After A Big Q1 Beat, What's J.Jill Doing That Other Apparel Stocks Aren't?

J.Jill Inc JILL turned heads when it strutted into the markets this spring.

In the company’s first quarterly report since joining the exchange in March, J.Jill posted earnings per share of $0.24 over $0.18 consensus estimates with a 20-percent beat in same store sales increases.

UBS analyst Michael Binetti attributed the positive performance to an “enviable” market position, with relatively low brick-and-mortar counts and high e-commerce activity, the latter of which represents 40 percent of sales.

“We believe 1Q was a good first glance that JILL’s mix is the right one for the future of apparel retail,” Binetti wrote in a Thursday note.

What Goes Right

Management boasted notable increases in active customers, particularly omnichannel, long-term and loyalty card-holding customers, each of which generate more revenue than their less-engaged counterparts.

“In our view, JILL is one of the best examples in specialty apparel of a high revenue mix in the industry’s growth channel (e.g. e-commerce) and a strong customer engagement/retention formula to help lower the risks of an abrupt step change lower in SSS (the biggest risk for specialty stocks, in our view),” Binetti wrote.

UBS raised its 2017 EPS estimate from $0.80 to $0.87, assuming SSS increases of 8.6 percent and total revenue boosts of 11.4 percent.

It also reiterated a Buy rating and set a price target of $16, predicting 22-percent upside from Thursday’s mid-day trading price of $13.15.

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