Q2 2025 J.Jill Inc Earnings Call

Speaker Change: and Mark Webb, Claire Spofford, Claire Spofford and Mark Webb, Claire Spofford, Claire Spofford

Speaker Change: Thank you for standing by and welcome to the J.J. Inc. 2nd quarter, 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Speaker Change: After the speakers remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, follow by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one.

Speaker Change: Thank you. I now like to turn the call over to Claire Spofford, Chief Executive Officer and President. You may begin.

Claire Spofford: Thank you, operator, and hello everyone. Thank you for joining us this morning.

Speaker Change: And detailed in our press release, we delivered a solid second-quarter performance, reflecting total comparable sales growth of 1.7% and adjusted even though it's 30.2 million dollars. Slightly above our expectations, and yielding a 19.4% adjusted even though margin for the period.

Speaker Change: Underlined this performance with a strong start to the period, which saw healthy, full-price selling, the customers responded well to our early summer collection, particularly around the mother's day holiday. We continued to see relative strengths in our direct channel, which helped us at ongoing dynamic trends in store traffic.

Speaker Change: As the quarter-progress, we notice the meaningful shift in consumer demand beginning in July.

Speaker Change: At Hearing Tour Discipline operating model, we promptly took strategic and precise actions during the quarter to promote floor-moving items to optimize yields, manage inventory and prepare for our fall product launch debuting after Labor Day.

Speaker Change: While we continue to see softness in August, it is a difficult time to assess and evaluate the drivers to the change in demand trends. As we are in the midst of small volume months, highlighted by seasonal sales and transitional

Speaker Change: as well as a volatile macro environment that is clearly created noise and distractions for our customers.

Speaker Change: That said, as Mark Webb review, we believe it is prudent to take these current trends into account as we assess our expectations for the balance of the year.

Speaker Change: While we are revising our guidance, our updated expectations remain in line with the hallmarks of our operating model, including healthy margins and significant cash generation.

Speaker Change: As we've discussed before, in retail, the best defense amidst an ever-changing environment is the consistent delivery of strong product disordments that resonate with our customer and meet her needs, her versatility, and trend rate items that she's looking forward to refresh her wardrobe.

Jill: FHA Jill, we designed, developed, source and market, the vast majority of our proprietary products based on a deep understanding of our customer in what she's looking for.

Speaker Change: This approach delivers consistency and yield strong margin performance.

Speaker Change: The annuity-like categories in our sortment that she comes to us for a year after year and season after season, like our core linen and cotton gods franchise, and we're especially strong through the heart of the quarter.

Speaker Change: In addition, we are pleased with our performance in our core bottoms programs and sweaters. Particularly our part again is certainly in our more fashion forward crochet and open stitch detailed sweaters.

Speaker Change: Dresses, which has been on a strong trend for two years, did not see the same full-press performance we've historically seen, as she started to trade into more Mark down and fail offerings during the period.

Speaker Change: But again, in accordance with our discipline operating model, we took appropriate action to move products in season and we ended the period with comparable inventory flat as we move into the fall season.

Speaker Change: As we look to the fall, we're excited to launch our iconic Jay Jill series. This product marketing effort will begin this month, highlighting our PontiPant and showing great-out-sitting options and underscoring with quality and versatility of poor Jay Jill products that are central to our value proposition.

Speaker Change: We are also excited about the Echo-Vero Fabric launch in our wherever-subbrand collection in support of our initiative to leverage sustainable fabrications. And of course, we are looking forward to welcoming fall with our new collections of sweaters and curler-weight offerings and trend rate pallets for the season.

Speaker Change: Turning next to our strategic priorities.

Speaker Change: We remain on track with our plans for our OMS project as well as our new store openings for later this year.

Speaker Change: Despite the softness we are currently seeing in retail traffic, we know that stores are an important channel for us to drive sales and customer acquisition.

Speaker Change: Many of our upcoming store openings are planned from markets that we know very well and that already have a strong customer base that we believe will not only drive retail sales but on the channel file growth as well.

Speaker Change: and we build our customer file and increase our brand awareness over time, where continuing to evaluate our marketing plans and diverse fire channels.

Speaker Change: Well, our customer file declines slightly for the quarter, consistent with the overall performance by channel. We saw nice growth in our direct-to-consumer customer file, particularly in the new-to-brand performance.

Speaker Change: A retail channel customers were more challenging, reflective of the traffic patterns we saw in the quarter.

Speaker Change: We launched our One Wardrobe No Limits campaign in late spring, and some nice dynamics on our reach campaign elements, a step forward in driving brand awareness and introducing new customers to the JJL value proposition.

Speaker Change: The introduction of the J.J. Social Circle, a collection of brand-right influencers, been a great way to show styling tips on real women and yielded strong response in our paid and owned media efforts.

Speaker Change: Building Brand Awareness takes time and we are still in the early stages of our efforts.

Speaker Change: As we look ahead, we will invest appropriately in marketing, continue to test and learn and lean into new ways to engage current customers as well as raise the profile of the brain into attract new customers.

Speaker Change: While we continue to focus on our customer and delivering her the experiences and products she wants, we are also operating in a very dynamic environment and are leaning into the disciplines of our operating model to continue to drive margin performance and generate strong cash flow.

Speaker Change: In addition, our commitment to our long-term objectives has not wavered.

Speaker Change: As evidenced by our voluntary debt pay down and initiation of the quarterly dividend program in Q2, we have strong confidence in our business and the opportunities for profitable growth that we know by ahead.

Speaker Change: Before I turn the call over to Mark, I want to take a moment to thank our team for their ongoing hard work and dedication as we continue to execute on our objective.

Unknown Executive: Thank you for standing by and welcome to the J.Jill Inc's second quarter, 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, follow by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you.

Speaker Change: I am also very excited to welcome Courtney Chan to our Board of Directors.

Speaker Change: Courtney brings a wealth of experience in finance, strategy, and investor relations to our board.

Speaker Change: Most recently Courtney was with Liberty Media in the roles of Chief Portfolio Officer and SVP of Investor Relations.

Claire Spofford: I now like to turn the call over to Claire Spofford, Chief Executive Officer, and President. You may begin. Thank you, operator, and hello, everyone. Thank you for joining us this morning. As detailed in our press release, we delivered a solid second quarter performance, reflecting totaled comparable sales growth of 1.7% and adjusted even as $30.2 million. Slightly above our expectations and yielding a 19.4% adjusted even dog margin for the period. Underlines performance with a strong start to the period, which saw healthy, full price selling, as customers responded well to our early summer collection, particularly around the Mother's Day holiday.

Courtney Chan: She previously served on the board of HSN Inc, Expedia Group, Lending Tree, and A Scholarship.

Speaker Change: She also co-founded the Women's e-commerce network, to unite female leaders in e-commerce and provide mentorship for promising female entrepreneurs. I couldn't be more thrilled to add such a talented female leader to our board.

Speaker Change: Let me now turn the call over to Mark to discuss our results and outlook in more details.

Speaker Change: Mark?

Mark Webb: Thank you, Claire, and good morning everyone. As Claire discussed, taken as a whole, our second quarter represents solid performance, with sales in line with our expectations and adjusted EBITDA, slightly above the high end of our prior guidance range.

Claire Spofford: We continued to see relative strength in our direct channel, which helped offset ongoing dynamic trends in the store traffic. As the quarter progressed, we noticed the meaningful shift in consumer demand beginning in July. At hearing toward Disciplined Operating Model, we promptly took strategic and precise actions during the quarter to promote slower moving items to optimize yields, manage inventory, and prepare for our fall product launch debuting after Labor Day. While we continue to see softness in August, it is a difficult time to assess and evaluate the drivers to the change in demand trends, as we are in the midst of small volume months highlighted by seasonal sales and transitional assortments, as well as a volatile macro environment that has clearly created noise and distraction for our customers.

Speaker Change: Though we experienced a slowdown in the month of July, we successfully navigated this dynamic period, sticking to our disciplined principles, deploying targeted promotions and taking markdowns as necessary, ending the quarter with like-for-like inventories in line with last year.

Speaker Change: In addition, we continue to progress our strategic initiatives.

Speaker Change: and took actions to further strengthen our balance sheet through the voluntary paydown of approximately $85 million of debt, partially funded by the issuance of 1 million shares of equity, and delivered value to shareholders through the initiation of a quarterly dividend program.

Speaker Change: While we are continuing to navigate an uncertain macro environment, we remain committed to executing our business model and managing the business with discipline. Before I review our revised outlook, let me discuss our second quarter of financial performance in more detail.

