J.Jill, Inc. (JILL) Q1 2026 Earnings Call Transcript

Thank you for standing by. My name is JL, and I will be your conference operator today. At this time, I would like to welcome everyone to the J.Jill Inc. First Quarter 2026 Earnings Call. Operator Instructions. Before we begin, I need to remind you that certain comments made during these remarks may constitute forward-looking statements and are made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in the press release and J.Jill's SEC filings. The forward-looking statements made on this recording are as of June 10, 2026, and J.Jill does not undertake any obligation to update these forward-looking statements. Finally, J.Jill may refer to certain adjusted or non-GAAP financial measures during these remarks. A reconciliation schedule showing the GAAP versus non-GAAP financial measures is available in the press release issued June 10, 2026. If you do not have a copy of today's press release, you may obtain one by visiting the Investor Relations page of the website at jjill.com. I would now like to turn the conference over to Mary Ellen Coyne, CEO and President. You may begin.

Good morning, and thank you for joining us. As I have said on previous calls, J.Jill is in the early stage of evolving both the brands and the business amidst the dynamics of a complicated external environment. We began 2026 with a sharp focus on expanding the customer file, making progress through disciplined execution in three key areas: evolving our product assortment, enhancing the customer journey and advancing the way we work. This strategic framework is essential to build a solid foundation for sustainable long-term growth. Evolution takes time and requires patience as our product and marketing strategies are introduced to both new and existing customers. Insights gained in the first quarter, particularly in stores where customers can touch, feel and experience our new assortment, supported by our exceptional sales associates, give us confidence in our ability to achieve success. We delivered first quarter results in line with our expectations for both sales and profitability. And while it was a challenging period for a number of reasons, we are actively applying learnings that should continue to drive momentum throughout the rest of this fiscal year and beyond. We know through both customer research and feedback from our sales associates that customers want J.Jill to evolve as their approach to building a wardrobe has evolved. But we also know that we must take care with the pace and scale of that change. We are being thoughtful about infusing newness while retaining the essential elements our most loyal customers value. From a product perspective, our assortment in Q1 reflected the start of a transition, still dominated by legacy product, but with some new styles and silhouettes representing where we are headed. Notable successes in the quarter were jackets and accessories. Accessories are only a small part of the business today, but they showed strong growth, and we see more opportunity. As we know, accessories are often an entry point into a brand for new customers or an impulse purchase that reactivates lapsed customers. In terms of key learnings, tops assortment skewed too far into shorter length and did not offer enough breadth in print. Another highlight in the quarter was our new-to-brand customer acquisition, which had slight year-over-year growth, driven primarily through the retail channel. Our store teams continue to perform at a high level, engaging existing, returning and new customers and doing a great job speaking to the brand's evolution. We saw a meaningful improvement in the profile of these new customers who are younger than our existing customers' average age. While the new-to-brand segment of our customer file remains relatively small, we believe its growth is key to our long-term success. This progress is encouraging. We are also leveraging learning to make enhancements to our e-commerce site, such as fabric guides, look books and stronger product storytelling, all of which help to educate online customers on our product evolution, the way our sales associates are already doing in-store. While the e-commerce channel continues to be more price sensitive, we expect these new tools and enhancements to more fully animate our product assortment and move someone from discovery to purchase. Turning to our three key areas of focus. First, evolving our product assortment. We are excited by customers' initial reactions to our summer assortment so far in the second quarter. These assortments reflect better alignment between our merchandising and design teams, represent a real step forward in terms of product evolution and are a good indication of where the brand is headed. These positive early reads are encouraging and position us for gradual sequential improvement in the second quarter and further throughout the remainder of the year as indicated in our guidance. Second, enhancing the customer journey. As part of our plan to reinvigorate the brand and expand the customer file, we have already begun to enhance how people engage with J.Jill across channels. During the quarter, we saw growth in the SMS file. And in March, we launched a new non-tender loyalty program called J.Jill Collective to a small subset of our customer base. We have plans to roll this out and we'll share more in the coming months. Leading this program and all customer and marketing strategies is our new Chief Marketing Officer, Kimberly Wallengren, who joined us at the end of April. Previously with Coach and American Eagle, she brings a proven track record of leveraging marketing to drive brand evolution, boost relevance and broaden the customer base. Kimberly's expertise is perfectly matched to our objectives, and we are delighted to welcome her to J.Jill. Our third area of focus is advancing the way we work. In addition to developing the right strategy, we have also been building the right capabilities. Our executive leadership team has the right balance of institutional knowledge, new insights and transformation experience to deliver on this strategy. Our strategies and capabilities will also be reinforced with new tools, starting with a merchandise planning and allocation system later this year. The new system will move us from a manual and time-intensive approach to one with more predictive and data-driven forecasting that will allow us to better assess demand planning and allocate more effectively, which we expect will support higher full price sell-through and greater markdown yields beginning in earnest in 2027. In summary, we are still in the early days of our transformation, but I'm encouraged by our progress and the discipline with which our team is executing against our strategic priorities. With that, I'll turn it over to Mark to speak to the details of the financials and our outlook.

