended June 25, 2005, the company recorded net sales of $215.8 million compared to $220.5 million in the prior year. Operating income for the six-month period was $2.2 million or 1.0% of net sales compared to $15.3 million or 6.9% of net sales in the prior year. Net income for the six months was $1.2 million or $0.06 per diluted share versus $8.8 million or $0.43 per diluted share in the previous year.
Gordon R. Cooke, President and Chief Executive Officer, commented, “Although the second quarter of 2005 was disappointing when compared to the second quarter of 2004, it turned out to be much stronger than we originally anticipated. This was attributable to slightly improved top-line results, particularly in our retail segment, combined with higher than anticipated gross margins and lower selling, general and administrative expenses.”
“Our results have obviously been impacted by our ongoing merchandising transition. While we are pleased with the initial response in retail to our newly introduced silhouettes, fits and color palette, we are still in the early stages of enhancing the boldness and depth of our embellished novelty and signature product,” continued Mr. Cooke.
“A particular challenge for J. Jill at the moment is our direct business which is being impacted by cannibalization from our retail stores as well as a delayed understanding and acceptance of the merchandising changes we have undertaken. We are currently implementing a number of initiatives to improve this business including increasing the amount of catalog-only product offerings and the density of offerings per catalog page,” continued Mr. Cooke.
(more)
“We remain focused on a couple of key objectives, namely, improving our retail sales productivity per square foot in order to deliver an appropriate level of profitability and stabilizing our direct business. The single most important factor in attaining these goals is to deliver an improved merchandise assortment tailored to each business segment. This is precisely the reason why we took on the extremely difficult task of transitioning our merchandise assortment while, at the same time, doubling the size of our merchandising and product development organization. Although we believe we have made significant progress in these areas, there is still a great deal yet to be accomplished,” concluded Mr. Cooke.
The J. Jill Group’s conference call to discuss its second quarter earnings will be broadcast live today at 4:30 p.m. Eastern Time at www.jjillgroup.com, and will be archived online within one hour of the completion of the conference call.
The J. Jill Group is a multi-channel specialty retailer of women’s apparel, including accessories and footwear. The company currently markets its products through retail stores, catalogs and its website jjill.com. J. Jill is designed to appeal to active, affluent women age 35 and older.
This press release contains certain forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, which reflect management’s expectations regarding future events and speak only as of the date hereof. Our actual results, performance or achievements may differ significantly from the results, performance or achievements discussed in or implied by the forward-looking statements. Factors that could cause such a difference include material changes in J. Jill’s business or prospects, in consumer spending, fashion trends or consumer preferences, or in general, political, economic, business or capital market conditions and other risks and uncertainties, including, but not limited to, the following: our ability to respond to changes in customer demands and fashion trends in a timely manner which could affect both total sales and the mix of sales between full price and liquidation merchandise; the success of our product development and merchandising initiatives; our ability to effectively build brand awareness; our ability to successfully redefine our direct segment business strategy; our success with sourcing merchandise outside China in response to the imposition of international or domestic sanctions, embargoes or quota restrictions; the success of our retail segment growth strategy; changes in competition in the apparel industry; the customary risks of purchasing merchandise abroad, including longer lead times, higher initial purchase commitments and timeliness of receipts of inventory; our ability to continue to have access to relevant lists of prospective customers from third parties and to effectively manage and utilize our multi-channel customer database; the possible adverse effect of a determination by us or our registered independent accounting firm that we have a material weakness in our internal controls over financial reporting; changes in, or failure to comply with, federal and state tax and other government regulations; our ability to respond to interruptions or delays in the delivery of products or services provided by our vendors and service providers; our ability to attract and retain qualified personnel; possible future increases in expense and labor and employee benefit costs; business abilities and judgment of management; our ability to respond to a major failure of our information systems; and other factors that are detailed from time to time in J. Jill’s SEC reports, including its Annual Report on Form 10-K for the fiscal year ended December 25, 2004. J. Jill disclaims any intent or obligation to update any forward-looking statements.
(tables to follow)
THE J. JILL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| | Three Months Ended | | Six Months Ended | |
| | June 25, | | June 26, | | June 25, | | June 26, | |
In thousands, except per share data, unaudited | | 2005 | | 2004 | | 2005 | | 2004 | |
| | | | (Restated) | | | | (Restated) | |
| | | | | | | | | |
Net sales | | $ | 117,417 | | $ | 120,561 | | $ | 215,786 | | $ | 220,490 | |
Cost of products and merchandising | | 75,587 | | 73,413 | | 145,229 | | 138,260 | |
Gross margin | | 41,830 | | 47,148 | | 70,557 | | 82,230 | |
Selling, general and administrative expenses | | 34,880 | | 35,799 | | 68,398 | | 66,947 | |
Operating income | | 6,950 | | 11,349 | | 2,159 | | 15,283 | |
Interest (income) expense, net | | (41 | ) | 96 | | 9 | | 238 | |
Income tax provision | | 3,121 | | 4,724 | | 988 | | 6,279 | |
Net income | | $ | 3,870 | | $ | 6,529 | | $ | 1,162 | | $ | 8,766 | |
| | | | | | | | | |
Income per share: | | | | | | | | | |
Basic | | $ | 0.19 | | $ | 0.33 | | $ | 0.06 | | $ | 0.44 | |
Diluted | | $ | 0.19 | | $ | 0.32 | | $ | 0.06 | | $ | 0.43 | |
| | | | | | | | | |
Weighted average shares outstanding: | | | | | | | | | |
Basic | | 20,170 | | 20,044 | | 20,157 | | 19,933 | |
Diluted | | 20,416 | | 20,705 | | 20,419 | | 20,509 | |
THE J. JILL GROUP, INC.