Claire Spofford: That said, as Mark will review, we believe it is prudent to take these current trends into account as we assess our expectations for the balance of the year. While we are revising our guidance, our updated expectations remain in line with the hallmarks of our operating model, including healthy margins and significant cash generation. As we have discussed before, in retail, the best defense amidst an ever-changing environment is the consistent delivery of strong product assortments that resonate with our customer and meet her needs, her versatility, and trend-grade items that she is looking forward to refresh her wardrobe.

Speaker Change: Total Company comparable sales for second quarter, which removes any impact from the calendar shift, as well as other non-comp items, increased 1.7% driven by a strong full-price selling in the direct channel.

Speaker Change: Total company sales for the quarter were about $155 million, down 0.9% versus Q2 2023.

Speaker Change: This performance was the result of an approximate $7 million drag due to the calendar shift compared to reported Q2 2020-3, which was mostly offset by higher compounds and modestly improving return rates.

Claire Spofford: At J. Jill, we design, develop, source, and market the vast majority of our proprietary products based on a deep understanding of our customer and what she is looking for. This approach delivers consistency and yields strong margin performance. The annuity like categories in our assortment that she comes to us for a year after year and season after season, like our core linen and cotton gods franchises, were especially strong through the heart of the quarter.

Speaker Change: Stores sales for Q2 were down about 5% compared to Q2-2023 driven primarily by the calendar shift as well as some impact from lower traffic which was most pronounced in the month of July.

Claire Spofford: In addition, we are pleased with our performance in our core bottoms programs and sweaters, particularly our cardigan assortment and our more fashioned forward crochet and open stitch detailed sweaters. Dresses, which has been on a strong trend for two years, did not see the same full price performance we have historically seen as she started to trade into more markdown and sale offering during the period. But again, in accordance with our disciplined operating model, we took appropriate action to move products in season and we ended the period with comparable inventory splat as we move into the fall.

Speaker Change: Direct sales as a percentage of total sales were about 47% in the quarter.

Speaker Change: Comparative a second quarter of fiscal 2023 direct sales were up about 4% as full-priced comparable selling and better return rates compared to last year more than offset the drag related to the counter shift.

Speaker Change: Q2 total company gross profit was about $109 million, down about $3 million compared to Q2 2023.

Speaker Change: Q2 gross margin was 70.5% down 128 basis points versus Q2 2020-23 driven by a higher mix of markdowns due to the calendar shift. As a full price week at beginning of quarter was replaced by a sale week at end of quarter.

Claire Spofford: As we look to the fall, we're excited to launch our iconic J.Jill series. This product marketing effort will begin this month, highlighting our PonziPant and showing great outfitting options and underscoring the quality and versatility of the core J.J.J.L, products that are central to our value proposition. We are also excited about the Echo Vero Fabric launch in our wherever sub-brand collection in support of our initiative to leverage sustainable fabrications. And of course, we are looking forward to welcoming fall with our new collections of sweaters and quarterly offerings and trend rate pallets for the season.

Speaker Change: by pricing decisions taken during the quarter in response to the slowdown in July, and by expected pressure related to this strategic decision to air freight some summer goods in line of the initial delays and uncertainty associated with the disruption in the Red Sea.

Speaker Change: SGA expenses for the quarter were about $86 million compared to approximately $84 million last year. The increase was driven primarily by wage inflation in both stores and HQ functions and about $500,000 in incremental expense associated with the LMS project.

Claire Spofford: Turning next to our strategic priorities. We remain on track with our plans for our OMS project as well as our new store openings for later this year. Despite the softness we are currently seeing in retail traffic, we know that stores are an important channel for us to drive sales and customer acquisition. Many of our upcoming store openings are planned for markets that we know very well and that already have a strong customer base that we believe will not only drive retail sales but on the channel file growth as well.

Speaker Change: The just to be the doll is $30.2 million in the quarter, compared to $34.6 million in Q2, 2020-23.

Speaker Change: Please refer to today's press release for a reconciliation of adjusted EBITDA to net income, the most comparable GAAP financial measure.

Speaker Change: Turning to cashflow for the quarter we generated about $16 million of cash from operations resulting in ending cash of about $28 million with zero borrowings against the ABO.

Claire Spofford: As we build our customer file and increase our brand awareness over time, we are continuing to evaluate our marketing plans and diversifier channels. While our customer file declines slightly for the quarter, consistent with the overall performance by channel, we saw a nice growth in our direct to consumer customer file, particularly in the new to brand performance. Our retail channel customers were more challenging, reflective of the traffic patterns we saw in the quarter.

Speaker Change: Looking at inventory, as mentioned last quarter, we expected reported inventories to be out meaningfully at the end of Q2 due to timing and the strategy to get in front of the Red Sea delays by shipping goods one week early, beginning with our follow-throughs.

Speaker Change: As expected, total reported inventories were up about 15% at the end of second quarter compared to end of second quarter last year, including these additional and transit ball goods.

Claire Spofford: We launched our one wardrobe no limits campaign in late spring and saw nice dynamics on our reach campaign elements, a step forward in driving brand awareness and introducing new customers to the JGL value proposition. The introduction of the JGL social circle, a collection of brand rate influencers, been a great way to show styling tips on real women and yielded strong response in our paid and owned media efforts. Building brand awareness takes time and we are still on the early stages of our efforts.

Speaker Change: Normalizing for these actions, inventories were about flat and the quarter.

Speaker Change: While the issues in the Red Sea with respect to our shipping lanes have stabilized, we have yet to see any signs of improvement, and therefore now expect to keep our mitigation plans in place, and as such, now expect reported inventory will remain elevated to at least the end of the fourth quarter of this fiscal year.

Claire Spofford: As we look ahead, we will invest appropriately in marketing, continue to test and learn and lean into new ways to engage current customers as well as raise the profile of the brand to attract new customers. While we continue to focus on our customer and delivering her the experiences and products she wants, we are also operating in a very dynamic environment and are leaning into the disciplines of our operating model to continue to drive margin performance and generate strong cash flow.

Speaker Change: Capital expenditures for the quarter were $2 million compared to $4 million last year. Investments were focused on stores and the OMS technology project which continues to make good progress.

Speaker Change: With respect to store count, we opened one new store in the quarter and temporarily closed one store for relocation, which will reopen in Q3. Store count at the end of the quarter was there for unchanged at 244 stores. Turning now to our outlook.

Claire Spofford: In addition, our commitment to our long term objectives has not wavered. As evidenced by our voluntary debt paydown and initiation of the quarterly dividend program in Q2, we have strong confidence in our business and the opportunities for profitable growth that we know by ahead.

Speaker Change: Reviewed, following a very strong start to the quarter, we experienced a change in trend in July, which continued through August. And while it is difficult to assess how long these trends will persist, especially as we are just setting the fall floor sets.

Claire Spofford: Before I turn the call over to Mark, I want to take a moment to thank our teams for their ongoing hard work and dedication as we continue to execute on our objectives.

Speaker Change: We believe it is prudent and necessary to take current trends into account as we assess our plans and adjust our expectations for the second half of the year.

Claire Spofford: I am also very excited to welcome Courtney Chun to our Board of Directors. Courtney brings a wealth of experience in finance, strategy and investor relations to our board. Most recently, Courtney was with Liberty Media in the roles of Chief Portfolio Officer and SBP of Investor Relations. She previously served on the board's HSN Inc, Expedia Group, Lending Tree and ACE Scholarship. She also co-founded the Women's e-commerce network to unite female leaders in e-commerce and provide mentorship for promising female entrepreneurs. I couldn't be more thrilled to add such a talented female leader to our board.

Speaker Change: The third quarter, we expect sales compared to Q3, 2020, to be down 1% to up 2% compared to $150.9 million in the prior year.

Speaker Change: We expect Q3 revenue to benefit by about $2 million related to the timing shift associated with the prior year, 53-week calendar, which we have reviewed in prior calls.

Speaker Change: We expect the justice, Eva Dodd, will be in the range of 23 and 27 million dollars. As mentioned, our guidance takes into account the current trends we are seeing in the business, as well as easier, year over year comparisons as we progress through the period.

Mark Webb: Let me now turn the call over to Mark to discuss our results in outlook in more detail. Mark? Thank you, Claire, and good morning everyone. As Claire discussed, taken as a whole, our second quarter represents solid performance. With sales in line with our expectations, and adjusted EBITDA slightly above the high end of our prior guidance range. Though we experienced a slowdown in the month of July, we successfully navigated this dynamic period, sticking to our disciplined principles, deploying targeted promotions and taking mark downs as necessary, ending the quarter with like for like inventories in line with last year.

