JILL - Earnings call transcript Q2 2019

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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 Second Quarter 2019 Conference Call. On today's call are Linda Heasley, President and CEO of J.Jill Inc., and Mark Webb, Executive Vice President and CFO. All lines have been placed on mute, to prevent any background noise. there question-and-answer remarks speakers the will session. a After Instructions]. [Operator

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

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

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

Linda Heasley

and address you demand, our assortment Thank this inventories issues significant store took talent. and morning. we the right the start second focus We experience, cost with year structure, challenging where results enhanced to good and The impacted quarter. in size align presentation on visual materially action better the could, to

with forth our we implemented earnings in we line call set we last our what As in expectations. performed

done. more which needs work progress fixing to be. to We that There have is be made

not in way customer in in out a impact To channels of point all weeks good traffic take doing We that XX are quarter. that to saw action we the XX this continuing across experience. so does

well summer positive led the with through. we product that traffic July period months. high We full had celebrated a June good that price essentials color her, were with for seasonal deliveries throughout that those driving had and sell as with key resonated and items both improved palette

While That we to lead risk. further. continued a infuse already will fashion to work shortening our monthly times, improve ability basis offsetting newness our is on on

and have the the balanced of, assortment to, all ensuring with that invested become performance working items, interspersed more Our in our an unique across delights inventory her, address demonstrates to commitment pieces infantiality a position must we marketing channels. media that standout have remixing demand we Concurrently appropriately have that spend.

customer Our to be continues loyal.

existing, our grown reactivated customer customers. new, quarter has file and across the During

pursue need reactivate we grow As stay brand to our and existing of we new customers lapsed to the aware file constantly of top essential mind to and to our customer. relevant customers are customer

to loyalty brand. way gaining triggers our customer and her. customer's We we identify now are serve and do more use and deeper, better we expected. effectively to We've insights But our seeing customer what she the data our was used to what into are spend data a with always the does, digging to opportunity shops why what the know can who she

As I unique some we have wonderful said have characteristics. before

often is Our speak is check our business tune regularly looking overlooked audience in her. model. to someone for We She to and retail.

by is to The with store customers and on tells location how top digital digital the many will us also that or media. with have component mobile bed base. either touch customer. with evolve interface Regardless of point chooses first how For how of shift images our largely brand component as our to to she the communicate content of day our platforms. touch any to example, the catalogs to marketing a we or as owing critical inspired catalog with point to a test the smart email these is In falls strategy we of of and are should our of continuing mind. Indeed device. she our and given through interaction is devices the day associate the soon social ends part our important an more with and she secondary But her J.Jill engaged asleep her as she being digitize often store the takes we too catalog starts that and brand

catalog this that conclude mailers. as postcard beginning fast testing of pages moved within now I circulation year the too the at and as reduced we well

This to cadence and over intervals. strategy have and frequency better and print a to aboard forward CIO, on brought digital contact announce our that Deanna go Steele is balances spend circulation ensuring and time as returned quarter thrilled contact more that of we a EVP, I'm we CDO. team normalized working specific

developed to are efficiencies the IT reviewing blue to our interaction our investments We committed technology across improve smart customer making and improve necessary project. related capabilities our overall to we points. and all is Deanna well the as as printing experience digital

previously announced is hold. the that, does project she While on

We steps will in in future. detail discuss the more next our

Brian's media Our to we analysis continue of under brand voice, our improve remix spend spending efforts and marketing as team we'll catalog optimize imagery. mentioned and reach, with the already leadership our along our working

repeat corrected that, last about all our product. said As operational side time it's it's all issues in about product. I

will the remainder to product. we work the continue improving to of year Looking on the

and months. in insights We have lens of for through the of accelerated under closer process assist will year. assortment the of fiscal look and we this direction customer's Shelly's to With to the those we continue to our into views the balance coming we reviewing the work and to influence use this Elliot market. as these can exercises steps bring able Through more floor through customer the are

has and look as year. with initiated and things we fruition have visual that and extensions, As cues. approach very predictable color we merchandising and improved more shown styling, results will all pleased to that to like saw change June and can forward July presentation improvement product comes I'm next we our

decisions and current we review board He will structure have spend. detail. on a that discuss now related have done made overhead cost our Mark of with in more to Finally investment thorough some and

and our talent, direction, brand and with summary inventory over quarter growth. actions affirmation past and structure made in done and that brand In addressing levels our our past to we implementing by-processes move ensure this management the of this disciplines customer ahead. changes opportunity intended practices to profitable the have long-term took believe our forward strength the we cost The were and the strongly respect year in to were power lies around I of us and then faster. and

will we call Mark? over and to progress. continuing confident decisions turn to are performance are We making look that update now forward the continue Mark. we to with stabilize our I our the to will you

