JILL J Jill Inc

J.Jill, Inc. (NYSE:JILL) today announced financial results for the third quarter and the thirty-nine weeks ended October 28, 2017.

Paula Bennett, President and CEO of J.Jill, Inc. stated, “While we are disappointed with our overall performance for the third quarter, we are pleased to have ended the period with positive trends in October driven largely by our retail store performance. Thus far in the fourth quarter, we have returned to total comparable sales growth, with our current product offering better aligned to what our customer expects from J.Jill. With our return to positive trends, and as we continue to analyze our performance, we believe we are well-positioned to deliver against our goals for the remainder of the year.”

For the third quarter ended October 28, 2017:

• Total net sales increased 1.6% to $162.0 million from $159.4 million in the third quarter of fiscal 2016.
• Total company comparable sales, which includes comparable store and direct to consumer sales, decreased by 0.6%.
• Direct to consumer net sales represented 39.5% of total net sales, compared to 40.4% in the third quarter of fiscal 2016.
• Gross profit increased to $108.5 million from $108.1 million in the third quarter of fiscal 2016. As a percentage of total net sales, gross profit was 67.0% compared to third quarter gross profit of 67.8% in fiscal 2016.
• SG&A was $95.2 million compared to $92.6 million in the third quarter of fiscal 2016. Third quarter 2017 SG&A included $0.7 million of non-recurring expenses related to the transition to a public company. Third quarter 2016 SG&A included $2.3 million of non-recurring expenses related to the Company’s IPO. Excluding these non-recurring expenses in both years, SG&A as a percentage of total net sales was 58.4% compared to 56.7% in the third quarter of fiscal 2016.
• Income from operations, inclusive of non-recurring SG&A expenses, decreased to $13.3 million from $15.5 million in the third quarter of fiscal 2016.
• Adjusted EBITDA* for the third quarter of fiscal 2017 decreased by 13.3% to $23.0 million from $26.6 million in the third quarter of fiscal 2016. As a percentage of total net sales, Adjusted EBITDA was 14.2% compared to 16.7% in the third quarter of fiscal 2016.
• Interest expense decreased to $4.5 million from $4.8 million in the third quarter of fiscal 2016.
• Income tax expense was $2.8 million compared to $2.8 million in the third quarter of fiscal 2016, and the effective tax rate was 31.6% compared to 26.5% in the third quarter of 2016.
• Diluted earnings per share was $0.14 compared to $0.18 in the third quarter of fiscal 2016.
• Adjusted diluted earnings per share* for the third quarter of fiscal 2017, which excludes non-recurring expenses, was $0.13 compared to $0.18 in the third quarter of fiscal 2016. Adjusted diluted earnings per share uses a 40% tax rate assumption for both periods.

For the thirty-nine weeks ended October 28, 2017:

• Total net sales increased 7.9% to $509.5 million from $472.1 million in the thirty-nine weeks ended October 29, 2016.
• Total company comparable sales, which includes comparable store and direct to consumer sales, increased by 5.6%.
• Direct to consumer net sales represented 41.8% of total net sales, up from 41.2% in the thirty-nine weeks ended October 29, 2016.
• Gross profit increased to $346.8 million from $322.5 million in the thirty-nine weeks ended October 29, 2016. As a percentage of total net sales, gross profit was 68.1% compared to 68.3% in the thirty-nine weeks ended October 29, 2016.
• SG&A was $289.3 million compared to $273.9 million in the thirty-nine weeks ended October 29, 2016. For the thirty-nine weeks ended October 28, 2017, SG&A included $5.0 million of non-recurring expenses related to the IPO and subsequent transition to a public company. For the thirty-nine weeks ended October 29, 2016, SG&A included $6.8 million of non-recurring expenses related to the Company’s IPO. Excluding these non-recurring expenses in both years, SG&A as a percentage of total net sales was 55.8% compared to 56.6% for the thirty-nine weeks ended October 29, 2016.
• Income from operations, inclusive of non-recurring SG&A expenses, increased to $57.5 million from $48.6 million for the thirty-nine weeks ended October 29, 2016.
• Adjusted EBITDA* for the thirty-nine weeks ended October 28, 2017 increased by 6.9% to $89.3 million from $83.5 million in the thirty-nine weeks ended October 29, 2016. As a percentage of total net sales, Adjusted EBITDA was 17.5% compared to 17.7% for the thirty-nine weeks ended October 29, 2016.
• Interest expense was $14.5 million, including $0.6 million of accelerated deferred financing amortization due to the voluntary pre-payment of $20.0 million on the term loan in the second quarter, compared to $13.6 million for the thirty-nine weeks ended October 29, 2016.
• Income tax expense increased to $16.9 million from $12.9 million in the thirty-nine weeks ended October 29, 2016, and the effective tax rate was 39.4% compared to 37.0% in the thirty-nine weeks ended October 29, 2016.
• Diluted earnings per share was $0.60 compared to $0.50 in the thirty-nine weeks ended October 29, 2016.
• Adjusted diluted earnings per share* for the thirty-nine weeks ended October 28, 2017, which excludes net non-recurring expenses, was $0.66 compared to $0.57 in the thirty-nine weeks ended October 29, 2016. Adjusted diluted earnings per share uses a 40% tax rate assumption for both periods.