Speaker Change: The high end of our guidance also assumes a greater level of improvement in full price trends more consistent with what we saw earlier in the year prior to the change in customer behavior beginning in July.

Speaker Change: In addition, third quarter guidance reflects expected gross margin pressure, the less an experience in Q2.

Speaker Change: related to elevated ocean brake costs, which have increased since our last update, and additional markdown and promo pressure as we remain committed to managing inventory and season, and edge in the quarter with inventory levels in line with our expectations.

Speaker Change: In addition, this guidance reflects approximately $400,000 in S3A investments related to the OMS project.

Mark Webb: In addition, we continued to progress our strategic initiatives and took actions to further strengthen our balance sheet through the voluntary paydown of approximately $85 million of debt, partially funded by the issuance of 1 million shares of equity, and delivered value to shareholders through the initiation of a quarterly dividend program. While we are continuing to navigate an uncertain macro environment, we remain committed to executing our business model and managing the business with discipline.

Speaker Change: While we continue to expect to invest in marketing to support the strategies the Claire reviewed, we are taking a more measured pace with these expenditures and other discretionary expenses as we enter the second half given the trends we are seeing.

Speaker Change: For full year, we are now expecting total revenue to be about flat to plus 1% gross margin to be down modestly and adjust the EBITDA to be down in the range of 4% to 9% compared to the 53 week fiscal year 2023.

Mark Webb: Before I review our revised outlook, let me discuss our second quarter financial performance in more detail. Total company comparable sales per second quarter, which removes any impact from the calendar shift, as well as other non-comp items, increased 1.7% driven by a strong full price selling in the direct channel. Total company sales for the quarter were about $155 million, down 0.9% versus Q2 2023. This performance was the result of an approximate $7 million drag due to the calendar shift compared to reported Q2 2023, which was mostly offset by higher comp sales and modestly improving return rates.

Speaker Change: This outlook has compared to prior year revenue of $608 million, and the just an EBITDA of $113 million, and reflects the negative impact from the loss of the 53rd week compared to fiscal year 2023, of about $8 million in sales, and $2 million in a just an EBITDA.

Speaker Change: as well as approximately $2 million in operating expenses related to the LMS project.

Speaker Change: Excluding the impact of a 53rd week and the operating expense investment in the OMS project, we expect fiscal 2024 revenue to be up in the range of 2 to 3% and adjusted EBITDA to be down 1 to 6% compared to the prior year.

Speaker Change: Regarding the store count, we still expect to grow net store count by up to five stores by the end of fiscal 2024, with up to four net openings during the third quarter, including the reopening of the store temporarily closed for relocation in Q2.

Mark Webb: Store sales per Q2 were down about 5%, compared to Q2 2023, driven primarily by the calendar shift, as well as some impact from lower traffic, which was most pronounced in the month of July. Direct sales as percentage of total sales were about 47% in the quarter. Compared to the second quarter of fiscal 2023, direct sales were up about 4% as full price comparable selling and better return rates compared to last year, more than offset the drag related to the calendar shift.

Speaker Change: and with respect to total capital expenditures.

Speaker Change: We now expect to spend about $22 million in reported cap extra fiscal 2024 compared to our prior guidance of approximately $26 million. The change in our expectations is primarily driven by the treatment of cloud-based software implementation costs as pre-paid expense in accordance with GAAP.

Mark Webb: Q2 total company gross profit was about $109 million, down about $3 million, compared to Q2 2023. Q2 gross margin was 70.5% down 128 basis points versus Q2 2023, driven by a higher mix of markdowns due to the calendar shift, as a full price week at beginning of quarter was replaced by a sale week at end of quarter. By pricing decisions taken during the quarter in response to the slowdown in July, and by expected pressure related to the strategic decision to air freight some summer goods in light of the initial delays and uncertainty associated with the disruption in the Red Sea.

Speaker Change: We view the amortization of these investments similar to depreciation and adjust them out of our reported adjusted EBITDA.

Speaker Change: In closing, while our updated guidance for the full year reflects a change in trends from our first half performance. It still reflects the resilience and strength of our operating model, delivering a just an EBITDA margin in the high teams and solid free cash flow, which helps us towards our ultimate goal of achieving a net cash position, even after disciplined investments to drive long-term sustainable growth and total shareholder returns.

Speaker Change: Thank you, I will now hand it back to the operator for questions.

Mark Webb: StNA expenses for the quarter were about $86 million compared to approximately $84 million last year. The increase was driven primarily by wage inflation in both stores and HQ functions and about $500,000 in incremental expense associated with the OMS project. Adjust to be the dollar was $30.2 million in the quarter compared to $34.6 million in Q2 2023. Press release for a reconciliation of adjusted evict dots and income, the most comparable GAAP financial measure.

Speaker Change: Thank you. Before we begin the question and answer session, I need to remind you that certain comments made during these remarks on today's call, may constitute four-looking statements and are made pursuant to and within the meeting of the safe harbor provisions of the private securities litigation reform act of 1995 as amended. Such four-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 jajals SEC filings. If you would like to ask a question, please press star one and your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again.

Mark Webb: Turning to cash flow for the quarter we generated about $16 million of cash from operations, resulting in ending cash of about $28 million with zero borrowings against the ABL. Looking at inventory, as mentioned last quarter, we expected reported inventories to be up meaningfully at the end of Q2 due to timing and the strategy to get in front of the Red Sea delays by shipping goods one week early beginning with our fall assortments.

Speaker Change: Your first question comes from the line of Ryan Myers from Lake Street Capital markets. Your line of doven.

Mark Webb: As expected, total reported inventories were up about 15% at the end of second quarter compared to end of second quarter last year, including these additional in transit fall goods. Normalizing for these actions, inventories were about flat to end the quarter. While the issues in the Red Sea with respect to our shipping lanes have stabilized, we have yet to see any signs of improvement, and therefore now expect to keep our mitigation plans in place, and as such, now expect reported inventory will remain elevated through at least the end of the fourth quarter of this fiscal year.

Ryan Myers: Thank you everyone guys, let's take my questions first one for me Mark, just want to get clarification on this and share it and it's going to be perfectly. Sounds like there'll be some softness in Bill's margin here, two, three but did you say that it's going to be higher than what it was here in QQ?

Mark Webb: Hey Ryan, thanks for the question. We said that the pressure in Q3, we would be a pressure, but it would be less than experienced in Q2.

Speaker Change: with the contributing factors being some elevated freight costs as ocean freight rates have increased. But the Q2 pressure was related to air freight, which is measured in dollars versus ocean freight, which is measured in dimes.

Speaker Change: and then some pressure related to our commitment to our operating model and discipline which is to action inventories in season to manage yield to the best sorabilities and the core within inventories where we need them.

Mark Webb: Capital expenditures for the quarter were $2 million compared to $4 million last year. Investments were focused on stores and the OMS technology project which continues to make good progress. With respect to store count, we opened one new store in the quarter and temporarily closed one store for relocation, which will reopen in Q3. Store count at the end of the quarter was therefore unchanged at 244 stores.

Speaker Change: Okay, make sense. And then, so I'm like you're seeing a little bit of traffic, it's not, it's not this. You know, I'm just curious, we're kind of the big levers, can you guys pull there to help and true traffic levels?

Speaker Change: Yeah, a great question Ryan, thank you.

Speaker Change: You know, we continue to monitor our return on performance marketing, performance marketing is a big element of traffic driving. We have our first fall floor set hitting tomorrow with substantial marketing support behind that, so, you know, we are...

Mark Webb: Turning now to our outlook. As Claire reviewed, following a very strong start to the quarter, we experienced a change in trend in July, which continued through August. And while it is difficult to assess how long these trends will persist, especially as we are just setting the fall floor sets, we believe it is prudent and necessary to take current trends into account as we assess our plans and adjust our expectations for the second half of the year.

Speaker Change: Hopeful that that will help support traffic going into the fall season. And then we also, as part of our sort of retail, high touch retail experience and model, we do a lot of outreach, particularly around new collections hitting, so the store teams will reach out to their known and best customers and get them excited to come in and explore the new offerings and set up styling appointments.

Mark Webb: But third quarter, we expect sales compared to Q3, 2023 to be down 1% to up 2%, compared to $150.9 million in the prior year. We expect Q3 revenue to benefit by about $2 million related to the timing shift associated with the prior year, 53-week calendar, which we have reviewed in prior calls. We expect adjusted evit, to be in the range of $23 and $27 million. As mentioned, our guidance takes into account the current trends we are seeing in the business, as well as easier year-over-year comparisons as we progress through the period.

