JILL - Earnings call transcript Q3 2018

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Operator

Good morning. My name is Carol, and I will be your conference operator today. At this time, I would like to welcome, everyone, to the J.Jill Third Quarter 2018 Conference Call. On today's call are Linda Heasley, CEO of J.Jill Inc., and Dave Biese, Executive Vice President and Chief Financial and Operating Officer. [Operator Instructions].

the need call you and Private may pursuant and I made certain are Securities begin, safe to this the of during constitute within amended. Litigation we Reform to of XXXX that remind comments made harbor Act Before provisions of as the meaning forward-looking statements from uncertainties cause actual results Such forward-looking both to could subject known and differ that materially such statements are unknown statements. risks and to SEC the risks filings. uncertainties J.Jill's described release Those in press and and are made obligation The of date our statements as forward-looking today do the statements. of are we and not forward-looking this to call, undertake any update

our refer may release showing we on GAAP issued this or A to Finally, on non-GAAP the financial measures measures press certain adjusted financial versus today. schedule reconciliation non-GAAP call. available is

not turn a you over Relations page today's press do one visiting jjill.com. you at the now website of have I the release, by copy will call of Investor obtain may Linda. If to our

Linda Heasley

morning. Good you. Thank

on the our We inventory positive make initiatives had e-commerce than we store we benefited are sales and from momentum, e-commerce line our of our our third that. quarter retail, during reflect the expectations, last continue consecutive We lower with better-than-expected. progress delivered quarter levels and our results year. business in In positive performed to our year posted enhancements and XXth and comps

the I to where want about are. speak results, further quarter's about talking Before we briefly

listening brand of been is a mix with performance to as and call, e-commerce prospective the the its our of areas XXXX during and of the as discovered, customers. our CEO, said projection. and we I As Pursuant visiting and such I to continue and customers operational inventory of level to stores, platform, our brand working parts year our address joining of have transition. last a our Since what number confirmed teams, I meeting the

management also We of process in adding the depth. are

is near listening in ongoing. last to trend-right having to transition is we required a performance more first in as providing I and two essential better imagery mid-term, customer include focused and see and relevant actions work the ahead product actions the phase to is and reflect to manner, improving the is call. phases: consistent complete relate that this of quarter's discussed to the All brand secure more her messaging These actionable offering better our lifestyle. and in our to

in more we to In to addition, are our overall marketing we react agility discipline nimbly. merchandising can improving changes consumer and ensure the and and planning, market

the with deliveries those company per value, XX and systems are plan founded to The and a evolve that product model a two it term. phase model. transitioning and model. the the robust with of should build, to is area number brand. even on will and The leverage we We sets good creating catalog store business has created equal an customer-centric, better The lifestyle our strengths primary a leverage at holistic focus foundation which an how we more pace. rapid landscape, expectations continue omnichannel technology more and to customer enjoy One retail longer-term change to a was and XX over longer e-commerce as J.Jill of catalog year. mailings, per We deliveries in manifest second and delivery. heritage catalog today still architecture support great evaluating brand's as growth-oriented

spend step have overlooked someone on need been a the there and significant grow is largely place. We and to in propensity a demographics forward is We a serve that appeal apparel solid valuable which her brand base. The and we remarkable loyal by and to for to believe space have high marketplace. customer, women our premise as with to

social digital, community and place positioned the be is uniquely she to and posture experience increasingly style, multichannel. are desires. and that We She

are about excited some full opportunities the time to but ahead the make are to will we moving. that It omnichannel in the look migration, require and are our We confident evolving model. direction forward we

to customer that as in and platform. and service world-class uniqueness well ongoing consistent our include personalized our an in leveraging seamlessly store offering as presence relationship digital path with will expanding The design product increasingly include offers securing Our the integrating merchandising growth mechanics and the commerce marketing. stores