The Company ended the third quarter fiscal 2017 with $25.8 million in cash. Inventory at the end of the third quarter fiscal 2017 increased to $85.4 million compared to $79.0 million at the end of the third quarter fiscal 2016. The Company opened four stores and closed three stores in the third quarter and ended the quarter with 275 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 fourth quarter of fiscal 2017, we expect total comparable sales to increase 2.0% to 4.0%. On a 14-week basis, GAAP diluted earnings per share are expected to be in the range of $0.05 to $0.07. Adjusted diluted earnings per share, which excludes approximately $0.5 million of non-recurring expenses associated with the Company’s transition to a public company, are expected to be in the range of $0.06 to $0.08. Both GAAP and adjusted diluted earnings per share will include approximately $0.4 million of public company costs not incurred in 2016, and are inclusive of approximately $0.01 related to the 53rd week of the fiscal year. Adjusted diluted earnings per share assumes an income tax expense rate of 40%.

For the full 2017 fiscal year, we expect total comparable sales to increase 4.0% to 5.0%. On a 53-week basis, GAAP diluted earnings per share are expected to be in the range of $0.64 to $0.66. Adjusted diluted earnings per share, which excludes approximately $5.5 million of non-recurring expenses associated with the Company’s IPO and subsequent transition to a public company, are expected to be in the range of $0.72 to $0.74. Both GAAP and adjusted diluted earnings per share will include approximately $1.1 million of public company costs not incurred in 2016, and are inclusive of approximately $0.01 related to the 53rd week.

The 53rd week of fiscal 2017, which is included in the earnings per share outlook given above, is expected to contribute approximately $9.0 million in sales and approximately $0.01 of earnings per share.

Conference Call Information

A conference call to discuss third quarter fiscal 2017 results is scheduled for today, December 5, 2017, 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 1580109 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 1580109. The telephone replay will be available until Tuesday, December 19, 2017.

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. The information included on our website 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, primarily consisting of outside legal and professional fees associated with the initial public offering and subsequent transition to a public company. 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, primarily consisting of outside legal and professional fees associated with the initial public offering and subsequent transition to a public company. 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 October 28, 2017     October 29, 2016 Net sales $ 161,975 $ 159,439 Cost of goods sold   53,479   51,334 Gross profit 108,496 108,105 Selling, general and administrative expenses   95,240   92,638 Operating income 13,256 15,467 Interest expense   4,496   4,844 Income before provision for income taxes 8,760 10,623 Provision for income taxes   2,766   2,815 Net income and total comprehensive income $ 5,994 $ 7,808 Net income per common share attributable to common shareholders Basic $ 0.14 $ 0.18 Diluted $ 0.14 $ 0.18 Weighted average number of common shares outstanding Basic 41,731,765 43,747,944 Diluted 43,554,000 43,747,944       For the Thirty-Nine Weeks Ended October 28, 2017     October 29, 2016 Net sales $ 509,473 $ 472,139 Cost of goods sold   162,721   149,673 Gross profit 346,752 322,466 Selling, general and administrative expenses   289,284   273,882 Operating income 57,468 48,584 Interest expense   14,525   13,630 Income before provision for income taxes 42,943 34,954 Provision for income taxes   16,926   12,924 Net income and total comprehensive income $ 26,017 $ 22,030 Net income per common share attributable to common shareholders

 

 

 

 

 

Basic $ 0.62 $ 0.50 Diluted $ 0.60 $ 0.50 Weighted average number of common shares outstanding Basic 41,933,244 43,747,944 Diluted 43,468,846 43,747,944          

J.Jill, Inc.