Speaker Change: So, you know, that sort of just another way that helps us drive traffic, particularly into the retail stores.

Speaker Change: Got it? Thanks for taking my questions.

Speaker Change: Thank you.

Speaker Change: Who are next question comes from the line of Cori Tarle from Jeffree's, your line is open.

Cori Tarle: Great. Good morning and thanks for taking my questions. Can you just walk us through the cadence that you saw in the quarter and maybe any quarter of the day turns that you're seeing just so we can get a better picture for

Mark Webb: The high end of our guidance also assumes a greater level of improvement in full price trends more consistent with what we saw earlier in the year prior to the change in customer behavior beginning in July. In addition, third quarter guidance reflects expected gross margin pressure, though less than experienced in Q2, related to elevated ocean brake costs which have increased since our last update, and additional markdown in promo pressure as we remain committed to managing inventory and season and edging the quarter with inventory levels in line with our expectations.

Speaker Change: sort of the cadence of comps and the trends that you saw.

Speaker Change: Sure, Corey, thanks. We saw a really strong start, actually a really strong performance through the first two months of Q2, May and June, which, as you know, are kind of the heart of our season and very big.

Speaker Change: Time of year for us. As we moved into July, we saw the trajectory change. We saw drop-off in traffic in both channels, and that persisted into August.

Mark Webb: In addition, this guidance reflects approximately $400,000 in SG&A investments related to the OMS project. While we continue to expect to invest in marketing to support the strategies that Claire reviewed, we are taking a more measured pace with these expenditures and other discretionary expenses as we enter the second half given the trends we are seeing. For full year, we are now expecting total revenue to be about flat to plus 1%, gross margin to be down modestly, and adjusted EBITDA to be down in the range of 4 to 9% compared to the 53-week fiscal year 2023.

Speaker Change: So, you know, the guidance that we're providing today is reflective of some of that trend.

Speaker Change: We also, you know, have the two by far biggest months of Q3 ahead of us in September and October and as I said our new floor set hits tomorrow.

Speaker Change: where we really kick into the fall season as opposed to July, which is kind of a sale month and August, which is very much a small transitional month. So, you know, we are hopeful, but we are being prudent as we look forward.

Mark Webb: This outlook is compared to prior year revenue of $608 million and adjusted EBITDA of $113 million and reflects the negative impact from the loss of the 53-week compared to fiscal year 2023 of about $8 million in sales and $2 million in adjusted EBITDA as well as approximately $2 million in operating expenses related to the OMS project. Excluding the impact of the 53rd week and the operating expense investment in the OMS project, we expect fiscal 2024 revenue to be up in the range of 2 to 3% and adjusted EBITDA to be down 1 to 6% compared to the prior year.

Speaker Change: I understand that's very helpful and then just on inventory I know optically it appears that it's up to 15% but

Speaker Change: I think excluding intransit fall goods you mentioned inventory is flat but you also mentioned that you're seeing higher mark down so just how do we think about inventory positioning versus promo posture going forward into the back half thank you so much.

Speaker Change: Yeah, Corey, I'll start with that, the um...

Speaker Change: The 15% is in transit driven and it is the fall assortments.

Speaker Change: and the fact that we in our strategic effort to get in front of the delays that we see, which are basically a week of delay on the water related to the shipping lanes going now, down around the Cape of Good Hope.

Mark Webb: Regarding store count, we still expect to grow net store count by up to 5 stores by the end of fiscal 2024, with up to 4 net openings during the 3rd quarter, including the reopening of the store temporarily closed for relocation in Q2. And with respect to total capital expenditures, we now expect to spend about $22 million in reported CAPEX during fiscal 2024 compared to our prior guidance of approximately $26 million. The change in our expectations is primarily driven by the treatment of cloud-based software implementation costs as prepaid expense in accordance with GAAP. We view the amortization of these investments similar to depreciation and adjust them out of our reported adjusted EBITDA.

Speaker Change: to get to the East Coast, that we made the decision with our Bender Partners, which we have great relationships with.

Mark Webb: In closing, while our updated guidance for the full year reflects a change in trend from our first half performance, it still reflects the resilience and strength of our operating model, delivering adjusted EBITDA margin in the high teens and solid free cash flow, which helps us towards our ultimate goal of achieving a net cash position, even after disciplined investments to drive long-term sustainable growth and total shareholder returns. Thank you.

Speaker Change: to ship about a week early to get in front of that and not have to incur.

Speaker Change: and more expensive air freight, etc. So that was the strategic decision.

Speaker Change: We take a look at our over the rails and it's clear that it is, our on-hand inventories are flat

Speaker Change: and the entrance is up to the about the amount you'll see on the balance sheet all entirely due to following over the rail about a week earlier than last year in a custom to our ownership this year.

Speaker Change: The fact of the matter is the slowdown that Claire mentioned in July was...

Speaker Change: White Spreaded, it was a cross.

Speaker Change: Generally, all metrics traffic was the leading indicator, and stores were the leading indicator there.

Claire Spofford: The, there were a lot of noise generating elements in July.

Speaker Change: So it's hard for us to pinpoint we mentioned it in some of our remarks exactly.

Unknown Executive: I will now hand it back to the operator for questions. Thank you.

Speaker Change: What the drivers are, but it's easy to hypothesize about all the noise that existed out in the environment, and particularly for a customer demographic such as ours who's more educated or affluent, perhaps more interested, I'm not sure.

Unknown Executive: Before we begin the question and answer session, I need to remind you that certain comments made during these remarks on today's call may constitute four looking statements and are made pursuant to and within the meeting of the safe harbor provisions of the Private Security's litigation reform act of 1995 as amended. Such four 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 Jageals SEC filings.

Speaker Change: but that definitely is what we saw slow down in July.

Speaker Change: and that inventory is purchased for our strategic intent.

Speaker Change: did not contemplate that slowdown, so that's where the kind of the switching of gears into our operating model discipline to manage to the best yield we can in season and end the course with inventories as clean as we can get them to enter the new quarter is what you're seeing a little bit of in the Q2 margin results.

Unknown Executive: If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again.

Ryan Meyers: Your first question comes from a line of Ryan Myers from late street capital markets. Your line is open. Thank you. Good morning, guys. Thanks for taking my questions. First one for me, Mark. I just wanted to get clarification on this. I'm sure I understand it correctly. It sounds like there'll be some softness and growth margins here in Q3, but did you say that it's going to be higher than what it was here in Q2?

Speaker Change: and then you're seeing in the guide for Q3 reflective of the sort of assumptions that that trend continues and that we continue to take some level of pricing action to manage our inventories to end Q3 in line.

Ryan Meyers: Hey Ryan, thanks for the question. We said that the pressure in Q3, we would feel pressure, but it would be less than experienced in Q2. With the contributing factors being some elevated freight costs as ocean freight rates have increased. But the Q2 pressure was related to air freight, which is measured in dollars versus ocean freight, which is measured in dimes. And then some pressure related to our commitment to our operating model and discipline, which is to action inventories in season to manage yield to the best to our abilities and to and the core with inventories where we need them.

Speaker Change: So that's kind of how we're thinking about inventories overall.

Speaker Change: Great, thanks so much for the color, best of luck.

Speaker Change: It's quite a...

Speaker Change: Your next question comes from a line of dealing cardid from William Blair, your line is open.

Speaker Change: [inaudible]

Speaker Change: Hey, thanks. So just taking that thought a little bit further, how would you characterize kind of a midpoint of your guide? It sounds like things and maybe I'm reading too much into this maybe got a little better in August and you know, you are seeing good demand around sort of bigger selling periods.

Speaker Change: I'm just kind of curious how you're extrapolating what happened in July through the balance of the year and then also to that same sort of point about sort of who your customer is.

Mark Webb: Okay, make sense. And then something like you're seeing a little bit of traffic snuff or softness. You know, I just curious what kind of the big levers can you guys pull there to help in true traffic levels? Yeah, great question, Ryan. Thank you. You know, we continue to monitor our return on performance marketing, performance marketing is a big element of traffic driving. We have our first fall floor set hitting tomorrow with substantial marketing support behind that.

Speaker Change: I curious how you've factored in the Navy of the election when you're kind of thinking about what happens next.

Speaker Change: and then Claire will jump in on the customer.

