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J.Jill, Inc. Announces Second Quarter Fiscal 2018 Results

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J.Jill, Inc. (NYSE:JILL) today announced financial results for the
second quarter ended August 4, 2018.

Linda Heasley, CEO of J.Jill, Inc. stated, "Our second quarter operating
performance was in line with our expectations. We are continuing to take
actions to ensure consistent performance in and across all channels. We
remain focused on our customer who exhibits a real love for J.Jill. We
are convinced that we have a great opportunity to be more to the women
we serve and are positioned to attract more women to the brand going
forward."

For the second quarter ended August 4, 2018:

  • Total net sales for the thirteen weeks ended August 4, 2018 were
    $179.7 million versus $181.4 million for the thirteen weeks ended
    July 29, 2017. The 0.9% decrease in total net sales versus the prior
    year was driven by the calendar shift created by the fifty-third week
    in fiscal 2017.
  • Total company comparable sales, which includes comparable store and
    direct to consumer sales, increased by 2.2%.
  • Direct to consumer net sales represented 40.9% of total net sales,
    compared to 43.1% in the second quarter of fiscal 2017.
  • Gross profit decreased to $116.7 million from $122.6 million in the
    second quarter of fiscal 2017. Gross margin was 64.9% compared to
    second quarter gross margin of 67.6% in fiscal 2017.
  • SG&A was $97.4 million compared to $97.0 million in the second quarter
    of fiscal 2017. Second quarter 2017 SG&A included $0.7 million of
    non-recurring expenses related to the Company's transition to a public
    company. Excluding these one-time expenses from last year's figures,
    SG&A as a percentage of total net sales was 54.2% compared to 53.1% in
    the second quarter of fiscal 2017, with the increase versus the prior
    year on a percentage basis driven by the calendar shift created by the
    fifty-third week in fiscal 2017.
  • Income from operations, inclusive of non-recurring SG&A expenses,
    decreased to $19.3 million from $25.6 million in the second quarter of
    fiscal 2017.
  • Adjusted EBITDA* for the second quarter of fiscal 2018
    decreased by 17.0% to $29.3 million from $35.3 million in the second
    quarter of fiscal 2017. As a percentage of total net sales, Adjusted
    EBITDA was 16.3% compared to 19.4% in the second quarter of fiscal
    2017.
  • Interest expense decreased to $4.9 million from $5.1 million,
    including $0.6 million of accelerated deferred financing amortization
    due to the voluntary principal pre-payment of $20.0 million dollars on
    the term loan in the second quarter of fiscal 2017.
  • Income tax expense was $4.0 million compared to $8.6 million in the
    second quarter of fiscal 2017, and the effective tax rate was 27.4%
    compared to 41.6% in the second quarter of 2017.
  • Diluted earnings per share was $0.23 compared to $0.28 in the second
    quarter of fiscal 2017, which included the impact of non-recurring
    expenses. Second quarter fiscal 2018 diluted earnings per share was
    negatively impacted by approximately $0.03 per share due to the
    calendar shift created by the fifty-third week in fiscal 2017, and
    included a $0.04 benefit from the lower tax rate in fiscal 2018.
  • Adjusted diluted earnings per share* for the second quarter
    of fiscal 2018, which was negatively impacted by the calendar shift
    described above, was $0.24 compared to $0.29 in the second quarter of
    fiscal 2017. Adjusted diluted earnings per share uses 26% and 40% tax
    rate assumptions in fiscal 2018 and 2017 respectively. The lower tax
    rate assumption in 2018, resulting from the U.S. Tax Cuts and Jobs Act
    enacted in December 2017, results in a benefit of $0.05 in the second
    quarter of fiscal 2018.