NET SALES SUMMARY
| | Three Months Ended | | Six Months Ended | |
| | June 25, | | June 26, | | June 25, | | June 26, | |
In thousands, unaudited | | 2005 | | 2004 | | 2005 | | 2004 | |
| | | | | | | | | |
Retail | | $ | 75,054 | | $ | 65,134 | | $ | 131,640 | | $ | 115,357 | |
| | | | | | | | | |
Catalog | | 18,472 | | 32,191 | | 37,807 | | 61,806 | |
Internet | | 22,146 | | 22,066 | | 43,636 | | 41,206 | |
Direct total | | 40,618 | | 54,257 | | 81,443 | | 103,012 | |
| | | | | | | | | |
Other | | 1,745 | | 1,170 | | 2,703 | | 2,121 | |
Net sales | | $ | 117,417 | | $ | 120,561 | | $ | 215,786 | | $ | 220,490 | |
THE J. JILL GROUP, INC.
OPERATING INCOME RECONCILIATION
| | Three Months Ended | | Six Months Ended | |
| | June 25, | | June 26, | | June 25, | | June 26, | |
In thousands, unaudited | | 2005 | | 2004 | | 2005 | | 2004 | |
| | | | (Restated) | | | | (Restated) | |
| | | | | | | | | |
Retail segment contribution | | $ | 8,134 | | $ | 9,287 | | $ | 6,019 | | $ | 11,733 | |
Direct segment contribution | | 9,970 | | 14,849 | | 19,908 | | 27,610 | |
Other | | (3,904 | ) | (4,368 | ) | (8,527 | ) | (8,495 | ) |
General and administrative expenses | | (7,250 | ) | (8,419 | ) | (15,241 | ) | (15,565 | ) |
Operating income | | $ | 6,950 | | $ | 11,349 | | $ | 2,159 | | $ | 15,283 | |
THE J. JILL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| | June 25, | | June 26, | | Dec. 25, | |
In thousands, unaudited | | 2005 | | 2004 | | 2004 | |
| | | | (Restated) | | | |
Assets: | | | | | | | |
Cash and cash equivalents | | $ | 24,891 | | $ | 81,986 | | $ | 31,966 | |
Marketable securities | | 44,668 | | — | | 34,062 | |
Accounts receivable, net | | 6,699 | | 16,359 | | 18,579 | |
Inventory | | 39,202 | | 27,034 | | 36,212 | |
Prepaid catalog expenses | | 5,139 | | 4,049 | | 3,894 | |
Deferred income taxes | | 10,594 | | 6,878 | | 9,761 | |
Other current assets | | 9,488 | | 7,781 | | 9,109 | |
Total current assets | | 140,681 | | 144,087 | | 143,583 | |
Property and equipment, net | | 136,477 | | 126,145 | | 133,972 | |
Other non-current assets | | 6,324 | | 4,665 | | 5,141 | |
Total assets | | $ | 283,482 | | $ | 274,897 | | $ | 282,696 | |
| | | | | | | |
Liabilities and stockholders’ equity: | | | | | | | |
Accounts payable and accrued expenses | | $ | 50,494 | | $ | 51,518 | | $ | 52,175 | |
Current portion of long-term debt | | 1,732 | | 1,755 | | 1,805 | |
Total current liabilities | | 52,226 | | 53,273 | | 53,980 | |
Long-term debt, less current portion | | 9,613 | | 11,345 | | 10,431 | |
Deferred credits from landlords and other | | 48,474 | | 42,595 | | 47,387 | |
Deferred income taxes | | 5,969 | | 3,600 | | 6,841 | |
Total liabilities | | 116,282 | | 110,813 | | 118,639 | |
Capital stock | | 114,725 | | 112,587 | | 112,709 | |
Accumulated other comprehensive loss | | (124 | ) | — | | (89 | ) |
Retained earnings | | 52,599 | | 51,497 | | 51,437 | |
Total liabilities and stockholders’ equity | | $ | 283,482 | | $ | 274,897 | | $ | 282,696 | |
THE J. JILL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| | Six Months Ended | |
| | June 25, | | June 26, | |
In thousands, unaudited | | 2005 | | 2004 | |
| | | | (Restated) | |
Cash flows provided by operating activities: | | | | | |
Net income | | $ | 1,162 | | $ | 8,766 | |
Depreciation and amortization | | 10,648 | | 8,915 | |
Deferred income taxes | | (1,639 | ) | 1,038 | |
Loss (gain) on trust assets | | 14 | | (53 | ) |
Loss on disposal of property and equipment | | 542 | | — | |
Changes in assets and liabilities | | 7,064 | | 12,746 | |
Net cash provided by operating activities | | 17,791 | | 31,412 | |
| | | | | |
Cash flows used in investing activities: | | | | | |
Additions to property and equipment | | (13,268 | ) | (9,745 | ) |
Maturities of marketable securities | | 6,105 | | — | |
Sales of marketable securities | | 2,000 | | — | |
Purchases of marketable securities | | (19,000 | ) | — | |
Investment in trust assets | | (1,108 | ) | (816 | ) |
Increase in cash held in escrow | | (335 | ) | (390 | ) |
Net cash used in investing activities | | (25,606 | ) | (10,951 | ) |
| | | | | |
Cash flows provided by financing activities: | | | | | |
Proceeds from stock transactions | | 1,631 | | 3,080 | |
Payments of debt borrowings | | (891 | ) | (842 | ) |
Net cash provided by financing activities | | 740 | | 2,238 | |
| | | | | |
Net (decrease) increase in cash and cash equivalents | | (7,075 | ) | 22,699 | |
| | | | | |
Cash and cash equivalents at: | | | | | |
Beginning of period | | 31,966 | | 59,287 | |
End of period | | $ | 24,891 | | $ | 81,986 | |