Speaker Change: The guidance we mentioned in my remarks, the high side of the guidance assumes some level of return to the full-priced general customer demand and response we've seen prior to July.

Mark Webb: So, you know, we are hopeful that that will help support traffic going into the fall season. And then we also, as part of our sort of retail high touch retail experience and model, we do a lot of outreach, particularly around new collections hitting. So the store teams will reach out to their known and best customers and get them excited to come in and explore the new offerings and set up selling appointments. So, you know, that's sort of just another way that helps us drive traffic, particularly into the retail stores. Got it. Thanks for taking my questions. Thank you.

Claire Spofford: and that's the, you know, some level still of pressure because August.

Speaker Change: the trend actually did not improve in August. July was challenging. August was challenging. August on a one-year compare for us, we don't tend to speak month by month but it was a more difficult compare and we mentioned that the rest of this period is slightly easier compared but we've...

Speaker Change: really given the sustained nature of it from July and August and the general nature of it.

Speaker Change: which, again, Claire will probably hit on in the customer side.

Claire Spofford: that it was the right posture for us, the right approach to the back half of the year, at this point given such a market change from the full price period to this transition sale period.

Corey Tarlowe: You know, our next question comes from a line up, Corey Tarlough from Jeffries. Your line is open. Great. Good morning. And thanks for taking my questions.

Mark Webb: Could you just walk us through the cadence that you saw in the quarter and maybe any quarter date trends that you're seeing just so we can get a better picture for sort of the cadence of comps and the trends that you saw? Sure, Corey. Thanks. We saw a really strong start, actually a really strong performance through the first two months of Q2 May and June, which, as you know, are kind of the heart of our season and a very big time of year for us.

Claire Spofford: to manage the operating model to be disciplined, to be ready to action inventory in season.

Claire Spofford: It's one of the hardest decisions facing retailers when you believe in your product but the demand's not there and we are committed to doing so and managing.

Claire Spofford: ourselves to that discipline within our operating model. The mid-range assumes that the trend doesn't continue, that we continue to action as necessary on strategic promotions and mark downs, and that the customer responds as the customer has been responding to those, and the downside scenario would assume some deterioration in that trend, or some.

Mark Webb: As we moved into July, we saw the trajectory change. We saw drop-off in traffic in both channels and that persisted into August. So, you know, the guidance that we're providing today is reflective of some of that trend. We also, you know, have the two by far biggest months of Q3 ahead of us in September and October. And as I said, our new floor set hits tomorrow, where we really kick into the fall season as opposed to July, which is kind of a sale month and August, which is very much of a small transitional month. So, you know, we are hopeful, but we are being prudent as we look forward. I understand that's very helpful.

Claire Spofford: Lack of response from the customer on the action that we're taking. So that's the best we can brave it up and I'll let Claire jump in on the customer.

Claire Spofford: Yeah, thanks, Dylan.

Claire Spofford: So, you know, we do this customer survey, you asked about distraction and we definitely thought come through loud and clear in our most recent customer survey that we feel did early August.

Claire Spofford: We saw, you know, things pop up in terms of, you know, why she's, what she's paying attention to, the election was certainly part of that, the Olympics were part of it, which, you know, that's obviously short-lived. But, you know, we did see that level of distraction kind of pop in terms of herself reported what she's...

Mark Webb: And then just on inventory, I know optically, it appears that it's up 16%. Bye. I think excluding in transit fall goods you mentioned inventory flat but you also mentioned that you're seeing higher markdown so just how do we think about inventory positioning versus promo posture going forward into the back half. Thank you so much. Yeah, Corey, I'll start with that. The 15% is is in transit driven and it is the fall assortments and the fact that we in our strategic effort to get in front of the delays that we see which are basically a week of delay on the water related to the shipping lanes going now down around the Cape of Good Home to get to the east coast that we made the decision with our with our vendor partners which we have great relationships with to ship about a week early to get in front of that and not have to incur more expensive air freight etc.

Claire Spofford: Thank you for your attention to.

Speaker Change: We also saw a very consistent, we thought some more interested in Markdown or sales.

Speaker Change: Promotions during the period, which is August. It's coming off of July. That's kind of to be infected.

Speaker Change: but we also saw strong purchase and tents for the fall season again so you know we're hopeful that she's true to her word with that and you know as we move into the fall season she comes back to refresher wardrobe as she usually does.

Speaker Change: But again, we're balancing all of this as we contemplate the guide going into Q3 in the balance the earth.

Speaker Change: Thank you. And then on this unit, the new dividend debt paydowns, any kind of visibility you can give on how you're thinking about the uses of free cash from here. Kind of at least just priority buckets growing the dividend and paying down further debt, et cetera.

Speaker Change: At this point, there's no update to the priorities we've stated before, where we remain committed to them, which is the first priority is to invest in the business and the systems upgrades that we're making great progress on, but continuing with the OMS project, which will go in place next year.

Mark Webb: So that that was the strategic decision. We take a look at our over the rails and it's clear that it is our on-hand inventory is flat and the in transit is up to the about the amount you'll see on the balance sheet all entirely due to fall going over the rail about a week earlier than last year and it cussed into our ownership this year. The fact of the matter is the slowdown that Claire mentioned in July was widespread and it was across generally all metrics traffic was the leading indicator and stores were the leading indicator there.

Speaker Change: The new stores, which will start to show net growth in Q3.

Speaker Change: and then it's the distribution opportunities, the pay-down of debt, I think we've made significant progress and paying down debt.

Speaker Change: We initiated the dividend, so those two were maybe becoming a bit more balanced.

Speaker Change: but no further update on priority to grow the dividend other than just say we view it as a dividend, the initiation of a dividend program.

Mark Webb: There were a lot of noise generating elements in July so it's hard for us to pinpoint we mentioned it in some of our remarks exactly what the drivers are but it's easy to hypothesize about all the noise that existed out in the environment and particularly for a customer demographic such as ours who's more educated more affluent perhaps more interested I'm not sure. But that definitely is what we saw slowdown in July and that inventory is purchased for our strategic intent did not contemplate that slowdown so that's where the kind of the switching of gears into our operating model discipline to manage to the best yield we can in season and and the quarters with inventories is clean as we can get them to enter the new quarter is what you're seeing a little bit of in the queue to margin results.

Speaker Change: We declared the Board of Directors declared the second dividend in that stream recently and we view that as a commitment going forward and for sure understand the dynamics of a dividend over time and how to add value through that channel that still the cash flow hallmark of the business model.

Speaker Change: In the guided update for the year is a very strong, margin performance, very strong cash generation and really good investable opportunities for that cash across the business and total shareholder return driving strategies.

Speaker Change: Very good. Thank you very much.

Speaker Change: You are next question comes from a line of Dana Telsey from Telsey Group. Your line is open.

Dana Telsey: Hi, good morning everyone. In terms of the performance, any difference in regional trends that you saw.

Dana Telsey: and then on the category performance, Claire, I think last time, lightweight fabrics and novelty tops and embroidery did well. What do you think drove the shift and dresses this quarter? And any category...

Mark Webb: And then you're seeing in the guide for Q3 reflective of the you know sort of assumptions that that trend continues and that we continue to take some level of pricing action to manage our inventories to end Q3 in line so that's that's kind of how we're thinking about inventories overall.

Claire Spofford: Thoughts of performance for this second half of the year.

Speaker Change: and with five fewer days between Thanksgiving and Christmas this year, how you're planning and just lastly, marketing and no last year there was a big marketing campaign, how you're thinking about marketing spend for the back half. Thank you.

Corey Tarlowe: Great thanks so much for the color best of luck.

Dylan Carden: Your next question comes from a line of Dylan Cardin from William Blair your line is open. Hey thanks so just just taking that thought a little bit further how would you characterize kind of the midpoint of your guide it sounds like things and maybe I'm bringing too much into this maybe got a little better in August and you know you are seeing good demand around sort of bigger selling periods. I'm just kind of curious how you're extrapolating what happened in July to the bounce of the year and then also to that same sort of point about sort of who your customer is.

Mark Webb: Thanks, Dana. Mark and I are looking each other. You want to go first and then I'll jump in. Oh, I'll have the regional, really fair. It's a quick answer. There really wasn't any smoking gun regionally that we saw. Namely speaking in the store.

Speaker Change: Side of things, the retail side of things, the South was a bit more challenged, Texas, et cetera, and there was some weather events that happened, but not enough to make us feel like that was the main driver, but of interest, and then what was interesting and something we're watching is that for the first time lifestyle, center traffic in the quarter actually lagged, mall traffic with respect to year over year declines, and that's something we haven't seen. Again, there was weather, extreme heat, et cetera, across the country, not very hard to pinpoint that as a driver.