Thank you, Mary Ellen, and good morning, everyone. I'll begin with a review of first quarter performance before discussing our outlook. Regarding first quarter, total company sales for the quarter were about $144 million, down 6% compared to Q1 2025, inclusive of total company comparable sales decline of 8.7%, which was partially offset by sales from new stores opened last year. Retail sales for Q1 were down about 4% compared to Q1 2025, driven by soft conversion, partially offset by higher average unit retails and supported by net six new stores compared to the first quarter of 2025. Direct sales were down approximately 8% compared to Q1 2025 and represented about 46% of total sales. Sales declines were driven by conversion and a mix to markdowns as consumers continue to demonstrate price sensitivity, especially in the direct channel. Q1 total company gross profit was about $98.7 million, down about $12 million compared to Q1 2025. Gross margin rate for Q1 was 68.3%, down 350 basis points versus Q1 2025, driven by approximately $4.7 million in net tariff costs and a higher mix of markdown sales, primarily in the direct channel. SG&A expenses for the quarter were about $90 million compared to approximately $91 million in Q1 2025. Lower marketing costs driven by a timing shift of the April catalog into May, lower G&A overhead and lower technology project costs were all partially offset by new store costs, occupancy inflation and merit increases. Adjusted EBITDA for the quarter was $16.7 million compared to $27.3 million in Q1 2025. Interest expense was $1.9 million in Q1 compared to $2.8 million in Q1 2025. Adjusted net income per diluted share was $0.45 compared to $0.88 last year, which reflected a diluted share count of 15.0 million shares this year versus 15.4 million shares last year. During the quarter, we repurchased 68,500 shares for approximately $790,000. And as of today, we have approximately $13 million remaining on the $25 million share repurchase authorization. Turning to cash flow. For the quarter, we generated about $1.7 million of cash from operations, resulting in ending cash of about $36.3 million. Free cash flow was an outflow of $1.1 million in the quarter. Please refer to today's press release for reconciliations of non-GAAP financial measures to their most comparable GAAP financial measures, adjusted EBITDA, adjusted net income and adjusted net income per diluted share to net income and free cash flow to cash from operations. Looking at inventory. Total reported inventories, excluding tariffs, were down about 3.5% at the end of the first quarter compared to end of first quarter last year. As reported inventory, inclusive of the cost of tariffs was up 5.6%. Capital expenditures for the quarter were $2.8 million compared to $2.7 million last year. Investments were focused primarily on stores as well as the new merchandise planning and allocation project. With respect to store count, we closed two stores during the first quarter and opened one new, resulting in end-of-quarter store count of 255 stores compared to 249 stores at the end of Q1 last year. Now for more on our outlook. For full year, we are reaffirming our prior guidance for sales, comparable sales, gross margin, adjusted EBITDA and free cash flow. We still expect full year sales to be flat to down 2%; full year comp sales to be down 1% to down 3%; year-over-year gross margin to decline approximately 50 basis points; and adjusted EBITDA of $70 million to $75 million. In addition, full year free cash flow is still expected to be about $20 million. We are continuing to invest in new stores but are adjusting our targeted net opening store count this year and related capital spend to reflect the current operating environment. As such, we now expect to spend between $20 million and $25 million of CapEx during the fiscal year compared to prior guidance of approximately $25 million, and we now expect to open between one and five net new stores this year versus prior guidance of about five net new stores. These expectations reflect about six to eight new stores, offset by closures. Our full year guidance reflects our expectation that strategies will show gradual improvement into Q2 before gaining more traction into Q3 and further momentum into Q4. For second quarter, we expect sales to be down 1% to down 3%, comp sales to be down 2% to down 4% and adjusted EBITDA to be in the range of $18 million to $20 million. This guidance includes the expectation for second quarter gross margin to decline approximately 100 basis points compared to last year, primarily driven by approximately $4 million of net tariff costs. With respect to tariff refunds, though we received early in the second quarter a small portion of our IEEPA tariff refund claim, we are not assuming any refund benefit in our guidance at this time, given ongoing uncertainties related to the timing and ultimate amount of any remaining reimbursement. Embedded in our guidance is an assumed average 20% reciprocal tariff rate on applicable inventory received prior to February 28, 2026, an assumed average 10% tariff rate on applicable inventory received after February 28, 2026, through the second quarter of fiscal 2026 and an assumed average 15% tariff rate thereafter. These assumptions equate to approximately $14.5 million of net tariff costs in our expected fiscal 2026 gross profit, down slightly versus our prior expectation with the benefit assumed to be offset by higher fuel and other input costs within our outlook. Lastly, we remain committed to executing on our total shareholder return strategies. As announced on June 3, the Board declared a quarterly dividend of $0.09 per share payable July 8 to shareholders of record as of June 24 and we will continue to opportunistically repurchase shares, though we'll do so at an appropriate pace. Now I'll hand it back to Mary Ellen for a few remarks before we go to Q&A.

