J.Jill, Inc. — Form 10-Q Summary
Reporting period: Thirteen weeks ended May 1, 2021 (fiscal 2021 first quarter); comparable period ended May 2, 2020. The filing is dated June 9, 2021. J.Jill is an omnichannel women’s apparel retailer with 265 stores at quarter-end and an e-commerce business.
Financial performance
| Metric | Q1 FY2021 | Q1 FY2020 |
|---|---|---|
| Net sales | $129.1 million | $91.0 million |
| Gross profit / gross margin | $87.8 million / 68.0% | $50.2 million / 55.1% |
| Operating income (loss) | $8.7 million | $(89.7) million |
| Net loss | $(18.3) million; $(1.89) per diluted share | $(70.3) million; $(7.91) per diluted share |
| Adjusted EBITDA / margin (non-GAAP) | $16.9 million / 13.1% | $(25.8) million / (28.4)% |
| Cash from operating activities | $(4.1) million | $3.0 million |
- Sales rose 41.9%; retail contributed $54.9 million and direct sales $74.2 million. Management attributed the improvement to all stores being open, stronger full-price selling, and fewer promotions. The comparison is substantially affected by store closures in the prior-year quarter.
- Gross margin improved with fewer markdowns and promotions. SG&A declined 10.0% to $79.1 million, including lower marketing and occupancy costs, partly offset by higher compensation and shipping costs.
- Reported net loss included $20.8 million of noncash fair-value expense on warrants and a derivative; the warrant charge was $18.6 million. The prior-year quarter included $52.0 million of impairment charges and substantial COVID-related store-closure effects.
Cash, liquidity and debt
- At May 1, 2021, cash was $10.7 million, current assets $121.8 million, and total assets $489.4 million. Shareholders’ deficit was $115.0 million.
- Revolver borrowings were $23.0 million, with $14.1 million of additional availability under the $40 million ABL facility; letters of credit of $2.9 million reduce availability. Debt components reported in the debt note totaled $231.7 million, excluding the revolver; including revolver borrowings, reported borrowings were approximately $254.8 million.
- Operating cash use reflected payments of accounts payable and accrued expenses, including vendor and rent liabilities deferred from FY2020. Financing provided $10.9 million, primarily from net ABL borrowing; capital expenditures were $0.5 million.
- The company expected a tax refund exceeding $25 million, substantially related to CARES Act net operating loss carrybacks. Management expected to use funds from the refund toward a required $25 million Priming Loan paydown by August 30, 2021.
Outlook, risks and unusual items
- No numerical revenue or earnings guidance was provided. Management said its current base forecast projected sufficient liquidity over the coming 12 months, but warned that risks could leave liquidity insufficient.
- The filing explicitly states that substantial doubt exists about the company’s ability to continue as a going concern within one year. Key uncertainties include store performance, customer demand and resilience, further COVID-19 disruption, and timing of the expected tax refund.
- On May 31, 2021, after quarter-end, the company issued 272,097 shares to Priming Loan lenders instead of repaying $4.9 million of principal. It disclosed that this would result in second-quarter noncash charges of approximately $0.6 million on the derivative and $38.3 million on warrants, followed by reclassification of the liabilities to equity. The Priming Loan requires at least a $25 million principal paydown by August 30, 2021 to avoid additional PIK interest and fees.
- Management reported no material change to previously disclosed risk factors, no material market-risk changes, and no legal proceedings believed likely to have a material adverse effect. Disclosure controls were assessed as effective.
Important facts for investors to verify
- Whether and when the expected tax refund is received, and whether it supports the required Priming Loan paydown by August 30, 2021.
- Available ABL borrowing capacity and compliance with liquidity and other credit-facility requirements as seasonal cash needs change.
- Store and direct-channel sales, full-price selling, and gross-margin sustainability against a prior-year quarter disrupted by closures.
- The effects of warrant and derivative remeasurement, share issuance, and resulting dilution on future reported earnings and equity.
- Progress on the going-concern risks identified by management and the assumptions underlying its 12-month liquidity forecast.