Dylan Carden: I'm curious how you've factored in maybe the election when you're kind of thinking about what happens next. Thanks.

Mark Webb: And then Claire will jump in on the customer. The guidance, we mentioned it in my remarks. The high side of the guidance assumes some level of return to the full price. The general customer demand and response we've seen prior to July. And that's the, you know, some level still of pressure because August, the trend actually did not improve in August. July was challenging. August was challenging. August on a one year compare for us.

Speaker Change: But we just thought it was an interesting...

Speaker Change: Note and we'll keep watch on that, still though very excited about the opportunity as we embark on opening new stores and markets, many markets that we already know and still are committed to that strategy, but something that we're watching with interest through the summer was related to those two different traffic patterns, but I'll have it to Claire Spofford.

Mark Webb: We don't tend to speak month by month, but it was a more difficult compare. And we mentioned that the rest of this, this period is slightly easier compares, but we've really given the sustained nature of it from July into August. And the general nature of it, which again, Claire will probably hit on in the customer side, that it was the right posture for us, the right, you know, approach to the back half of the year at this point given such a market change from the full price period to this transition sale period.

Claire Spofford: Thanks Mark. So, Pat Agori Performance. We actually saw two things that we saw slow down and two, two, one, and you're over here, basis.

Pat Agori: and maybe versus expectations in Q2 word dresses as we talked about, you know, that's been a strong trend. We've seen a trade into more separate dressings and that's something we're building into our planning going forward, you know, reducing our dependence on dresses.

Speaker Change: and the other thing that has come down a bit is sort of some of those.

Mark Webb: To manage the operating model, to be disciplined, to be ready to action inventory in season. It's one of the hardest decisions facing retailers, when you believe in your product, but the demand is not there. And we are committed to doing so and managing ourselves to that, that discipline within our operating model. The mid range assumes that the trend doesn't continue, that we continue to action as necessary on strategic promotions and markdowns, and that the customer responds as the customer has been responding to those. And the downside scenario would assume some deterioration in that trend or some lack of response from the customer on the actions that we're taking. So that's the best we can frame it up.

Speaker Change: Moore-Nolty Top, some of the woven tops. That said.

Speaker Change: Wolventhops in our categories of linen and cotton gauze, we're very, very big contributors to the performance in Q2, particularly through the first two months, May and June, which are the bigger months of the quarter.

Speaker Change: [inaudible]

Speaker Change: Great volume done there, and those are annuity businesses as we talk about all the time, nice long margin core programs of the business.

Speaker Change: So those continue to be strong.

Speaker Change: You know, as we look forward into fall, we are encouraged by the fact that our bottom business has been going well and we see a nice trend there. We also, even though it's been summer, have seen a nice trend in sweaters, particularly some of our more fashion forward sweaters like our open crochets. I mentioned that in my script.

Claire Spofford: And I'll let Claire jump in on the customer. Yeah, thanks, Dylan. So, you know, we do this customer survey. You asked about distraction, and we definitely saw it come through loud and clear in our most recent customer survey that we fielded early August. We saw, you know, things pop up in terms of, you know, why she's what she's paying attention to, the election was certainly part of that. The Olympics were part of it, which, you know, that's obviously short lived.

Claire Spofford: But, you know, we did see that level of distraction kind of pop in terms of herself reported what she's thinking about and paying attention to. We also saw a very consistent, well, we saw some more interested in markdown or sales promotions during the period, which is August. It's coming off of July. That's kind of to be expected. But we also saw strong purchase intent for the fall season again. So, you know, we're hopeful that she's true to her word with that.

Speaker Change: Those two categories are big categories in the fall season, and you will see as our fall floor set hit tomorrow, the importance of those. So, you know, that's an encouraging sign. And, and as we think about.

Speaker Change: Christmas, you know, Dana, the good news in the bad news is that Q4 is not the strength in our business because it's more promotional and it's a smaller quarter for us.

Dana Telsey: So we are being very, obviously, mindful in the shifting calendar, we are making some adjustments in terms of...

Dana Telsey: the dates of our floor set, moving something up. And we hope to sort of address the shorter gap in selling season between.

Dana Telsey: Thanksgiving and Christmas with some of those actions.

Claire Spofford: And, you know, as we move into the fall season, she comes back to refresh her wardrobe as she, as she usually does. But again, we're balancing all of this as we contemplate the guy going into Q3 in the balance.

Dana Telsey: and then with regard to marketing, you know.

Dana Telsey: Marketing is a lever that I believe very strongly and we really started to make them.

Dylan Carden: Understood. Thank you.

Dana Telsey: Investments and Commitments to...

Dana Telsey: Building Brand Awareness, that takes time.

Mark Webb: And then on the new dividend debt paydowns, any kind of visibility, you can give on how you're thinking about the uses of free cash from here. At least just priority buckets growing the dividend, paying down further debt, et cetera. Dylan, at this point, there's no update to the priorities we've stated before. We remain committed to them, which is the first priority is to invest in the business and the systems upgrades that we're making great progress on, but continuing with with the OMS project, which will go in place next year.

Dana Telsey: That said, a lot of the performance marketing efforts with digital marketing efforts are very flexible. It's not like the old days where you're doing, now I'm dating myself, but you know, big brand campaigns where you're committing to magazines and or, you know, the print.

Dana Telsey: Component of our marketing ex, which is still really important to our mix, but a lot of our marketing is digital social, which we can flex up or down. Should we see energy?

Dana Telsey: Come back in, we will invest behind it and invest in the marketing.

Dana Telsey: But we are prudent with that and as you know we tend to not get out ahead of ourselves with investments we try to stay balanced. So we will continue to monitor that and pull those levers lean in when we can and drive the business that way.

Mark Webb: The new stores, which will start to show net growth in into three. And then it's the distribution opportunities, the paydown of debt. I think we've made significant progress in paying down debt. We initiated the dividends, so those two are maybe becoming a bit more balanced, but no further update on priority to grow the dividend, other than to say we view it as a dividend, the initiation of a dividend program. We declared the board of directors declared the second dividend in that stream recently.

Dana Telsey: Thank you.

genie instructor: Your next question comes from a line of genie instructor from BTIG. Your line is open.

genie instructor: Hi, good morning. Maybe a long move line. You manage S-China really well on the quarter and it sounds like you found some additional opportunities to take in around that. So they just speak to where you're finding those opportunities on S-China and then overall with the S-China flexibility looks like as you look to preserve margin.

Mark Webb: And we view that as a commitment going forward and for sure understand the dynamics of a dividend over time and how to add value through that channel, but still the cash flow hallmark of the business model in even the guided update for the year is a very strong margin performance, very strong cash generation and and really good investable opportunities for that cash across the business and total shareholder return driving strategies.

Speaker Change: and I'll take that pass at that question.

Speaker Change: The sort of general theory for us, and it's somewhat behind the decision which we never take lightly around our guidance.

Speaker Change: to shift into a cautious mode given the trends that we're seeing.

Speaker Change: is very much in part two.

Dylan Carden: Very good. Thank you very much.

Speaker Change: Put ourselves in the right mindset, the cautious mindset, and that also puts us on the ball's of our feet to make sure we're managing.

Dana Telsey: Your next question comes from a line of Dana Telsi from Telsi Group. Your line is open. Hi, good morning, everyone. In terms of the performance, any difference in regional trends that you saw and then on the category performance, Claire, I think last time lightweight fabrics and novelty tops embroidery did well. What do you think drove the shift and dresses this quarter? And any category of thoughts of performance for this second half of the year and with five fewer days between Thanksgiving and Christmas this year, how you're planning and just lastly marketing.

Speaker Change: the discretionary expenditures and the business to the extent that we can.

Speaker Change: We have, as mentioned, in my remarks, we have wagerplation that

Speaker Change: is within the P&L and that will continue at, you know, the main drivers that we call out this quarter were.

Speaker Change: Wage and Plation, and then we also have the investments that we're making in these strategic foundational IT systems OMS this year.

Speaker Change: and those will continue.

Speaker Change: and the strategic investments will also continue as we mentioned, but as Claire was just going over with respect to the marketing spend, that's an area where we will.

Dana Telsey: And last year there was a big marketing campaign. How you're thinking about marketing spend for the back half. Thank you. Thanks, Dana. Mark and I are looking at each other. You want to go first and then I'll jump in. Well, I'll have the regional real answer to quick answer. There really wasn't any smoking gun regionally that we saw nominally speaking in the store side of things, the retail side of things, the south was a bit more challenged, Texas, et cetera.