For the twenty-six weeks ended August 4, 2018:

  • Total net sales for the twenty-six weeks ended August 4, 2018 were
    $361.3 million versus $347.5 million for the twenty-six weeks ended
    July 29, 2017.
  • Total company comparable sales, which includes comparable store and
    direct to consumer sales, increased by 2.2%.
  • Direct to consumer net sales represented 40.7% of total net sales,
    compared to 42.9% in the twenty-six weeks ended July 29, 2017.
  • Gross profit decreased to $237.0 million from $238.3 million in the
    twenty-six weeks ended July 29, 2017. Gross margin was 65.6% compared
    to 68.6% in the twenty-six weeks ended July 29, 2017.
  • SG&A was $197.7 million compared to $194.0 million in the twenty-six
    weeks ended July 29, 2017. For the twenty-six weeks ended
    August 4, 2018, SG&A included $1.3 million of non-recurring expenses
    and $0.2 million of accelerated stock compensation expense as a result
    of a CEO transition. For the twenty-six weeks ended July 29, 2017,
    SG&A included $4.3 million of non-recurring expenses related to the
    IPO and subsequent transition to a public company. Excluding these
    one-time expenses from both this year's and last year's figures, SG&A
    as a percentage of total net sales was 54.3% compared to 54.6% in the
    twenty-six weeks ended July 29, 2017.
  • Income from operations, inclusive of non-recurring SG&A expenses,
    decreased to $39.3 million from $44.2 million in the twenty-six weeks
    ended July 29, 2017.
  • Adjusted EBITDA* for the twenty-six weeks ended
    August 4, 2018 decreased by 8.2% to $60.8 million from $66.3 million
    in the twenty-six weeks ended July 29, 2017. As a percentage of total
    net sales, Adjusted EBITDA was 16.8% compared to 19.1% in the
    twenty-six weeks ended July 29, 2017.
  • Interest expense decreased to $9.7 million from $10.0 million,
    including $0.6 million of accelerated deferred financing amortization
    due to the voluntary principal pre-payment of $20.0 million dollars on
    the term loan in the twenty-six weeks ended July 29, 2017.
  • Income tax expense was $7.9 million compared to $14.2 million in the
    twenty-six weeks ended July 29, 2017, and the effective tax rate was
    26.7% compared to 41.4% in the twenty-six weeks ended July 29, 2017.
  • Diluted earnings per share was $0.49 including the impact of one-time
    expenses, compared to $0.46 in the twenty-six weeks ended
    July 29, 2017. First half fiscal 2018 diluted earnings per share
    included approximately $0.09 benefit from the lower tax rate in fiscal
    2018.
  • Adjusted diluted earnings per share* for the twenty-six
    weeks ended August 4, 2018, which excludes non-recurring expenses and
    other one-time items, including CEO transition expenses, affecting
    diluted earnings per share, was $0.52 compared to $0.53 in the
    twenty-six weeks ended July 29, 2017. Adjusted diluted earnings per
    share uses 26% and 40% tax rate assumptions in fiscal 2018 and 2017
    respectively. The lower tax rate assumption in 2018, resulting from
    the U.S. Tax Cuts and Jobs Act enacted in December 2017, results in a
    benefit of $0.10 in the first half of fiscal 2018.

The Company ended the second quarter fiscal 2018 with $62.0 million in
cash. Inventory at the end of the second quarter fiscal 2018 decreased
to $61.6 million compared to $62.8 million at the end of the second
quarter of fiscal 2017. The Company opened three and closed three stores
in the second quarter and ended the quarter with 273 stores.

* Non-GAAP financial measures. Please see "Non-GAAP Financial
Measures" and "Reconciliation of GAAP Net Income to Adjusted EBITDA and
Adjusted Net Income" for more information.

Outlook

For the third quarter of fiscal 2018, the Company expects total
comparable sales to decrease 2% to 4%. Total net sales are expected to
increase 2% to 4%, driven by the calendar shift created by the
fifty-third week in fiscal 2017, that will shift sales from the fourth
quarter to the third quarter in fiscal 2018. GAAP diluted earnings per
share are expected to be in the range of $0.09 to $0.11, including a
$0.02 benefit from a lower tax rate, and a $0.03 positive impact related
to the calendar shift. This is compared to $0.14 in the third quarter of
fiscal 2017. Adjusted diluted earnings per share for the third quarter
of fiscal 2017, which excludes non-recurring expenses, was $0.13
assuming a 40% tax rate.