Mark Webb

Linda you morning Thank everyone. good and

operating though a total demands And As processes taking but in to not P&L levels these half inventory Linda the We P&L. action color will of business during have going to inventory help XXXX. I assessed second actions both management the which more flexibility elevated stabilize in provide good focus the on we progress are mentioned line will made our forward add impact still with the in-season moment. bring during we to the quarter. and capital us on execution more with and second we'll reviewed and only efforts better expenses on the

basis $XXX.X X.X% year increased sales were increasing excess full last selling and direct of XXX.X was quarter. better rate events SG&A sales XXX.X product. points gross price than quarter margin as company XXX.X the net guidance last sales clearing second slightly total versus up was million onetime inclusive Gross was in detail. Total The will for total percent year's better year-over-year discuss year's million helped $XXX.X the as more XXX compared offset X.X% of quarter profit Total million decreased XX.X%. which to comparable last million. XX.X% For I partially versus were a the reduction X.X%. in million from sales expenses in drag the

of SG&A sales technology XX.X% Excluding million prior by were discussed last the these selling with [ph] investments, year costs associated marketing XX.X% last onetime versus and million depositing sales which XXX.X expense or driven project expenses we of increase XX.X quarter. with expenses, or

intent reduce undertook of overhead During areas. customer quarter while comprehensive with in strategic review excess cost preserving the driving to the we investments second SG&A a

While and and a in in excess still one of floor this to reduction reductions in more expenses space. of headcount resulted closing do review office work other the headquarter overhead including

million to expect million SG&A annualized approximately of generate $X $X savings to in as We actions. a these result

J.Jill reductions store payroll second efficiency so these opportunities. important differentiators not with in as spends included in continue or to selling selling three strategic events onetime Including SG&A. include marketing actions we actions investments for did mind. these proceeding our quarter with that we're XXXX marketing payroll both and in but We are there Our for review reviews view

lease office onetime incurred severance, expense on just to overhead the asset. right impairment review we the outplacement, from of First, charges and related use discussed

onetime net claim in had fire in was intangible we capitalization drop taken following of balance sheet. two of an $XX.X to $X.X the a cargo $XX.X the total impairment related a Second, market prompted the year. on items charges non-cash a in of settlement destroyed a in million. to QX favorable lastly, insurance assets A these charge inventory in impact the of ship review review first And value second earnings carrying the a bringing million. of earlier This call million resulted for quarter the charge

to year. for XX.X% a of the was million of EBITDA was loss million or $XX.X year. compared million quarter income million $XX.X last income operating versus $XX.X GAAP of last $XX.X sales Adjusted

As rate net was of press both The excess EBITDA A in is driven adjusted and a X% of of income EBITDA versus the included quarter. decrease to clearing last was year. in in primarily reconciliation our dollars the sales impact release. percentage XX.X% by inventory

year. Interest items in net a year million for to of a X.X% $XX.X GAAP last or $X income million expense versus compared versus the per $X.XX rate tax was of per was the the $X $X.X the the tax effective quarter share diluted last loss second diluted last to million for previously XXXX tax driven non-recurring the expense million quarter benefit period mentioned. year. $X.XX million or the for million of quarter of by $XX.X share compared and impact XX.X% was $X.X income was Tax

adjusted share was of onetime earnings versus of income year share items, per a $X.XX $X.XX per loss QX Excluding diluted in XXXX. this

of XXXX Turning second cash. end second the at an was the transit balance shipped $XX.X and the the quarter million XXXX. units in million ended of to Inventory removed fiscal $XX.X end from as as to of QX at sales with increase we held for in compared million as end of disposal timing in the $XX the of inventory quarter quarter the sheet quarter. includes and units well