catalog social way. will to delivery greater part the social and refine promote New from are our a a capabilities expect to placing to closer And we where contact and her efficiencies product each capabilities moving the she the the marketing Digital will in we be our allow the we high messaging change offer contemporary design, product digital our brand This the a we the is always revisiting leveraging relevant go-to-market underway that tailored come be capabilities us where media ensure ensure we to already, evolution, responsive way more strategy development investments, to think and will currently, us J.Jill. addressing our and its as we're flexible product. and and of improving effectiveness time us more media delivering to has and enhancing now in nimble allow customer role manufacturing and of of and continuum. quality customer require including and to the product experience. vertically-integrated are messaging Accordingly, instructions go-forward. calendar our relevant process, operate, and go-to-market of immediately to Overall, improving reworking marketing the our to sizing make our are current we

longer-term I look success. to about of as So this phase evolutionary prospects in addition fiscal near-term and most in advancing to it forward subsequent what initiatives, year-end a making of for at our year a years. mean to growth the XXXX foundation these setting sharing more will initiatives see we our

XXXX. ensure a to elaborate quarter, we to to has us as guidance remain turn for transition, his successor want our and this fourth you I dedication he to for search Before and the the smooth on intention him leave I J.Jill. to Dave? announced over saw quarter morning, it Dave, I since third will for his grateful to as results Dave begin thank with the his immediately. that brand commitment am

David Biese

Thank Linda. you,

we as to comparable quarterly comparisons, fourth the going calendar the quick weeks but a related shift. from third the quarter using a XXXX XXXX, we shift calendar sales On it restated XX XXXX of to are a last not in an to impact materially does fiscal when is the Before moves sales and our from related does that timing into our impact comparisons calculate This the reminder note, XXXX. versus year experienced numbers, annual NRF's impact compared XX-week in quarter year.

quarter to third results. now Moving

increased comparable Our sales X%. total company

sales Our shift. sales, whereas $XXX.X by increase our our continued comparable drove to positive conversion. versus traffic deliver performance by over stores X.X% of gains, last an Total the channel $XXX net driven our driven calendar million year's reflecting million, were guidance and direct

business year. XX%. total to XX.X% XX.X% reflect versus last versus of The lower last continued gross profit million margin $XXX.X direct for XX.X% clearance $XXX.X last was sales was Our Gross activity million August. year's rate compared accounted year and in

improved expenses IPO margin quarter a $XXX.X expense being by to September was gross SG&A included March year. $XX.X the inventory related year's those last company versus public across of approximately months. third healthier Our driven nonrecurring million $XXX,XXX following October our in Last million to XXXX. in transition and

X% $XX.X As nonrecurring year's was Operating for or expenses. year. $XX.X EBITDA XX.X% sales versus quarter year's and XX.X% income expenses, the which sales, SG&A a last was the percentage compared X.X% of million year. income excludes million operating last $XX.X Adjusted $XX total net million to excluding of or adjusted compared million to of was sales last last nonrecurring as of

share of million sales, of million the income included this Cuts I diluted higher year's quarter third our $X.X versus expense XX.X%. third This was versus last comparing When $X.XX of from $X.XX interest Tax net reflects U.S. Interest was Tax the approximately result period negative million benefited was the EPS $X.X GAAP effective of adjusted XXXX, $X.XX percentage net effective moved the diluted shift, expenses million fourth a impact EBITDA Act. reconciliation $X.XX rate the quarter rate to of release. for by the or further million $X.X tax versus noted. rates the expense rate. the versus year, XX.X% third of XX.X% year, EBITDA for which benefited and quarter. calendar benefits from included million compared in quarter approximately tax Jobs $X.X last $X.X year's year. the year-over-year. $X A a As income and into per The the to XX.X% reduction last last the to the in quarter from lower is to quarter was was year, share press or nonrecurring $X.XX for quarter per which the due

this to morning's refer performance year-to-date release. our highlights, For please press

cash Turning in to of revolving ended mix million the was $XX.X This and million improved the under million inventory. availability the the compared end quarter reflects reduction of and $XX.X level with million third the the sheet. end balance $XX.X facility. in to $XX.X credit quarter our the quarter We at Inventory XXXX. at in of

stores ended quarter the stores. During the and quarter, we opened XXX two with

the or were Our open $X.X in new fourth for early stores quarter. that capital in the opened expenditures which will quarter million, was primarily