Speaker Change: We always do, but we will put extra effort into reviewing.

Claire Spofford: the effectiveness, the expectations of it in light of.

Claire Spofford: the general sort of macro environment that we're seeing.

Claire Spofford: and make decisions where we can and need to curb that expense or to refine the expense to the best performing.

Dana Telsey: And there was some weather events that happened, but not enough to make us feel like that was the main driver, but of interest. And then what was interesting and something we're watching is that for the first time lifestyle center traffic in the quarter actually lagged mall traffic with respect to year over year declines. And that's something we haven't seen. Again, there was weather, extreme heat, et cetera across the country, not very hard to pinpoint that as a driver, but we just thought it was an interesting note and we'll keep watch on that.

Claire Spofford: Opportunity within the mix. So that will continue. And then it's the usual cast of characters of variable or discretionary expenses, where we just pivot into a very

Claire Spofford: You know, specific mindset around knowing where the trend of the business is.

Claire Spofford: and what constitutes discretionary and what's business critical and those are levers that we pull and get ready to pull, stand ready to pull as the trends continue and it's embedded in the guidance ranges that we provide.

Dana Telsey: Still, though, very excited about the opportunity as we embark on opening new stores and markets, many markets that we already know and still are committed to that strategy, but something that we're watching with interest through the summer was related to those two different traffic patterns, but I'll have to clarify for. Thanks, Mark. So category performance, we actually saw two things that we saw slowdown in Q2 on a year of year base, and maybe versus expectations in Q2 word dresses as we talked about.

Speaker Change: Perfect, and then one more on customer count. I know you said it was down slightly in the quarter, but underlying that I'm just wondering what you're seeing on new customer acquisition with the transit been just in terms of customer demographic and if you're continuing to see that younger customer come in.

Speaker Change: Thanks to Nina, you know, over the course of the quarter we did see.

Speaker Change: Again, you know, real strengths in the first two months of the quarter and then a little bit of a drop-off in the latter part, we saw a nice...

Dana Telsey: You know, that's been a strong trend. We've seen a trade into more separate dressings, and that's something we're building into our planning going forward, you know, reducing our dependence on dresses. And the other thing that has come down a bit is sort of some of those more novelty tops, some of the woven tops. That said, woven tops in our categories of linen and cotton gauze. We're very, very big contributors to the performance in Q2, particularly through the first two months May and June, which are the bigger months of the quarter.

Speaker Change: Growth in the direct to consumer file, particularly in our best customer segment. In the quarter, we are a little more challenged in the retail only customers. So that was a little bit reflective of the overall channel performance, but we continue to

Speaker Change: Invest against that.

Speaker Change: You know, slightly younger customer at the younger end of our target demographic, and you know, I think those efforts are ongoing and continue to be a valuable source of growth for us as we move forward.

Speaker Change: Hey, thank you.

Dana Telsey: You know, we saw great, great volume done there, and those are annuity businesses as we talk about all the time, nice long margin core programs of the business. So those continued to be strong. You know, as we look forward into fall, we are encouraged by the fact that our bottom's business has been going well, and we see a nice trend there. We also, even though it's been summer, have seen a nice trend in sweaters, particularly some of our more fashion forward sweaters like our open crochets.

Speaker Change: Your next question comes from a line of Jonah Kim from T.D. Cowan. Your line is open.

Jonah Kim: Hi, thank you for taking my question, just a quick question on marketing front as you continue to evaluate and diversify your channels. How are you measuring success of your marketing investment?

Speaker Change: and what are you most excited about in the second half in terms of marketing? And then would love any color, you provide a little bit of a promotion, but how you what are you seeing in the environment and how you're thinking about for the holidays season in particular. Thank you.

Dana Telsey: I mentioned that in my script. Those two categories are big categories in the fall season, and you will see as our fall floor set hits tomorrow, the importance of those. So, you know, that's an encouraging sign. And as we think about Christmas, you know, Dana, the good news in the bad news is that Q4 is not the strength in our business because it's more promotional and it's a smaller quarter for us.

Jonah Kim: Sure, thanks, Jonah.

Speaker Change: with marketing, you know, it is a full gamut in terms of marketing next, right? Everything from...

Speaker Change: Parent and the catalogs that are still very important to driving our business, to all forms of digital marketing and some social marketing. I spoke to some of the social stuff in Q2 with our J.J. Social Circle, which is brand-right influencers and...

Dana Telsey: So we are being very obviously mindful in the shifting calendar. We are making some adjustments in terms of the dates of our floor sets moving something up. And we hope to sort of address the shorter gap in selling season between Thanksgiving and Christmas with some of those actions. And then with regard to marketing, you know, marketing is a lever that I believe very strongly in. We've really started to make some investments and commitments to building brand awareness.

Speaker Change: and you know we saw some nice engagement there and excitement. I'm excited about all of it. We are very disciplined in terms of performance, marketing and we...

Speaker Change: Me.

Speaker Change: Constantly looked at the CPMs and the return on investment in all those marketing.

Speaker Change: Efforts and Adjust accordingly. You know, one of the dynamics that we are contemplating as we think about Q3 is...

Speaker Change: The CPM's and the expense of certain channels given all of the noise surrounding the elections that tends to drive those expenses up. That is fully contemplated in the way we're thinking about our planning between now and the middle of November.

Dana Telsey: That takes time. That said, a lot of the performance marketing efforts, the digital marketing efforts are very sort of flexible. It's not like the old days where you were doing, and now I'm dating myself. But, you know, big brand campaigns where you're committing to magazines and or, you know, the print component of our marketing, which is still really important to our mix. But a lot of our marketing is digital social, which we can flex up or down.

Speaker Change: So, you know, lots of, lots of great things. We're also leaning in. I mentioned in my script to some things that are really distentral to J. Jill in our value proposition. So, you'll see the J. Jill Iconics.

Speaker Change: Camping, kickoff with our Ponti-Pant in actually this month. We are in September. We're excited about that because it is reflective of kind of the core of our value prop in terms of versatility fabric first.

Dana Telsey: Should we see energy come back in where you will invest behind it and invest in the marketing. But we are prudent with that. And as you know, we tend to not get out ahead of ourselves with investments. We try to stay balanced. So we will continue to monitor that and pull those levers lean in when we can and drive the business that way. Thank you.

Speaker Change: Great Ways to Outfit. We are styling it in a variety of ways, focused at bringing in that target customer that we've been talking about. So that's just another example of the ways that we're kind of innovating the marketing message and really speaking not only to our core customer, but...

Janine Stichter: Your next question comes from a line of Janine Stichter from BTIG. Your line is open. Hi, good morning. Maybe along those lines, you manage SGNA really well on the quarter. And it sounds like you found some additional opportunities to tighten around that. So we just speak to where you're finding those opportunities on SGNA and then overall what the SGNA flexibility looks like as you look to preserve margins. Yeah, thanks, Janine. I'll take the pass at that question.

Speaker Change: to our potential customer that we're trying to acquire.

Mark Webb: and then from a promotional standpoint, you know, as Mark said, given the trends in the business, given the way we're thinking about two, three in the guide, we have contemplated the need to promote marginally in season to move through our inventories.

Mark Webb: As always, we will do that in a very disciplined way and make sure that we are balancing, moving through the inventory, driving the top line with.

Mark Webb: The sort of general theory for us, and it's somewhat behind the decision which we never take lightly around our guidance to shift into a cautious mode, given the trends that we're seeing is very much in part to put ourselves in the right mindset, that the cautious mindset, and that also puts us on the balls of our feet to make sure we're managing the discretionary expenditures in the business to the extent that we can. We have, as mentioned in my remarks, we have wage inflation that is within the P&L, and that will continue at the main drivers that we call out this quarter were wage inflation, and then we also have the investments that we're making in these strategic foundational IT systems, OMS this year, and those will continue.

Speaker Change: Promoting as little as we can in order to achieve those objectives. So again, as narrow as shallow and as short-lived as possible, but those things are things that we flashed over the quarter.

Speaker Change: I'm sorry you asked about Q4, you know, again we will take that same stance with Q4, Q4 tends to be more promotional, we expect that it will be again, but we will try to, you know, stay committed to our approach too.

Speaker Change: Full Price Selling, and manage our promotional cadence accordingly.

Speaker Change: Thank you.

Speaker Change: Your final question comes from the line of Marnie Shapiro from Retail Tracker. Your line is open.