Conference Call Information

A conference call to discuss second quarter fiscal 2018 results is
scheduled for today, August 21, 2018, at 8:00 a.m. Eastern Time. Those
interested in participating in the call are invited to dial (844)
579-6824 or (763) 488-9145 if calling internationally. Please dial in
approximately 10 minutes prior to the start of the call and reference
Conference ID 1899475 when prompted. A live audio webcast of the
conference call will be available online at http://investors.jjill.com/Investors-Relations/News-Events.

A taped replay of the conference call will be available approximately
two hours following the live call and can be accessed both online and by
dialing (855) 859-2056 or (404) 537-3406. The pin number to access the
telephone replay is 1899475. The telephone replay will be available
until Tuesday, August 28, 2018.

About J.Jill, Inc.

J.Jill is a premier omnichannel retailer and nationally recognized
women's apparel brand committed to delighting customers with great
wear-now product. The brand represents an easy, relaxed, inspired style
that reflects the confidence and comfort of a woman with a rich, full
life. J.Jill offers a guiding customer experience through more than 270
stores nationwide and a robust e-commerce platform. J.Jill is
headquartered outside Boston. For more information, please visit www.jjill.com
or http://investors.jjill.com.
The information included on our websites is not incorporated by
reference herein.

Non-GAAP Financial Measures

To supplement our unaudited consolidated financial statements presented
in accordance with generally accepted accounting principles ("GAAP"), we
use the following non-GAAP measures of financial performance:

  • Adjusted EBITDA, which represents net income (loss) plus interest
    expense, provision (benefit) for income taxes, depreciation and
    amortization, equity-based compensation expense, write-off of property
    and equipment, and other non-recurring expenses and one-time items. We
    present Adjusted EBITDA on a consolidated basis because management
    uses it as a supplemental measure in assessing our operating
    performance, and we believe that it is helpful to investors,
    securities analysts and other interested parties as a measure of our
    comparative operating performance from period to period. We also use
    Adjusted EBITDA as one of the primary methods for planning and
    forecasting overall expected performance of our business and for
    evaluating on a quarterly and annual basis actual results against such
    expectations. Further, we recognize Adjusted EBITDA as a commonly used
    measure in determining business value and as such, use it internally
    to report results.
  • Adjusted Net Income, which represents net income (loss) plus other
    non-recurring expenses and one-time items. We present Adjusted Net
    Income on a consolidated basis because management uses it as a
    supplemental measure in assessing our operating performance, and we
    believe that it is helpful to investors, securities analysts and other
    interested parties as a measure of our comparative operating
    performance from period to period.
  • Adjusted Earnings per Share ("Adjusted EPS") represents Adjusted Net
    Income divided by the number of shares outstanding. Adjusted EPS is
    presented as a supplemental measure in assessing our operating
    performance, and we believe that it is helpful to investors,
    securities analysts and other interested parties as a measure of our
    comparative operating performance from period to period.

While we believe that Adjusted EBITDA, Adjusted Net Income, and Adjusted
EPS are useful in evaluating our business, they are non-GAAP financial
measures that have limitations as analytical tools. Adjusted EBITDA,
Adjusted Net Income, and Adjusted EPS should not be considered
alternatives to, or substitutes for, net income (loss) or EPS, which are
calculated in accordance with GAAP. In addition, other companies,
including companies in our industry, may calculate Adjusted EBITDA,
Adjusted Net Income, and Adjusted EPS differently or not at all, which
reduces the usefulness of such non-GAAP financial measures as tools for
comparison. We recommend that you review the reconciliation and
calculation of Adjusted EBITDA, Adjusted Net Income, and Adjusted EPS to
net income (loss) and EPS, the most directly comparable GAAP financial
measures, under "Reconciliation of GAAP Net Income to Adjusted EBITDA
and Adjusted Net Income" and not rely solely on Adjusted EBITDA,
Adjusted Net Income, Adjusted EPS, or any single financial measure to
evaluate our business.