X% of year. these items up Excluding hand the on quarter second inventory end XXXX of last versus as was

we at XXX quarter to four store count end. the bringing one quarter store opened During and closed

$X.X were expenditures capital Finally million.

in action right Turning and the elevated second quarter of and for now quarter costs third to aggressive to the our address year. inventories. took the outlook rest We size

persists We units some back in have on will we cost in balance said season of XXXX. our of we for as We sourced, long-term our the set been to benefits do. buying XX% environment though those these going impact progress working demand China the will for as SG&A. to macro to the below to well levels list begin sold half the cost improve inventory nominally forward. offer year and have elevated reducing sale are units still the gross made of for to Inventory That work also in great have efforts tariffs to in goods pay also sourcing profit management near-term better are reliance providing goods off past believe of of our in and September while still and to more processes teams in the uncertainty and manufacturing total

third into and net following total sales in taken With rest the X% year-over-year. between for open stores to quarter decrease expected outlook between $X.XX Net plus sales earnings to $X.XX $X.XX be will expect to five be X% And margin expense All to decrease is are diluted about for in to of the ending Interest quarter; account XXX $X XXX stores. these to total year. gross will negative this the the of of third our basis be we expect in fiscal for X%, points with lastly share we XXXX. approximately the issues compared million. per mind the comparable quarter the X%, will quarter

X% full total down still sales our to outlook X% the comparable be now we to to sales net flat year, decrease Turning expect to and total to X%. for

negative decrease to year-over-year. year to $X rate X%. expense margin about Interest about expect still fiscal We XXXX. basis expected relative points expected million approximately gross is increase The be XXX to for is to tax the

is Diluted a XX%. per earnings rate the $X.XX Excluding share projected is be per in of $X.XX. per the range which $X.XX diluted of share to of includes expected of a the earnings from QX earnings now guidance share. the $X.XX This loss half $X.XX to diluted be per share tax year. in guidance the $X.XX Adjusted is of investment impairment, impairment a to approximately the expected technology compared includes to prior drag the to $X.XX to first

and During $XX expecting are the discussed. million pausing primary now planned on million the took the spend of we year the is driver initiative action capital second expenditures and guidance technology between of quarter reviewed XXXX. and for full already year our The for to reduction in $XX capital

the to year to expect continue approximately we end Lastly with stores. XXX

oversight discipline. to and management the actions optimistic concludes head back my stabilizing operator questions. In and the remarks, That business, I prepared summary taking call still made have year. work more a in half to as of back manner we swift we inventory is are cautiously now into There do decisive will turn improving the we and the the progress for

Operator

[Operator Instructions].

Your question Jefferies. from go of the comes first from ahead. Please Janine Stichter line

Janine Stichter

you're the the end ask Hey, to disposal, shipments just units little you bit [ph] about in units us any good for out are want Question am you morning could inventory if trends for occupying help due versus everyone. I parse if Mark, wondering tariffs? early to the holding

Mark Webb

Hi, Janine.

removed related So was then jobber. increase that was for share and the of in and reported sum are to lion's transit the the inventory holding more we've related a to

we and be that been units coming with that's at I we reported claim in, was should that as first was strategic plan is for of shipments over The equivalent of the tariffs of in have to that To little some quarter. can't for tariff for advance benefit respect really the X% up of end the number that I of X%. wasn't a that so inventory earlier which we that It's really in hand or level more strategy the we I fortuitous store on it's available of us. think us think fluid a sale situation present but D.C. for number helpful up have the a that us. the the in end the quarter reported second the that

on carrying inventories. represents some So sequential of improvement hand the in level

Janine Stichter

of what impact from said taking into on I year go the the the are that September. to think tariffs how Okay, you you And that's just might helpful. then place tariffs, in that you any or a Does have thinking modest half back there? offsets the about contemplate price increases,

Mark Webb

all our tariffs. We've mitigation on It's in has factored in working list included strategies. guidance. for some team been the The

captured all the XX% guidance of I is think the which have was September latest that of mitigation announcement starting that strategies the with some had. But along provided. we in we that the

Janine Stichter

you. Thank great. Okay,

Operator

go ahead. next Your question Morgan Kimberly Stanley. comes from Please from Greenberger