Thanks, Mark. As our product continues to evolve and our new marketing strategies take hold, we expect to see gradual sequential improvement in our business. We are encouraged by the learnings gained in Q1 and the green shoots we have seen to date, most notably the growth in new-to-brand customers and the strength in emerging product categories. Our enthusiasm for the potential of J.Jill is balanced by an understanding that successful transformations take time. We are confident we are making the right decisions today to position the brand for sustainable long-term growth and value creation. Thank you. And now we'll take your questions.

Operator Instructions. Your first question comes from the line of Jonna Kim with TD Cowen.

How would you assess the macro impact to your consumer in the first quarter and second quarter versus assortment that still needs to improve? And could you give us a little bit more color on how Mother's Day trended for you? I know it's a big event for you. So what are some learnings from this year versus last year and how you evolve that event going forward?

Thanks for the questions. I'll start with consumer. In our most recent surveys, our consumer continues to exhibit caution and is more choiceful. But what we also see is she truly believes in the hallmarks of this brand in quality and customer service, and she has had a very positive response to our latest collections. The way that we think about this in a challenging and promotional environment is that we need to focus internally on getting product in front of her that she will respond to. That's what we've seen as we're heading into Q2. We're very encouraged by the latest floor sets, including the one that dropped right before Mother's Day. We saw a more coordinated marketing effort this year and know that as we move forward, there is opportunity for us to continue to build on that as it is such an important holiday for us. Stores performed stronger than direct, which you would expect, with some activations in stores that were very positive.

Got it. Understood. And then just one follow-up. As you look at the second half, you talked about gradual improvement, but what really gives you confidence in that inflection? Is there a specific product change and marketing that you feel especially more optimistic on?