Forward-Looking Statements

This press release contains, and oral statements made from time to time
by our representatives may contain, "forward-looking statements."
Forward-looking statements include statements under "Outlook" and other
statements identified by words such as "could," "may," "might," "will,"
"likely," "anticipates," "intends," "plans," "seeks," "believes,"
"estimates," "expects," "continues," "projects" and similar references
to future periods, or by the inclusion of forecasts or projections.
Forward-looking statements are based on our current expectations and
assumptions regarding capital market conditions, our business, the
economy and other future conditions. Because forward-looking statements
relate to the future, by their nature, they are subject to inherent
uncertainties, risks and changes in circumstances that are difficult to
predict. As a result, our actual results may differ materially from
those contemplated by the forward-looking statements. Important factors
that could cause actual results to differ materially from those in the
forward-looking statements include regional, national or global
political, economic, business, competitive, market and regulatory
conditions, including risk regarding, our ability to manage inventory or
anticipate consumer demand; changes in consumer confidence and spending;
our competitive environment; our failure to open new profitable stores
or successfully enter new markets and other factors set forth under
"Risk Factors" in the Form 10K. Any forward-looking statement made in
this press release speaks only as of the date on which it is
made. J.Jill undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future developments or otherwise.

(Tables Follow)

 
J.Jill, Inc.
Consolidated Statements of Operations and Comprehensive Income
(Unaudited)

(Amounts in thousands, except share and per share data)

 
  For the Thirteen Weeks Ended
August 4, 2018     July 29, 2017
Net sales $ 179,713 $ 181,372
Cost of goods sold   63,058   58,724
Gross profit 116,655 122,648
Selling, general and administrative expenses   97,365   97,011
Operating income 19,290 25,637
Interest expense   4,853   5,084
Income before provision for income taxes 14,437 20,553
Provision for income taxes   3,952   8,557
Net income and total comprehensive income $ 10,485 $ 11,996
Net income per common share attributable to common shareholders
Basic $ 0.24 $ 0.29
Diluted $ 0.23 $ 0.28
Weighted average number of common shares outstanding
Basic 42,855,366 41,549,825
Diluted 44,716,193 43,554,275
 
 
For the Twenty-Six Weeks Ended
August 4, 2018     July 29, 2017
Net sales $ 361,254 $ 347,498
Cost of goods sold   124,258   109,242
Gross profit 236,996 238,256
Selling, general and administrative expenses   197,659   194,044
Operating income 39,337 44,212
Interest expense   9,670   10,029
Income before provision for income taxes 29,667 34,183
Provision for income taxes   7,924   14,160
Net income and total comprehensive income $ 21,743 $ 20,023
Net income per common share attributable to common shareholders
Basic $ 0.51 $ 0.48
Diluted $ 0.49 $ 0.46
Weighted average number of common shares outstanding
Basic 42,535,849 42,033,984
Diluted 44,061,804 43,559,781
 
 
J.Jill, Inc.
Consolidated Balance Sheets
(Unaudited)

(Amounts in thousands, except common share data)

     
August 4, 2018 February 3, 2018
Assets
Current assets:
Cash $ 62,035 $ 25,978
Accounts receivable 5,107 4,733
Inventories, net 61,591 80,591
Prepaid expenses and other current assets   22,466   21,166
Total current assets 151,199 132,468
Property and equipment, net 113,063 118,420
Intangible assets, net 142,569 148,961
Goodwill 197,026 197,026
Other assets   558   682
Total assets $ 604,415 $ 597,557
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 43,128 $ 53,962
Accrued expenses and other current liabilities 45,717 48,759
Current portion of long-term debt   2,799   2,799
Total current liabilities 91,644 105,520
Long-term debt, net of discount and current portion 238,165 238,881
Deferred income taxes 43,107 46,263
Other liabilities   28,885   27,577
Total liabilities   401,801   418,241
Commitments and contingencies
Shareholders' Equity

Common stock, par value $0.01 per share; 250,000,000 shares
authorized;
43,744,033 and 43,752,790 shares issued and
outstanding at August 4, 2018 and
February 3, 2018,
respectively