fourth had Turning whereas a weeks, our XXXX XX fourth XXXX outlook. now quarter to weeks. quarter reminder, of the of And XX as the had

comparable to to on between we was growth sales plan the year. sales XX-week X.X% that included to levels quarter, For quarter decrease fourth this XX-week Last elevated expect X% comparable of duplicate not fourth basis. do total we X% clearance year's and and a

net versus included as in occurred of quarter to a quarter. We flat XX% stores clearance year's the Total additional to and approximately negative elevated shift last expected between in as be greater calendar year's year, expect sales comparable week. as X sales e-commerce reflecting last and our to XX%, share that well year be are fourth our sales having decrease last sales the direct last

less reflects from the range higher $X.XX. the further the quarter Cuts a of quarter third the XXXX, interest to are included earnings the per due to $X.XX by This excluding flat is activity, negative expected quarter. deleverage year's We will sales, expect basis XXX for XX.X%. year the the having SG&A Interest cost to from be margin reflecting year. the reduced of calendar to expected into move deleverage quarter Diluted $X.XX Tax to from to compared to the shift. benefit fourth be nonrecurring to This after calendar expense benefit is in U.S. fourth last of million rate due Jobs lower which from X a share and to is approximately the compared quarter resulting year-over-year to Act. last in of points last the rates. approximately and $XXX,XXX increase in shift clearance driven of $X.XX compared gross The and $X.X the one the slightly week week, XXrd fiscal $X.XX

the the we is quarter During ending of the eight million the close expenditures the million and prior $XX nonstore year for XXXX. guidance. prior be $XX guidance, million certain of one, now capital to versus $XX in million with in open quarter, to to our stores, expect XXX to stores expect We reflecting with which consistent to to our projects range $XX movement

we would optimize near our business fiscal we tariffs. also in guidance ahead, of long profitable providing further to the position ourselves meantime, Looking year-end we take over the will make term. XXXX continue in growth about our possibility the I call, while the to additional although to term the plan be like to for on point action

our on impact We we're are see the believe diverse to with to move we certain impact we We where China, China, with plan back China, business. leveraging we our base in and we steps that, may on turn of currently operator our internally comparatively vendors goods working taking produce for the low, working already those to call are to of And the and goods. minimize that the minimize questions. in vendor production out amount keep production any is further to I'll

Operator

[Operator Instructions].

America first question Bank Our Hutchinson Merrill from Lorraine of comes Lynch. line from the of

Lorraine Hutchinson

last pretty up as the Some year? you fourth in from and clearance September be gross quarter encouraging commentary expect margin the Do lack to October growth margin. you on the sales

David Biese

flat margin to, negative we that's fourth the for in guidance, straight-out answer. we our said, so Well, of the in terms are slightly quarter,

our things terms in for left we to we the we allowance, looking In we the it, so it competitive, of we ourselves you said in the fourth even third left quarter things even I'll inventory the clean ahead going further. quarter and certainly terms see as ourselves be a into I the that to fourth the at our seeing we've going say, bit about keep right little that that more the closer, quarter, if continue will, say, see was we into seeing inventories the of to year, editing would room, transition assortment exit and one that of our

down when we're half about we happened to XXX of say, basis basis getting though, XX closer back year, about third a that, our In quarters to kind So year. take of little first you of in points. you start now I the down I'll We the were gross three the margins last about year, think the would roughly, points the quarter improved what and lap flat. to to first

we into XXX of we next As basis some year, move down points to lap quarter. start those

to firm margins. product look to our So up continue we

Lorraine Hutchinson

the that company SG&A then about preparing longer-term there we growth is And Okay. a sales maybe in for than Should will for commentary success that higher XXXX. opportunities? assume ready of some year get long-term XXXX to be

David Biese

and talk I'll with we planning patience, in the with whatever I to Right would on of we're commentary in our mindful structure sales. see on our very to are commensurate we'll give certainly that that say, for year-end. for our line tailor I'll we is our Well, position your we'll cost in about better what but sales. would the that be looking to, say, to can spending a now, do wait we a year-end, ask

