Jill's Poised for Growth Following Enhanced Assortment Offering and Strong Quarterly Results, Says Analyst

Telsey Advisory Group analyst Dana Telsey reiterated a Moderate Risk rating on the stock of J.Jill Inc JILL and a price target of $30.

In a meeting with the analyst, Jill stated that rationalizing stores remain its key priority, with its fleet standing at 243 at the end of 2022 (vs. peak count of 287 stores).

The company strategizes on exiting weaker markets and entering favorable locations that align with its multi-channel distribution approach. 

It targets to open 20-25 stores in the coming years, with a new store launched last week and a third one coming up this week. The company is witnessing a new customer acquisition rate of around 60% in stores.

JILL is following a conservative business approach amid inflationary pressures and macroeconomic headwinds. Wage inflation and irregular shopping trends are major causes of concern for the company in 2023. 

Although it has tried tackling wage pressure by reducing store operating hours in line with shopping trends, new store openings may surface new challenges related to co-ordinating reduced hours with mall operators.

Cotton prices are also key costs to monitor in the near term. Although the company witnessed volatile cotton prices throughout 2022, the breaking of long-staple cotton prices in December 2022, much later than regular cotton, should turn cotton prices favorable in late 2023. 

This, along with the projected positive shift in freight cost, should favorably impact its input prices.  

The company is confident that its new POS system will boost the opportunities for store and omni point of sale, enhancing the in-store shopping experience for customers. Also, the company is working towards updating foundational data management systems across the organization.

JILL has been following a tight inventory management strategy by adjusting the pricing and promotions of products, whenever necessary, based on overperformance or underperformance. The strategy should boost margins, even with markdowns, and maintain a clean inventory.

The company has been focusing on inclusive size offerings and now covers up to 20 sizes in its offline stores and even more range in online stores. With this, JILL aims to gain new customers and cater to existing core customers (45-65 years old). 

With the better-than-expected recent quarterly result, enhanced assortment offerings, an attractive customer base, and solid omnichannel offering, the analyst sees the ability for gradual gain in topline and increased profitability. 

Price Action: JILL shares closed lower by 1.21% at $25.26 on Tuesday.