Marnie Shapiro: Hey guys, um...

Marnie Shapiro: Actually Mark, I'm gonna weigh in for one second and say that I will pinpoint for you exactly that the weather is a problem It was a million degrees and so much of the country for July and August and no woman wants to try on clothing when she's all sweaty So I'm gonna blame the weather at least in part of it, but I'm curious

Mark Webb: And the strategic investments will also continue, as we mentioned, but as Claire was just going over with respect to the marketing spend, that's an area where we will always do, but we will put extra effort into reviewing the effectiveness, the expectations of it in light of the general sort of macro environment that we're seeing, and make decisions where we can and need to curb that expense or to refine the expense to the best performing opportunity within the mix. So that will continue, and then it's the usual cast of characters of variable or discretionary expenses, where we just pivot into a very specific mindset around knowing where the trend of the business is, and what constitutes discretionary, and what's business critical, and those are levers that we pull and get ready to pull, stand ready to pull, as the trends continue, and it's embedded in the guidance ranges that we provided.

Speaker Change: When the customer came to your store in May and June, did you see good full price selling? I know linen and gossled very well with that full price.

Speaker Change: When you did break sail in July at August, did she come in to buy the sail or was traffic still muted even then? And the sail didn't really matter.

Mark Webb: Thanks, Mark. Appreciate the weather comments. And I agree with you. Yes, to answer your question, may and June were very strong full-priced selling months. Pretty much across the assortment. As I said, we did see some weakness and dresses on a relative basis. They still had very high penetration to the business, but just didn't perform exactly the way we wanted them to.

Mark Webb: and we did see some drop-off throughout the quarter in some of our woven top businesses.

Mark Webb: Those core franchises were really strong, a lot of fashion was really strong.

Mark Webb: May and June were just really strong full-price months for us. As we moved into July, we tried to lean into that full-price selling probably a little more than we should have. We had a refresh in early July that was a full-price refresh and I think the world had moved on to sale and she didn't respond the way we had hoped she would. We did see a shift into, you know, mark down selling in sale selling in the month.

Janine Stichter: Perfect, and then one more on customer count. I know you said it was down slightly in the quarter, but underlying that I'm just wondering what you're seeing on new customer acquisition, what the trends have been just in terms of customer demographic, and if you're continuing to see that younger customer come in. Yeah, thanks, Janine. You know, over the course of the quarter, we did see, again, you know, real strengths in the first two months of the quarter, and then a little bit of a drop off in the latter part, we saw nice growth in the direct to consumer file, particularly in our best customer segment.

Speaker Change: She was not

Speaker Change: Responding to that to the extent that we would have expected her to, and that was part of the flow down that we thought we just thought general traffic flow down in both channels, which says, you know, she wasn't, which funding to fail, the way we would expect either. So, you know, we are excited to be moving back into the full price.

Janine Stichter: In the quarter, we were a little more challenged in the retail only customers, so that was a little bit reflective of the overall channel performance, but we continued to invest against that slightly younger customer at the younger end of our target demographic, and I think those efforts are ongoing and continue to be a valuable source of growth for us as we move forward.

Speaker Change: Part of the year was fall in September and starting tomorrow. So we'll be looking at it and I'm sure you will give me a review of our product disertment and stores when you go look at it.

Speaker Change: Yes, and I just want to follow up on that comment because even when you pulled the sail, she's still...

Speaker Change: was inviting, but it was the same product that was in the stores from

Speaker Change: May and June, it wasn't except for that one new July set.

Janine Stichter: Okay, thank you.

Jonah Kim: Your next question comes from a line of Jonah Kim from TD Cowan. Your line is open. Hi, thank you for taking my question. Just a question on marketing front as you continue to evaluate and diversify your channels. How are you measuring success of your marketing investment and what are you most excited about in the second half in terms of marketing? And then would love any color you provide a little bit on promotions, but how are you what are you seeing in the environment and how are you thinking about for the holiday season in particular? Thank you.

Speaker Change: did she stop lying linen and gauze as well? Like she stopped lying just across the board, right?

Speaker Change: Chiefslow down across the board, yes.

Speaker Change: Okay, that's our breakdown. Take the rest off-lime with you guys.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: and we have reached the end of our question and answer period and this does conclude today's conference call. We thank you for your participation and you may now disconnect.

Claire Spofford: Sure. Thanks, Jonah. With marketing, you know, it is a full, it's the full gamut in terms of marketing mix, right? Everything from print and the catalogs that are still very, very important to driving our business to all, all forms of digital marketing and some social marketing. I spoke to some of the social stuff in Q2 with our J.Jill social circle, which is brand-right influencers and, you know, we saw some nice engagement there and excitement.

Claire Spofford: I'm excited about all of it. We are very disciplined in terms of performance marketing and we constantly look at the CPMs and the return on investment in all those marketing efforts and adjust accordingly. You know, one of the dynamics that we are contemplating is we think about Q3 is the CPMs and the expense of certain channels given all of the noise surrounding the elections that tends to drive those expenses up. That is fully contemplated in the way we're thinking about our planning between now and the middle of November.

Claire Spofford: So, you know, lots of, lots of great things. We're also leaning in, I mentioned in my script, to some things that are really just central to J.Jill in our value proposition. So you'll see the J.Jill iconics campaign kickoff with our PontiPant in actually this month. We are in September. We're excited about that because it is reflective of kind of the core of our value prop in terms of versatility, fabric first, great ways to outfit.

Claire Spofford: We are styling it in a variety of ways focused at bringing in that target customer that we've been talking about. So that's just another example of the ways that we're kind of innovating the marketing message and really speaking not only to our core customer, but to our potential customer that we're trying to acquire. And then from a promotional standpoint, you know, as Mark said, given the trends in the business, given the way we're thinking about Q3 and the guide, we have contemplated the need to promote marginally in season to move through our inventories.

Claire Spofford: As always, we will do that in a very disciplined way and make sure that we are balancing moving through the inventory, driving the top line with promoting as little as we can in order to achieve those objectives. So, again, as narrow, as shallow, and as short lived as possible, but those things are things that we flash over the quarter. I'm going to dig into that again. Sorry, you asked about Q4. You know, again, we will take that same stance with Q4. Q4 tends to be more promotional. We expect that it will be again, but we will try to, you know, stay committed to our approach, to full-price selling and manage our promotional cadence accordingly. Thank you.

Marni Shapiro: Your final question comes from a line of Marni Shapiro from Retail Tracker. Your line is open. Hey guys, actually Mark, I'm going to weigh in for one second and say that I will pinpoint for you exactly that the weather is a problem. It was a million degrees in so much of the country for July and August, and no woman wants to try on clothing when she's all sweaty. So I'm going to blame the weather at least in part of it.

Marni Shapiro: But I'm curious, when the customer came to your store in May and June, did you see good full-price selling? I know linen and gauss sold very well. Was that at full price? And when you did break sale in July and August, did she come in to buy the sale or was traffic still muted even then? And the sale didn't even, didn't really matter. Thanks, Marni. Appreciate the weather comment. And I agree with you.

Marni Shapiro: Yes, to answer your question, May and June were very strong full-price selling months pretty much across the assortment. As I said, we did see some weakness and dresses on a relative basis. They still had very high penetration to the business, but just didn't perform exactly the way we wanted them to. And we did see some drop-off throughout the quarter in some of our woven tops businesses. But those core franchises were really strong.

Marni Shapiro: A lot of the fashion was really strong. May and June were just really strong full-price months for us. As we moved into July, we tried to lean into that full-price selling, probably a little more than we should have. We had a refresh in early July that was a full-price refresh. And I think the world had moved on to sale and she didn't respond the way we had hoped she would. We did see a shift into, you know, mark down selling and sale selling.

Marni Shapiro: In the month, she was not responding to that to the extent that we would have expected her to. And that was part of the slowdown that we saw. We just saw general traffic slowdown in both channels, which says, you know, she wasn't responding to sale the way we would expect either. So, you know, we are excited to be moving back into the full-price part of the year with fall in September and starting tomorrow.

Marni Shapiro: So, we'll be looking at it and I'm sure you will give me a review of our product assortment in stores when you go look at it. Thank you. Yes, and I want to follow up on that comment because even when you pulled the sale, she still wasn't biting. But it was the same product that was in the stores from May and June. It wasn't except for that one new July set. Did she stop buying linen and gauze as well? Like, she stopped buying just across the board, right? She slowed down across the board, yes. Okay, that's perfect.

Marni Shapiro: I'll take the rest offline with you guys. Okay. Thank you.

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