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spk01: Thank you for listening to the J. Jill First Quarter Fiscal 2021 Earnings Commentary. Claire Spofford, President and Chief Executive Officer, and Mark Webb, Executive Vice President and Chief Financial Officer, will provide further remarks on the company's first quarter fiscal 2021 results, ended May 1st, 2021, which were announced with the press release dated June 8th, 2021. Following today's remarks, there will be no question and answer session. I need to remind you that certain comments made during these remarks may constitute forward-looking statements and are made pursuant to and within the meaning of the safe harbour provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Both risks and uncertainties are described in the press release and J. Jill's SEC filings. The forward-looking statements made on this recording are as of June 8, 2021, and J. Jill does not undertake any obligation to update these forward-looking statements. Finally, J. Jill may refer to certain adjusted or non-GAAP financial measures during these remarks. A reconciliation schedule showing the GAAP versus non-GAAP financial measures is available in the press release issued June 8, 2021. If you do not have a copy of today's press release, you may obtain one by visiting the Investor Relations page of the website at jjill.com. I will now turn the remarks over to Claire.
spk02: Thank you, and good morning, everyone. Our first quarter results reflect encouraging progress against initiatives focused on strengthening the operating model and driving healthy margin recovery. Like many in retail, we are pleased to participate in the strong rebound in consumer activity this spring with the accelerated rollout of vaccinations and the lifting of many COVID-19 related restrictions across the country. For the quarter, we delivered top line growth of 42% compared to last year, balanced across our retail and direct channels. In addition to the benefit of anniversary last year's temporary store closures, sales growth was driven by healthy conversion and full price selling in both channels. These results coupled with continued disciplined inventory management and a more refined promotional cadence drove strong gross margins expansion for the period leading to adjusted EBITDA of $17 million for the first quarter. While traffic continues to recover, Our customer is showing us she's really excited to shop with us in stores and online. We saw a great response to our product assortments this spring. Customers, both existing and new, are really engaging with us and are reacting to our great wear now offering. From our comfortable knit to our beautiful dresses and inspiring Pure Jill collection, she's gravitating toward novelty and newness, both online and in-store, with a sense of urgency to purchase, not reliant on promotions. As we look forward, we will continue to drive a deliberate cadence of newness to continue to build on the momentum we are seeing. Most recently, we were thrilled with the strong performance we've seen to date in May, particularly over the Mother's Day holiday. With the ability to celebrate holidays and special moments in person with family and friends, our customer is eager to shop and we are thrilled to be delighting her once again. With respect to our operating model and the ongoing work to strengthen the foundation, we're especially committed to our continued focus on disciplined inventory management. The strong growth margin recovery we saw in Q1 benefited from our leaner and healthier inventories. This allowed us to sell more at full price and pull back on promotions accordingly. This is a great indicator of a healthier business that we intend to lean into going forward. In summary, we are very pleased with the progress made during the first quarter and believe it is an important step forward We continue to see opportunity to refine our operating model and drive efficiencies across our organization, and we will be working hard to make progress against these initiatives. We look forward to continuing to delight our customers with incredible product and the shopping experience she trusts us to deliver wherever and whenever she chooses to shop J Jill. I will now turn the call over to Mark to review our first quarter financial results in more detail.
spk00: Thank you, Claire, and good morning, everyone. As Claire mentioned, the first quarter of 2021 marked another quarter of good progress for JGL. Our strategy coming into 2021 following COVID impacted 2020 was to drive gross margin through lean inventories and lower promos. Our product collections resonated better with customers than anticipated, contributing to results above our expectations for the quarter. Store sales were up 56% over Q1 2020, which was impacted by the temporary store closures related to COVID-19. Also, each month in the first quarter of 2021 was sequentially better than the prior month when compared against 2019. Direct sales were above 2019 levels and up 33% versus Q1 2020, driven by positive customer response to new full-price product collections. Q1 gross margin was 68%, up almost 1,300 basis points over Q1 2020 and up 220 basis points compared to Q1 2019. The improvement in gross margin was driven primarily by better full-price selling and lower promotional discounts. SG&A expenses were $79 million, down $9 million versus prior year and down $26 million versus 2019, driven by work done last year on our operating model that has resulted in refined marketing investment and lower selling and occupancy costs. Adjusted income from operations was $8.8 million compared to adjusted loss from operations of $35.6 million in the first quarter of fiscal 2020. For the first quarter of fiscal 2021, the company did not incur any impairment charges compared to $52 million of impairment charges in the first quarter of fiscal 2020. Please refer to today's press release for a reconciliation of adjusted income from operations. Turning to the balance sheet, Total liquidity, as defined in the priming terminal agreement, measured as ending cash plus check flow plus ABL availability, was $31.3 million at the end of the first quarter. In line with our goal to manage inventory tightly to support full price selling, inventories at the end of the quarter were down 21% compared to last year's quarter end. Warrants related to the subordinated credit facility and the embedded derivative associated with the priming term loan were marked to market during the quarter, driven by the increase in J. Jill's stock price since the end of fourth quarter 2020, resulting in a non-cash charge to the income statement of approximately $21 million, which caused an increase in the related liabilities of the same amount. Additionally, since the end of the quarter, in accordance with the terms of the priming loan, we issued approximately 272,000 additional shares to the priming lenders as of May 31st. With the continued increase in JGL's stock price since the end of first quarter, we will recognize an additional $39 million non-cash charge for the final mark-to-market adjustment as of May 31st. the value of the warrant and embedded derivative liabilities are considered equity rather than liabilities as of May 31st with no further mark-to-market adjustments beyond that date. Capital expenditures in the quarter were about $500,000 versus $1.8 million last year. We still expect to spend approximately $10 million in capital for full fiscal year 2021. We closed two stores in the first quarter, ending with 265 stores, and still expect to close about 20 stores for the full year 2021. As we look to the balance of the year, as Claire mentioned, we are pleased with our strong start to the second quarter and with the momentum in the business. We expect second quarter revenues to continue to rebound as we anniversary temporary store closures from last year and store traffic levels continue to recover in both lifestyle centers and malls. With respect to gross margin, we, like many of our peers in the industry have reported, have and expect to continue to experience supply chain disruption. To date, any impact has been negligible, and we will continue to work with our supplier base and logistics providers to mitigate as much as possible going forward. We remain focused on driving full price selling at lower promotional discounts, which should support gross margin expansion through the end of this year. Thank you. And I'll now hand it back over to Claire.
spk02: Thank you, Mark, and thank you all for your attention this morning. We are pleased with the momentum we're driving in the business and the great response we're seeing from our customers. I want to thank all of our teams and stakeholders for their ongoing support of J. Jill. We have an incredible brand and a great opportunity in front of us to continue to build on the progress we're making. We look forward to updating you again on our next earnings call. Thank you.
spk01: This concludes today's conference call. On behalf of JJL, we thank you for participating. You may now disconnect.
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