Operator

Our Kimberly comes Stanley. from question Greenberger next Morgan from

Kimberly Greenberger

commentary. then just And current know to your production wanted ask I Can heading to move for on have China? tariffs, tariff into able of follow And of you or coming able development just might on targets to color to then out China. additional you'll be Dave, us wanted of let some if provide you I the Linda, some do how is calendar. be the product out XXXX, much up much your how go-to-market you

You talked to decisions needing think closer about make in. I

calendar could your making talk would or helpful. of be reengineering about in that the are to you if go-to-market that just some you changes processes really So that

David Biese

in but us the that, what frankly at in offset whether increases factory in don't to keep work now any we are in Yes, risk. on to I'll to offset impact frame are be factory of want in point approximately could And process I to any as either minimize terms largely We to XX% some I we that and to vendors, basis China, or the reduce sure. a of say, reiterate around working our that percentage is understand as do can the opportunities we're expect But point, way. process. in now, doing do lot otherwise the of to doing Kimberly, here in sweater to business. to first frankly a want or share others. the meaningfully with because made, a right is is meaningful business have where just that, it we our think well for in reduce with production manageable base price we our that and we otherwise can extent production we and currently with time are think we are to factory very that be we China we a the I'll where relative that of

Linda Heasley

time, to in relative we the pointed she to and Kimberly, with product been the us research your Denim, we to of them of And our news where there's like has XX our our has we have some us. the she do opportunities and more that us loves. can love the programs, certain were wishes that's newness the loves do month kept what the that drop have on or More would pant -- At development, focus of in we question product, of which is seasonal for not told groups great seasonally, is year months treating we really she customer that programs every like suggest she stock doing direction approach same better.

is need have marketplace challenge, the even in near what So and is the be, those perfecting consumer in what to expectation to her integrated that them trends we're are best-in-class stock development the of as increasingly, and calendar, faster. happening customer can to out. our longer to product bandwidth XX% where that's better-in-class we is approaching now be more our and and When it happening -- her and cycles the to strategy and what is Internet having or we think and process be create vertically Good such a news us, roughly always in get for shorter the you of look we shrinking stand is regularly through we and we accordingly. isn't refreshed retail than is to the and at retail, products occurring best-in-class relative XX% first But marketplace today, to the trend. access

know with lot flexibility need to we a have development we in there So is our we base. a a more we But see of quickly. agility our respond and vendor great lot and cycles vendors,

working we're what Does towards sense? that that's So make now.

Kimberly Greenberger

Yes.

Operator

next from and company. comes Our Cowen from Oliver question Chen

Oliver Chen

the And also making experience sure the of sure sure making navigation Linda, of of in will you appeal appealing also make you website, What customer terms while are be some brought your website to the has you'll well? brand as J.Jill your focused about are a in what customer omnichannel maintain I there. the been what lastly older across to prioritize know the you've spectrum. that -- thoughts you're thoughts younger to user the is you and earlier age And just are wanted changes loyal on on how on to hypothesis and about what you where and biggest Regarding of best-of-class had? the traffic earlier terms opportunities the for the feeling digital, it your opportunities and

Linda Heasley

to need hit X. X, X, I'll

some the have calls, replatform -- new and to site we talked over the the the about of challenges website, the last with of the we addressing two the On technology.

been doubled experience, those That product Predictor on more so we the so the At great issues we're finding of, for customer time, perfecting what figure how and And -- equation, Predictor we in that is she Fit what a her know her. as the recrafted driving now. help expectation has conversion way. completed, the way PayPal and out same and down a marketplace wanted best fixed. getting it to adding it's to activating things still really for identified in is We're including we Fit example, is

is customer area this So I we so to experience of was think the know it. But changing on quickly, is better have earlier we this it year. significantly than stay top

that more there's it's capabilities on digital we're out we're ready improved traffic news. that and about where -- focused roll work that the conversion view feeling both conversion, progress really we social, really she but That's the finding the on now. good But applications, out that this customer more on and I your So especially site. is that digital We're we're now. we're good and metrics getting to the responsiveness But not of is. work to still conversion that To is is but in have social point as and wasn't had a think all dramatically. focused right