Sure. Q1 was a period of testing and learning for us. It was the start of our evolution. The product was predominantly legacy product, but we did fast track new categories and new silhouettes and are taking the learnings from that and using them appropriately as we're moving forward. We learned a lot around product specifics and communications to our consumer. We talked a little bit about the direct business and the things we are adding in terms of the look book and fabric guide to move customers from consideration to conversion. Moving forward, we're taking those learnings. We're very encouraged by current results as Q2 has kicked off: assortments and assets, and we're adjusting appropriately. We are rebalancing where we feel we need to. We know that we did not have enough color in the first quarter. We know that customers wanted more tunics in the first quarter. These are things that we have corrected as we move into the back half of the year, and we're very excited about it. We continue to underscore that this is an evolution and that evolution takes time. All of that is implied in our guidance as gradual sequential improvement. The way that we are thinking about product and our product framework and strategy is around a Venn diagram where 60% of what we do will be applicable to both existing and new customers, and then we'll have 20% on either side where we are protecting legacy and moving forward. What we've learned is that balance in categories—where we offer an assortment of silhouettes that address the middle and both ends—is where we're seeing much success.

And Mary Ellen, Jonna, I would add from the implications in the guidance, everything Mary Ellen said about this year and how different it was this time last year gives us the confidence that we'll continue to gradually build this year. As compared to last year when we had a relatively new team coming together, we were working toward this moment and business performance actually degraded a little bit through the end of the year into Q4. Also, the ending inventory position at the end of Q1 is in a better place than it's been in a while, and we've adjusted the buys as we go forward. That supports some of the full-price and new product strategies we're executing.

Your next question comes from the line of Janine Stichter of BTIG.

Congrats on the progress. I wanted to ask about the direct channel. How do you think about restoring the more full-price nature of that channel? Or do you think of it as remaining more of a clearance channel? And then on the stores, you lowered the outlook for new stores. Just curious how new stores are performing. Is this more a function of adding fewer new stores based on the environment or anything you're seeing on the stores you're closing? Is there any change to how you're thinking about the hurdles for closing units?

I'll start. On the direct channel, stores are driving stronger results than direct at the moment. We know we are up against a promotional environment. But as I said earlier, we're very encouraged as we head into Q2 to see some improvement in full-price selling. We're actively taking steps to engage customers more fully in the lifestyle of the brand with the look book, fabric guide and added video on the site. There are things we're doing to really engage that customer because we know we're sitting in a promotional environment, but we can stand out if we have the right product and the right messaging. So that's what I'll say about direct.

And with respect to the store count and capital, we felt at this point it was prudent to nudge that down a bit. It's more about the general environment and some uncertainty in the macro world and a little bit about developments in the mall landscape—some remerchandising, luxury additions—so we want to be prudent watching how those efforts impact traffic and our customer. But we still feel very confident in the 300-store target we put out previously. It's more a reassessment of timing to that goal. Overall, the stores continue to perform as we've indicated on previous calls: better in markets where we're reentering and the customer knows us; a little longer ramp in some new markets. We'll continue to prioritize lifestyle centers, reentry markets and a select few new markets.

Great. And I know it's still early, but anything you can share on the initial pilot of the non-tender loyalty program?

Yes. It is early days. We've had a very strong response so far. J.Jill Collective is a vehicle we will use to continue to engage and retain our existing customers and the response so far in terms of engagement has been very high. We're looking forward to rolling that out to a broader group as we progress through the balance of the year.

Your next question comes from the line of Dana Telsey of the Telsey Group.

Mary Ellen, as you enhance the product, one of the categories that wasn't mentioned was bottoms. How did they do, whether in skirts or in bottoms? And as you see the continued enhancement of the product like the takeaways you had on shirts that were a little bit shorter, how much should remain the core? How much should remain new? Do you think of it as a percentage? And then on new customer additions, any new demographic profile of those customers? And lastly, Mark, in terms of marketing that goes to the second quarter, how do you think of gross margin and SG&A, any puts and takes for Q2 and beyond?