Consolidated Balance Sheets

(Unaudited)

(Amounts in thousands, except common unit and common share data)

  October 28, 2017 January 28, 2017 Assets Current assets: Cash $ 25,806 $ 13,468 Accounts receivable 9,062 3,851 Inventories, net 85,406 66,641 Prepaid expenses and other current assets 16,385 18,559 Receivable from related party   —   1,922 Total current assets 136,659 104,441 Property and equipment, net 113,126 102,322 Intangible assets, net 152,591 163,483 Goodwill 197,026 197,026 Other assets   743   1,033 Total assets $ 600,145 $ 568,305 Liabilities and Shareholders’ / Members’ Equity Current liabilities: Accounts payable $ 56,524 $ 38,438 Accrued expenses and other current liabilities 48,324 46,121 Current portion of long-term debt   2,799   2,799 Total current liabilities 107,647 87,358 Long-term debt, net of discount and current portion 244,078 264,440 Deferred income taxes 71,169 73,511 Other liabilities   27,526   20,132 Total liabilities   450,420   445,441 Commitments and contingencies Shareholders’ / Members’ Equity Common stock, par value $0.01 per share; 250,000,000 shares authorized;

43,747,944 shares issued and outstanding at October 28, 2017

437 — Common units, zero par value, 1,000,000 units authorized, issued and outstanding at

January 28, 2017

— — Contributed capital — 116,743 Additional paid-in capital 117,150 — Accumulated earnings   32,138   6,121 Total shareholders’ / members’ equity   149,725   122,864 Total liabilities and shareholders’ / members’ equity $ 600,145 $ 568,305      

J.Jill, Inc.

Reconciliation of GAAP Net Income to Adjusted EBITDA

(Unaudited)

(Amounts in thousands)

  For the Thirteen Weeks Ended October 28, 2017     October 29, 2016 Net income $ 5,994 $ 7,808 Interest expense 4,496 4,844 Provision for income taxes 2,766 2,815 Depreciation and amortization 8,628 8,688 Equity-based compensation expense (a) 278 173 Write-off of property and equipment (b) 229 — Other non-recurring expenses (c)   658   2,261 Adjusted EBITDA $ 23,049 $ 26,589   For the Thirty-Nine Weeks Ended October 28, 2017 October 29, 2016 Net income $ 26,017 $ 22,030 Interest expense 14,525 13,630 Provision for income taxes 16,926 12,924 Depreciation and amortization 25,768 27,289 Equity-based compensation expense (a) 539 458 Write-off of property and equipment (b) 569 384 Other non-recurring expenses (c)   4,964   6,824 Adjusted EBITDA $ 89,308 $ 83,539 (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. 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.      

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   October 28, 2017     October 29, 2016 Net income and total comprehensive income $ 5,994 $ 7,808 Add: Provision for income taxes   2,766   2,815 Income before provision for income taxes 8,760 10,623 Add: Other non-recurring expenses(a)   658   2,261 Adjusted Income before provision for income taxes 9,418 12,884 Less: Adjusted Tax Provision(b)   3,767   5,154 Adjusted net income $ 5,651 $ 7,730 Adjusted net income per common share attributable to common shareholders Basic $ 0.14 $ 0.18 Diluted $ 0.13 $ 0.18 Weighted average number of common shares outstanding Basic 41,731,765 43,747,944 Diluted 43,554,000 43,747,944 (a):     Represents items management believes are not indicative of ongoing operating performance. 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. (b): The adjusted tax provision for adjusted net income is estimated by applying 40% to the adjusted income before provision for income taxes.       For the Thirty-Nine Weeks Ended October 28, 2017     October 29, 2016 Net income and total comprehensive income $ 26,017 $ 22,030 Add: Provision for income taxes   16,926   12,924 Income before provision for income taxes 42,943 34,954 Add: Other non-recurring expenses(a)   4,964   6,824 Adjusted Income before provision for income taxes 47,907 41,778 Less: Adjusted Tax Provision(b)   19,163   16,711 Adjusted net income $ 28,744 $ 25,067 Adjusted net income per common share attributable to common shareholders Basic $ 0.69 $ 0.57 Diluted $ 0.66 $ 0.57 Weighted average number of common shares outstanding Basic 41,933,244 43,747,944 Diluted 43,468,846 43,747,944 (a):     Represents items management believes are not indicative of ongoing operating performance. 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. (b): The adjusted tax provision for adjusted net income is estimated by applying 40% to the adjusted income before provision for income taxes.  

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ICR, Inc. for J.JillInvestors:Caitlin Morahan/Joseph Teklits, 203-682-8200investors@jjill.comorMedia:Alecia Pulman/Kate Kohlbrenner, 203-682-8224jillpr@icrinc.com