Q3 2020 J.Jill Inc Earnings Call

Yeah. So we'll provide further remarks on the company's fiscal third quarter results at October 31st Twentytwenty, which were announced with the press release date of December 10th Twentytwenty four.

Following today's remarks, there will be no question and answer session.

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.

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 Gi Joe's FCC filings before.

The forward looking statements made on this recording or as of December 10th Twentytwenty and GI Joe does not undertake any obligations to update. These forward looking statements. Finally, Gi Joe may refer to certain adjusted or non-GAAP financial measures. During these remarks, a reconciliation schedule showing the GAAP.

First as non-GAAP financial measures is available in the press release issued December 10th Twentytwenty.

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 GTL Dot Com I will now turn the remarks of over to Jim.

Thank you and good morning, everyone.

At first spoke with you. This same time last year, we had made leadership changes and we're sending a plan for strengthening Gi Joe's Foundation.

Then very early in 2020, we began to navigate the challenges presented from the co bid 19 pandemic at the world and still facing today.

It is an understatement to say that this has been an unprecedented year for retail energy Joe.

With that said well our results have yet to show a meaningful recovery as our core customer remains cautious we are gradually making sequential improvement.

Importantly, during the third quarter, we made significant progress in positioning Jujo for its next chapter, including our previously announced agreement with our lenders, which provides us the needed flexibility to build our path back to profitable growth as well as the announcement of a permanent CEO Claire sponsored who will begin her.

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In addition to these announcements we have also reevaluated, our operating model and taken several steps to strengthen it for the future.

We're optimizing our product assortment and streamlining the number of product flows, which will improve the efficiency of price development activities.

As well as store and ecommerce operations.

We have reviewed our marketing mix, reducing the number of important but expenses kind of like drops to be in line with the new product flows.

We have adjusted our organizational overhead to reflect a simplified way of working.

And we have reviewed our historically strong store fleet with a critical eye on traffic and revenue potential.

Made tough decisions to close well, we're performing predominantly mall based stores.

As Jay gelatin bars on its next chapter I'm excited to have clear join as permanent CEO beginning in early February.

Claire's returning to the company with a strong knowledge of Gi Joe's incredible loyal customer base.

And has a proven track record of evolving brands into profitable digitally driven businesses.

As I transition back to my role as director I look forward to continuing to work with Claire in the rest of the team as they continue to believe in the power that is yet to be end walk from this brand.

I will now turn the call over to Mark to review our results and provide more detail with regards to our financial and operating restructure.

Okay.

Thank you Jim and on behalf of all the teams I would like to thank you for your leadership over the past here at <unk>.

Jim noted the cold at 19 pandemic has created unique challenges. This year in response to these challenges we have taken at deliberate actions that not only help to survive set of uncertain times, but we believe have put us in a position of strength once the pandemic subsides.

We strengthened the balance sheet, we extended the maturity on almost 98% of our term loan debt by two years to 2024.

We amended our debt covenants with our lenders obtaining a leverage ratio holiday from Q4 2021 with more lenient leverage ratios. Initially upon reinstatement at a minimum liquidity covenant was instituted to put focus on this most important metric in the short term.

And finally, we issued a new junior term loan and paid down our revolving loan facility all of which provide us liquidity at breathing room to continue to execute our foundation building strategies with total liquidity measured as bank cash plus.

They'll ability of over $53 million at the end.

The third quarter.

Over the coming years, JJ will be well positioned to take advantage of profitable growth opportunities.

Operationally, we have aggressively managed inventories, we canceled orders where possible and reallocated units from stores to direct to better align supply with demand.

And as necessary, we took markdowns and carved out units for third party liquidation in order to end 2020, as clean as possible to enable us to position for recovery in 2021 of the gross margin in Q3 reflects these actions with the majority of the 550 basis point decline coming from clearance activities income.

Moving the impact of third party liquidations.

End of quarter inventories finished down almost 17% compared to last year, we will continue to be aggressive inventory management. This year with the goal of starting fiscal 2021 with inventories well positioned to support average unit retail and gross margin recovery. We also reviewed our store fleet and line of performance impact.

From the pandemic and made the decision to close of up to 20 stores. This year 11 of which have already close to the end of the third quarter.

We will continue to review the fleet in 2021 for further optimization opportunities.

We believe physical stores are a critical channel for change at all and do not rule out a return to store growth in the future once the full effects of the pandemic on malls and customer shopping patterns is understood.

We believe that the actions we have taken including those that Jim reviewed will contribute to a stronger foundation from which to change at all can grow in the future.

Now let me quickly cover a few key highlights from our third quarter performance.

At quarter revenue sequentially improved compared to second quarter, achieving 70% of last year's sales levels.

All stores were opened as of the start of the quarter, though many operated on reduced operating hours to control variable costs at store demand continue to recover.

Net revenues were up 4% for the quarter and penetration remains quite healthy at 63% of total sales.

With regards to profitability as previously mentioned gross margin of 58.9% was primarily impacted by actions taken to manage inventory aggressively to set changing a lot of recovery in 2021.

SGN expenses were down $6 million compared to last year, despite $13 million of nonrecurring expenses, primarily driven by transaction related costs incurred during the quarter expense savings were driven by reduced marketing spend lower store selling costs associated with fewer operating hours and reductions in overhead headcount.

In summary, we have taken many actions this year that we believe strength and the operational foundation of the company.

We know there is much work to be done and uncertainty remains in the macro environment related to the cold at 19 pandemic.

With improved operational discipline and greater financial flexibility. We are confident at the steps we have taken will set us up well in 2021 and beyond.

I'll now turn the call back to Jim for his closing remarks, Jim.

Well this year has presented incredible challenges to the organization I'm. So proud of everyone's efforts and dedication during this time.

I want to thank all of our teams for their hard work and wish everyone, a happy and healthy holiday season.

This concludes the GI Joe's third quarter fiscal 2020 earnings commentary, we thank you for your participation you may now disconnect.