Thanks. On bottoms, we saw a tougher first quarter in terms of bottoms. That seems to be an industry trend. As the quarter progressed, our dress business picked up, which usually offsets bottoms—if customers buy one they often don't need the other. We saw great business in jackets and outerwear and dresses improved. On core versus new, we are measured. As I mentioned earlier, we are making sure that the vast majority of what is in our assortment appeals to both existing and new customers. When in any given category we offer a balanced assortment of silhouettes—20% leaning toward new, 20% being very legacy, and the majority in the middle appealing to both—that's how we're building it. Regarding tunics, a year ago our business in tunics was weak. This year, when we reduced them, the consumer said she wanted more choice in tunics. We were able to rebalance that in the back half of the year. Color was also an obvious call-out: February into March was too neutral, and customer response to color improved in Q2. On new-to-brand customers, we are encouraged: these customers are younger than our existing customers' average age and they are spending at a higher average order value. As we think about marketing, we have tools like J.Jill Collective to retain our existing customers, we are focused on bringing new-to-brand customers in, and importantly on converting them to repeat customers.

Dana, on the marketing spend and SG&A, SG&A in Q1 was down about $1 million, driven in part by the catalog timing shift, which was roughly a four-day shift from the last week of April into the first week of May. That contributes to some pressure in Q2. Another contributor was lower project costs compared to last year—last year we had OMS cutover costs in Q1; this year the merchandise planning and allocation project is a lower burn compared to that prior cutover. As you get into Q2, we'll continue to invest in marketing and the timing shift puts a bit more pressure into Q2 than in Q1. Project costs start to normalize year-over-year before they become a headwind in the back half of the year. The guidance we provided for Q2 with margin down about 100 basis points implies the tariff load we described with our inventory positioning and some of the progress we expect to get in full-price performance and yield. The model would indicate something like a few million dollars of pressure on SG&A in Q2. Modeling first-half net SG&A is probably a good way to think about the back half relative to the prior year.

Your next question comes from the line of a Jefferies analyst.

I think you just touched on it a bit about second half gross margins. But can you just walk through the implied second half improvement for gross margin, especially after the improving tariff environment?

Sure, Jefferies Analyst. A couple of points on that. I want to be really clear that we haven't factored anything related to refunds. We're status quo to where we've talked previously about tariff load in the margin with the small exception that the 10% rates we had previously assumed would go through Q1 are now assumed to go through Q2, which is some upside in the tariff expectation. We mentioned the full year load of $14.5 million; last time we said about $15 million. It's about a $1 million movement in that line, which provides less year-over-year pressure from tariffs in Q3. We expect that at the current assumptions to be a tailwind into Q4. At the same time, inventory positioning—which excluding tariffs at the end of Q1 was down 3.5%—and our indication in the press release that we're positioning back-half units down about mid-single digits, along with product strategies, should help drive more fundamental margin at full price and yield across full price and markdown. Those are our assumptions: gradual improvement more so in Q3 and more in Q4 as product strategies solidify and we get reps under our belt with every floor set, and that's what's predominantly implied under the margin in the guidance.

Your next question comes from the line of Marni Shapiro of The Retail Tracker.

Sorry, I had to hop on a minute early. I just wanted to ask, I know you had a little bit of trouble with the colors. But where you had color, from my vantage point, it sold out immediately. You had a beautiful pop of pink that came in, some blues. So was it across the board? Or when those colors came in, they sold very quickly and at full price?

The latter, Marni. We struggled with color in February and March when it was much more neutral and colors were muted. The minute we dropped that pink delivery, full-price selling was very strong. Both pink solid and prints that had pink in them followed up by a delivery that was around a beautiful aqua color sold very strongly. Then we went into Memorial Day with red, white and blue; red is always very strong for us. Color is working and it's something we will be very cognizant of as a percentage of the assortment moving forward.

Also, I felt like customers were in and out of your stores instantaneously. Could we also talk about the customers who are looking for deals a bit more? Are these newer customers coming in online looking for deals, or are they across the file?

They are across the file, and it's what we've seen the last several quarters with the promotional cadence online remaining elevated. What we need to do is cut through, and we're seeing encouraging results as we started Q2 with some full-price selling in the direct channel. We'll continue to elevate that online experience. As we bring new people in, we must ensure they have the full J.Jill experience and that they are converting at full price.

With no further questions, that concludes our Q&A session and today's conference call. Thank you for joining. You may now disconnect.