Q1 2021 JJill Inc Earnings Call
Thank you for listening to the J Jill first quarter fiscal 'twenty 'twenty, 1 earnings commentary Claire Spofford, President and Chief Executive Officer, and Mark Webb Executive Vice President and Chief Financial Officer will provide further remarks on the company's first quarter of fiscal 'twenty 'twenty, 1 results and it may 1st.
'twenty 'twenty, 1 which for announced for the press release date of June H 'twenty 'twenty 1.
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 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 <unk> SEC filings before looking statements made on this recording or as of June 8th 2.
'twenty, 1 and J Jill does not undertake any obligation to update these forward looking statements.
Finally, J Jill maybe for to certain adjusted or non-GAAP financial measures. During these remarks are.
A reconciliation schedule showing the GAAP versus non-GAAP financial measures is available in the press release issued June 8.2021 at <unk>.
You do not have a copy of today's press release, you may obtain 1 by visiting the Investor Relations page of the website at J Jill Dot com.
I'll now turn the remarks over to Claire.
Thank you and good morning, everyone.
Our first quarter results reflect encouraging progress against the initiatives focused on strike, putting the operating model and driving healthy margin recovery line.
Like many in retail we are pleased to participate in the strong rebound in consumer activity. The spring with the accelerated rollout of vaccinations in the lifting of many COVID-19 related restrictions across the country.
For the quarter, we delivered top line growth of 42% compared to last year balanced across our retail and direct channel.
In addition for the benefit of Anniversarying last year's temporary store closures.
Sales growth was driven by healthy conversion and full price selling in both channel.
These results coupled with continued disciplined inventory management at a more refined promotional cadence drove strong gross margin expansion for the period, leading to adjusted EBITDA of $17 million for the first quarter.
While traffic continues to recover our customers showing us he's really excited to shop with us in stores and online.
We saw great response to our product assortment for the spring customers, both existing and new of really engaging with us and of reacting to a great. We're now offering.
From a comfortable net to our beautiful dresses and inspiring period Youll collection, she's gravitating toward novelty and newness, both online and in store with a sense of urgency the purchase not reliance on promotion.
As we look forward, we will continue to drive of deliberate cadence of newness to continue to build on the momentum we're seeing.
Most recently, we were thrilled with the strong performance we've seen to date in may, particularly over the mother's day holiday.
With the ability to celebrate holidays in the special moments in person with family and friends, our customers eager to shop, and we are thrilled to be delighting her once again.
With respect to our operating model and the ongoing work to strengthen the foundation for especially committed to our continued focus on disciplined inventory management.
The strong growth margin recovery, we saw in Q1 benefited from a leaner and healthier inventory.
This allowed us to sell more at full price and pull back on promotions accordingly.
This is a great indicator of the healthier business that we intend to lean into going forward.
In summary, we are very pleased with the progress made during the first quarter and believe it is an important step forward.
We continue with the opportunity to refine our operating model and drive efficiencies across our organization and we will be working hard to make progress against these initiatives.
We look forward to continuing to delight, our customers with incredible product and the shopping experience you trust us to deliver wherever and whenever she chooses to shop J Jill.
I will now turn the call over to Mark to review, our first quarter of financial results in more detail.
Thank you Claire and good morning, everyone at.
As Claire mentioned at the first quarter of 2021, Mark another quarter of the good progress for J Jill our strategy coming into 2021. Following Covid impact of 2020 was to drive gross margin for lean inventories kind of lower promos are proud of collections resonated better with customers than anticipated.
Contributing to results above our expectations for the quarter.
The store sales were up 56% over Q1, 2020, which was impacted by the temporary store closures related to COVID-19.
Also the each month in the first quarter of 2021 was sequentially better than the prior month when compared against 2019.
Direct sales were above 2019 levels end up 33% versus Q1.2020, driven by positive customer response to new full price product collection.
Q1, gross margin was 68% up almost 13 of 100 basis points for Q1, 2020 end up 220 basis points compared to Q1 of 2019.
The improvement in gross margin was driven primarily by better full price selling and lower promotional discounts.
SG&A expenses were $79 million.
Down $9 million versus the prior year end down $26 million versus 2019, driven by work done last year on our operating model that has resulted in refined marketing investment at a lower selling and occupancy costs.
Adjusted income from operations was $8.8 million compared to adjusted loss from operations of $35.6 million in the first quarter of fiscal 2020.
For the first quarter of fiscal 2021, the company did not incur any impairment charges compared to $52 million of impairment charges in the first quarter of fiscal 2020.
Please refer to today's press release for a reconciliation of adjusted income from operations.
Turning to the balance sheet total liquidity as defined in the private term loan agreement measured as ending cash plus chat flow plus ABL availability was $31.3 million at the end of the first quarter.
In line with our goal to manage inventory tightly to support full price selling inventories at the end of the quarter were down 21% compared to last year's quarter end.
Warrants related to the subordinated credit facility and the embedded derivatives associated with the prime and term loans were mark to market during the quarter driven by the increase in <unk> stock price since the end of fourth quarter of 2020, resulting in a non cash charge to the income statement of approximately 21 million.
Which caused an increase in the related liabilities of the same amount.
Additionally, since the end of the quarter in accordance with the terms of the price well, we issued approximately 272000 additional shares to the private lenders as of May 31.
With the continued increase in <unk> stock price since the end of first quarter, we will recognize an additional $39 million.
Non cash charge for the final mark to market adjustment as of May 31.
The value of the warrants and embedded derivatives liabilities are considered equity rather than liabilities as of May 31, with no further mark to market adjustments beyond that date.
Capital expenditures in the quarter were about $500000 versus $1.8 million last year.
Still expect to spend approximately $10 million of capital for full fiscal year 2021.
We closed 2 stores in the first quarter, ending with 265 stores and still expect to close about 20 stores for the full year 2021.
As we look to the balance of the year as Clare mentioned, we are pleased with our strong start to the second quarter and with the momentum in the business. We expect second quarter revenue to continue to rebound as we anniversary of temporary store closures from last year and store traffic levels continue to recover and both lifestyle centers and malls.
With respect to gross margin, we like many of our peers in the industry have reported have and expect to continue to experience supply chain disruptions to date any impact has been negligible and we will continue to work with our supplier base and logistics providers to mitigate as much as possible going forward.
We remain focused on driving full price selling at lower promotional discounts, which should support gross margin expansion through the end of this year.
Thank you and I'll now hand, it back over to Claire.
Thank you Mark and thank you all for your attention this morning.
Pleased with the momentum we are driving the business from the Great response, we're seeing from our customers.
I want to thank all of our teams and stakeholders for their ongoing support of J, Jill we have an incredible brand and at <unk>.
Great opportunity in front of us to continue to build on the progress we're making we look forward to updating you again on our next earnings call. Thank you.
This concludes today's conference call on behalf of J Jill Lee. Thank you for participating you may now disconnect.
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