testing loyal a an products, do loyal ensure we're different in third imagery, we're we do that perfect bring question front. her, to mining customer, attention to slightly to And types her figure to so new-to-brand that as focus are our how we've we on to still new-to-brand customers, bring older that, that lifestyle said of happier don't out a of we're is on talking we in alienate then is your relative What where tends So spend our both been very the come these and and making as in applications key we and attracting who showing to for of more we lot question. the areas customer style as the customer and I ways that be younger. is finding, we our customer and

can and we a give are is and that. and focused definitely they people we're showing it versatility anywhere wear to very more product wish flexibility behind act, that doing. product, resilience design the of part time, quality So more to that's want the on in and But so the stay it balancing J.Jill. the true same unique what of has we her thoughtful we're At details been

Operator

Stichter Janine Our comes next question Jefferies. from from

Janine Stichter

ask to wanted of just the progression the about quarter. I during sales

maybe throughout talked of promotional away I seems as as did seen to some about give the some think you've exiting of the consumer you've from the to some chose of August just walk walked the the even as the it away bit quarter a though more off you a the response so some activity? from color then activity. slow maybe Can being details of terms promotional you comp trend on of quarter start, in what you from and sales accelerate

David Biese

that still point, part the in relative the now think, gross the fair our things still we the cleaning activity one as in I -- had so that clearance that amount quarter. use of August a we in impacted first so we mean, of of Well, August to still the up with August, inventory, saw I commentary provided margin we of

line. as to our more far were was in in their being more of quarter, towards that different, just looking sell-off period the significantly having As it it's inventories of us September we the off to line always yet that used that rest which with clearance, sales relative wasn't

would we encouraged by given I fact saw in September we think were line margin The were September that general. October's I October there this what response, and in the the and as a months but that similarly. I and response improved say, about So were to product with generally would say, and and was, strong that expected that all the better of in margins perform we inventory months managing was the we generally

Janine Stichter

current on give can quarter-to-date any the then And trend? you commentary

David Biese

and quarter to we the -- say, had with would I certainly were guidance line in we our be. where informed It that's expected

it. balance had we're feel standpoint, that than the what to it's we of looking -- the and we're dramatically we've quarter for not guided different from the we make positive the that not and way So anticipated not quarter

So comfortable regard. that pretty feeling we're in

Operator

comes Deutsche Paul Trussell question next from Bank. from Our

Krisztina Katai

Katai fourth for back Krisztina just circle on guidance. Paul. your I wanted is quarter on to This

to comparison? about better And cadence. forecast you've reaction date I understand just extent So the versus the expectations is what prior think your in the of fourth what quarter negative wanted strategy the expectations. the year changes to quarter to to due how promotional comp we and some seen of customer to should

David Biese

So take if the had, business, year's being last that of it for sale we out last guide -- mean, to or of you level the off-price of year. off-sale is our majority negative it I volume accounts

a had X% influence, and year, that that healthy that a big So when you in think about that's was so regard. pretty last comp,

On minds, your part is the tell fourth the the -- the promotional least, cadence. second we you're dramatically time that quarter, just I our your change I -- think of where in at question response. that point going customer isn't you in to would

So September and we I by that encouraged say October. would very were

are in We necessarily quarter just down bringing really to less looking its execute nature. the the by promotional cadence fourth

think -- is we we as margin, the game last some I'll the say, anticipated has certainly something certainly So of that and we we and at year versus guided show still beginning year. the in the which are, strength relative

Krisztina Katai

And the the catalog you then the considering brand that it. merchandising. some second, and just Got of and changes regarding mentioned you're

the just making associated changes your risks view some about how with are view to you changes and you So of of talk could the these model? that

Linda Heasley

a intent not The risk not in to into put to the is customer model. alienate

need months that said, that year. have XX single every I we so newness And we the of talking stays about, comes but the of some product we're as month changes

the delighted think it's to We've receiving of imagery also the that catalog. in lifestyle already implementing as be changes part balancing been And we we've customer, the styling to actually does and as that to the in that we had in she's And that the that's going reactivating lost. appear So act we're bringing new-to-brand catalog see negative it. into. that see it not you you fact, a by relative customers started the well