Kimberly Greenberger

all will or normalized less Mark, of that to I basis that Great, growth XX% the of to much. more for XXX a or out all question is on And so did there timeframe product so anything thank you revenue make by or account sourcing margin that? year gross reflect fully expect points margins? see margin sourcing you such is pressure what say the else you on of the merchandise Thank this product had you when morning. merchandise China good you the for on in confident then year-end feel of that decline, China, do we'll need there? clarification you your was And that much, and the Linda just the you changes

Linda Heasley

compiles notes. some start while Mark I'll

can making job coming each is So successive morning. as much We're the product as that up. changes we to good

we new off. through in build half to we stands into direction year of on year we she course customer back the they our loves feel we Steve really have year. And where in know as see so corrections believe we board brand driven the of earlier to building really the on you'll next lot making and can and the about things Elliott this we just as of with what September the excited what forward as product know know and to the some I where push take missteps had for a relative loves that the J.Jill very color team well in harking

see I improvement push nice see So the next again QX the rest about And and of could. back I year. steady through then part for in the of forward the corrections it those year, cautious because we very again we're going into course year a where were

down. you're here get keeps see I Again, excited you tempered But appreciate coming over and Mark my think what to very Mark. again tuned. stay me So I up. going partner

Mark Webb

tackle been over a China We a year teams the first. of working I bring down I'll now on last to Kimberly as the over the as of reliance country. the think have course China sourcing

the of XXX that the below we're through primarily manufacturing that's but the had remember inventory margin system that decline to I China of now gross of annualized an think current that's through about and we through benefit the points to full wanted the environment at that inventory so be jobbing, made anticipated quarter. too XX% we for basically we of statement alternative but see the ended we was moving much selling looking progress we state sound sort year-over-year end full kind a either so selling up and now conscious going And that the of we've first we and on The COGS and than impact with we in us. that and was price financially of be think basis allow would party the that were selling had happens them more jobbing the we fact the methods third some talked quarter that of also reality means cleared selling the so And price had through at which is sort did of because The have to to stores experience. etc. decision

So we the the year. did incremental primary the that of impact driver this jobbing year-over-year was

Kimberly Greenberger

Thanks so much Mark.

Operator

Paul Our Deutsche Bank. comes ahead. next from Trussell from question Please go

Paul Trussell

Good could AUR think was ticket terms same expectations were help us help of how the you your morning. UPT? and performance, of satisfied direct the in to When you store terms us line versus with comes happened it Also traffic what the and in there? about top in understand

Mark Webb

it take Paul, direct in to I'll performance. then may the on Linda want jump

from at the we of quarter where better guided the came the of end guidance. we in through range our So

I opportunity move think strong customer last excess of in signal the we into did mentioned of I I been that's stores. we store course jobber a around sequential that through could hasn't guidance a to us sort it more and in the traffic So versus the in and question provided for a in better our the to on fairly traffic connection we the the and it has not store our the as see some bucket inventory metrics problem liable it in decided it's in and actions of, conversion to think as quarter issue. interpret The we we strength the made is store. Kimberly, I through you the has of trying were been correcting apparel But specialty that move those for improvement some all AUR and so us in the the customer traffic slightly traffic, than retail. And been expectations. have brand that the unique think The

result encouraged by throughout that quarter. the so And

that want I up reported is pleased anything As for direct direct you there Linda, don’t performance if we with know sales to… the result. X%,

Linda Heasley

across conversion. has channels. very to we're points, think the all I mindful Well, Conversion of been touch all something point the about Mark's

mobile we're channel challenged growing is with we fastest Our know most conversion. that's and

particularly help making appropriate So the we in digital to conversion better. that are platform investments

the back visual going of we there So in the the move help and merchandising, part and in I the that's product in changes, conversion also to particular. year we believe presentation, where store that again with think we can then could of some product merchandising with channel change the

the here we the to smartly have upside So, about relative there's we it good is thinking news leveraging us -- some for traffic. think and

the we Now can even make if conversion. for we can her experience shopping easier drive

Paul Trussell

Thank some the any there? evaluating detail or sizing, more you and spoke doing and right infrastructure to you examples