437 437
Additional paid-in capital 119,236 117,393
Accumulated earnings   82,941   61,486
Total shareholders' equity   202,614   179,316
Total liabilities and shareholders' equity $ 604,415 $ 597,557
 
 
J.Jill, Inc.
Reconciliation of GAAP Net Income to Adjusted EBITDA
(Unaudited)

(Amounts in thousands)

 
  For the Thirteen Weeks Ended
August 4, 2018     July 29, 2017
Net income $ 10,485 $ 11,996
Interest expense, net 4,853 5,084
Provision for income taxes 3,952 8,557
Depreciation and amortization 8,892 8,341
Equity-based compensation expense (a) 1,083 237
Write-off of property and equipment (b) 16 338
Other non-recurring expenses (c)     721
Adjusted EBITDA $ 29,281 $ 35,274
 
For the Twenty-Six Weeks Ended
August 4, 2018 July 29, 2017
Net income $ 21,743 $ 20,023
Interest expense, net 9,670 10,029
Provision for income taxes 7,924 14,160
Depreciation and amortization 18,249 17,140
Equity-based compensation expense (a) 1,843 261
Write-off of property and equipment (b) 28 340
Other non-recurring expenses (c)   1,346   4,306
Adjusted EBITDA $ 60,803 $ 66,259
 
(a):     Represents expenses associated with equity incentive instruments
granted to our management and board of directors. Incentive
instruments are accounted for as equity-classified awards with the
related compensation expense recognized based on fair value at the
date of the grants.
(b): Represents net gain or loss on the disposal of fixed assets.
(c): Represents items management believes are not indicative of ongoing
operating performance. For the period ended July 29, 2017, these
expenses are primarily composed of legal and professional fees
associated with the initial public offering completed March 14, 2017
and subsequent transition to a public company. For the twenty-six
weeks ended August 4, 2018, these expenses include costs related to
a CEO transition.
 
 
J.Jill, Inc.
Reconciliation of GAAP Net Income to Adjusted Net Income
(Unaudited)

(Amounts in thousands, except share and per share data)

 

 

For the Thirteen Weeks Ended
August 4, 2018     July 29, 2017
Net income and total comprehensive income $ 10,485 $ 11,996
Add: Provision for income taxes   3,952   8,557
Income before provision for income taxes 14,437 20,553
Add: Other non-recurring expenses(a)     721
Adjusted Income before provision for income taxes 14,437 21,274
Less: Adjusted Tax Provision(b)   3,754   8,510
Adjusted net income $ 10,683 $ 12,764
Adjusted net income per common share attributable to common
shareholders
Basic $ 0.25 $ 0.31
Diluted $ 0.24 $ 0.29
Weighted average number of common shares outstanding
Basic 42,855,366 41,549,825
Diluted 44,716,193 43,554,275
 
  For the Twenty-Six Weeks Ended
August 4, 2018     July 29, 2017
Net income and total comprehensive income $ 21,743 $ 20,023
Add: Provision for income taxes   7,924   14,160
Income before provision for income taxes 29,667 34,183
Add: Other non-recurring expenses(a) 1,346 4,306
Add: Accelerated equity-based compensation expense   244  
Adjusted Income before provision for income taxes 31,257 38,489
Less: Adjusted Tax Provision(b)   8,127   15,396
Adjusted net income $ 23,130 $ 23,093
Adjusted net income per common share attributable to common
shareholders
Basic $ 0.54 $ 0.55
Diluted $ 0.52 $ 0.53
Weighted average number of common shares outstanding
Basic 42,535,849 42,033,984
Diluted 44,061,804 43,559,781
 
(a):     Represents items management believes are not indicative of ongoing
operating performance. For the period ended July 29, 2017, these
expenses are primarily composed of legal and professional fees
associated with the initial public offering completed March 14, 2017
and subsequent transition to a public company. For the twenty-six
weeks ended August 4, 2018, these expenses include costs related to
a CEO transition.
(b): The adjusted tax provision for adjusted net income is estimated by
applying a rate of 26% for fiscal 2018 and 40% for fiscal 2017, to
the adjusted income before provision for income taxes.
 

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