David Biese

just mindful And are just very jump we changes. I'll to, of planful in to reiterate, and

we make and going before into the we -- a data we for to toward test as that make great requires changes most investment move have significant read we're much these think use it. part, that it anything or more We you to that

Operator

of next Our from Brian Bank Tunick question Canada. comes from

Brian Tunick

things. that curious versus are digital were then you the either move the focus about we guess, additional XXXX? into -- think key really as your two and stores? from category And property areas needle timeline What product could of I on between we the curious any One, omnichannel some distortions head learnings also of initiatives.

Linda Heasley

Relative we be that to and the tunics finding bringing on-trend seen is more the product we're got and I to great additional can go-forward. attracting should had which of product the store core on is pieces, already, mentioned a basis, capabilities, we you'll -- month, the stand we the online at to collections and the a vehicle well will year, not her. omnichannel using our the category on and timeline last her. a drop to brand. now capsule and clearance Every caught annual just Relative more for as what that's the I few features the of say, from of part to slightly part that's a But on the e-commerce distortions, complete we but what digital a Denim pants are as items leggings, new time, as collection relevant you, on that be business imagery staying the life of is them working but seasonally more an we're more even in of same well, DNA where unique basis. and not on J.Jill be Mind part editions as her a store, customer. of have seen fashion online platform, We're new-to-brand only, improved online is platform, you in frequent coming younger on we always

Operator

Boruchow Our Ike Fargo. from question Wells next comes from

Lauren Frasch

lot wondering This the What you that performance the of around the is a this store factors of the it difference primary are improvements channel QX, sooner? Ike. in sounds with provide rather would the you later direct been the on soon expect return Lauren, Linda, that you're could if to? you digital And and work do for it planning, continuous like growth color to more little or attribute was website, the expect DTC. also between with on comps have I doing for to you a especially than delta you

David Biese

seen as where is, like. the stores conversion little mean, performance, just XX talked strong and the we've just also strength the delivered, bit on And how quarters I think the portfolio fact continuously I have guess, we've how we've now. on and our a the consecutive back So been, in we've mentioned, I traffic

the we the conversion. anomaly third from the we've almost we're And both it tracks think, done two our seeing earlier quarter and se, say channels the that tend are that conversion talked to the regard we all we've pretty, what steady as in standpoint that the in has in about try Internet, thing that would per back I direct, we traffic to I were an -- I as in specifically given open in in compare So that drove called and to not challenges work out showed improvement. guide. really

weren't have at we terms say, it is So to when about some opportunity say are we I how we to turn traffic. that, that. is in terms And about in and and traffic as be see patient would in on. what right as to aggressive in that into going thought seeing ask we're an we excited that be or in it encouraged, on something this, right working we're the terms traffic where that for would back back I happens. of investing how when I'll and we do for we we've we are and leave would say, should I'm an But as of conversion. now past through of turn opportunity us that to of What see you been I I

Linda Heasley

repeat me. you sorry. can And your question to I'm

Lauren Frasch

Sure, to just about, improvements further out. continuous out with you push this guys a talking does the growth have direct that in been return

Linda Heasley

see to and to know to through J.Jill we channel at still working point, available to her a what's does our channel. We're traffic direct we the We're lot as chooses, she she and coming our in brand customers where now. online new-to-brand driving often wants that the responsiveness seeing great that store at to she Dave's to shop. looking And but choose look of where letting are --

that So the and she making focused certain traffic holistic we shop. driving experience optimize to giving really focused and of that on to regardless we're then brand chooses where brand on our

Operator

There time. are the at turn closing remarks. Linda, further some over back this no now to questions I for will call

Linda Heasley

joining future Thank everyone for forward happy wish all you I look updating us results holidays. Thanks our on today. you. and to I

Operator

concludes This today's conference.

disconnect. now may You

J.Jill (JILL) 28 Nov 182018 Q3 Earnings call transcript