Mark Webb

-- a in utilization Yeah look along headcount Paul, reviewing In with and we on here cost we the space. we is took so and XX% floor building and utilizing in corporate a the some the that. overall we structure of which to quarter little occupied actions one space at our expenses take and reductions overhead almost total the -- were to office four related took floors our Quincy were our our space we under able were we including a out able

your -- respect us was just for opportunity good out. take is lease there with asset. on then on there floor the was use impact accounting sublease in the when the impairment you increase an periods of it that you of financial a you the that out your that would until affectively in an and So to impact And sublease it. that, space take slight in that to benefit a I you to actually add P&L the the occupancy new of impairment right get expense then

Linda Heasley

decision with decisions instead the we rework. cost and very now addition it's get We're I of teams to to place and have in add hard time that's that to also product significant do In made making. in and work cost. And earlier having working would sync right another

sampling, quality improve can where we product looking better it's to do on we market. me we can it to price where bring the at full get of let So the

work development and So -- our up that before. body of whole there's calendar addresses brought is product know a which we this we long it's

to work of apply. So there's a lot

Mark Webb

to we at huge stepped work party made and usual to some addition related suspects, contributions savings is looking efficient the can expense continuing. third etc. travel around Ongoing etc, of a spends in would we the for in the become those organization up our to and that supplies, us. expenses, spend there way the in lastly at in good that we the in has discretionary are look Paul And how more indirect business, a more Everyone take

Paul Trussell

my little just is last particular question better you provided. the than and bit original this outlook. you you did quarter Obviously Thank guidance a regarding mentioned as the

from tariffs? we towards has been what As perhaps second the your or forecasts half prior look changed with of the exceptions edited

Mark Webb

start. I'll So,

the you We tariffs mentioned. impact obviously of as included have

macro expense We trade create lot a back about that that world, in of expense reflected. have into psyche remain market that optimistic is real impacted the disputes uncertainty in There still our took, is activities the we and we've etcetera, reality overall the half. the news, the environment. We going The movements etcetera, are impacts to going consumer on that and right. cautiously

of still impacting guidance we're a stuff. are but looking uncertainty of of around in more sequential for continued So macro us some we stance improvement terms that and taking the

Paul Trussell

of Best luck. you. Thank

Operator

Instructions]. [Operator

ahead. question from Please from Boruchow Wells comes next go Your Ike Fargo.

Lauren Frasch

Good everyone. This for Ike. is Frasch morning Lauren on

driver as And this accelerated a but Thank bit you a the maybe put bit little the look the of you a that margin its talk end on as was? the about and of the through step sales next a we thinking the primary of could right at QX into by position margins, question in sales, the As the Paul's on what to are levels inventory work of percentage size back year of you. know have should cadence given of you and holding inventory I that half impact quite total be bulk you are clean of today then you hit amount clearing you taken touched year? bit your DTC the how a

Mark Webb

the Sure Lauren, start margin. let me on

has really right. So in excess the sale, achieve expect the that to still third we're down reserved level been holding inventory that to party we

QX hit hit in the normal the of on margin back half is of XXX we that inventory provided the terms in from So, clearing the points as for in more the year. the excess our a guidance we're we really and basis cadence --

year in acceleration. QX we guidance For direct full to the to implied that the QX provided, respect with and consumer

Linda Heasley

the for We've into to things prospecting our been doing platform the to to and direct working -- success e-mail. the the acceleration. So, site made to the win And imagery, very we've web its that most we've us. this Having view offering product off. customer that. we of ads been year very really purchased number great been we acceleration investments limited a And been new messaging, relative layout, to past pointed seeing you're communication significant also digital doing she a The on likely new with of brand site have point to that. come paying well is site We've the the relative had first. a we that our and and are messaging in consumer and have and that's quantity big responded

it's to channel. combination relative our factors working of So advantage that to direct are a to the consumer

Lauren Frasch

much. you very Thank

Mark Webb

Thanks Lauren.

Operator

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

Linda Heasley

Thank call. to forward talking earnings our at you quarter We you you. next look everyone. Thank to

Operator

conference This concludes call. today's

You disconnect. now may

J.Jill (JILL) 27 Aug 192019 Q2 Earnings call transcript