J. Jill, Inc.

Thank you for standing by and welcome to the JGL second quarter 2025 earnings conference call. Before we begin, 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 meeting of the safe harbor provisions of the private securities litigation reform act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties are described in the press release and JGL's SEC filings. The forward-looking statements made on this recording are as of September 3rd, 2025 and JGL does not undertake any obligation to update these forward-looking statements. Finally, JGL 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 September 3rd, 2025. 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 JGL.com. I'd now like to turn the call over to Mary Ellen Coyne, Chief Executive Officer and President at JGL. You may begin.

Good morning, everyone, and thank you for joining us today. With my first full quarter as CEO of JGL completed, I want to begin by thanking our team. for their dedication and support. Since joining in May, I've had the opportunity to dive deeper into all aspects of our business, and I remain confident in the significant opportunities ahead, despite navigating some near-term challenges. In the second quarter, sales trends sequentially improved month over month enabling us to deliver total sales down less than 1% and adjusted EBITDA of $25.6 million. Improved traffic, both online and in stores, supported this performance, as well as increased promotional activity, which we leveraged to better align inventory to sales trends as we entered the back half of the year. I am energized by what I see, having had 100 days to assess this business. We serve a growing and valuable demographic. We have a deep understanding of this customer segment and have therefore developed a loyal customer base. We operate with discipline, which has allowed us to consistently deliver high margins and generate significant free cash flow. We will continue to lean into these strengths and position the brand to drive long-term profitable growth. To do this, we must expand our customer file, attracting a significant number of new customers re-engaging those who have shopped with us before, and continuing to delight our existing loyal customer base. In the near term, we plan to move quickly but thoughtfully, testing new initiatives and leaning in to those that work to deliver on our objectives and widening the aperture of our focus to appeal to a broader audience. Concentrating on driving customer growth, we will execute immediately on three areas. One, evolving our product assortment. Two, enhancing the customer journey. And three, improving the way we work. With respect to product, we need to widen the appeal of our assortment to attract new customers while continuing to deliver newness that is relevant and versatile to fit her lifestyle. Our new Chief Merchandising Officer, Courtney O'Connor, has been partnering closely with creative director Elliot Staples and the design, merchandising, and planning team to develop a compelling assortment for spring 2026 while making subtle refinements in the product assortments and presentations for fall and winter this year. We are going to focus on delivering a stronger, more cohesive product assortment moving forward eliminating redundancy to incorporate new styles that serve more of the customer's lifestyle needs to capture a greater share of her wardrobe. As we make these enhancements, we will also be leaning into expansion opportunities in areas such as accessories, building on what is currently a small but highly scalable business. Moving to our second area of focus, enhancing the customer journey. We are evaluating ways to expand our reach to capture the full marketing funnel, top, middle, and bottom. We just recently completed a small test with television advertising, and for the back half of this year, we made adjustments to the marketing mix, enabling greater flexibility to engage a wider audience. In addition, as we evaluate the right balance across our marketing channels, We have reshot certain imagery for the second half of the year that you will begin to see across digital media, catalogs, in stores, and online soon. We run highly profitable stores, which also serve as a great marketing vehicle for the brand. They allow us to tell our product story to both new and existing customers, and we are excited for our upcoming store openings later this fall. We are confident in our long-term goal to open 50 stores by the end of 2029. As we execute on this objective, we are constantly evaluating opportunities for store locations focused on driving productivity, welcoming new customers, and increasing brand awareness. We know the opportunity that is in front of us, and it is one that our whole organization is rallying around. To support this, we are focused on improving the way we work, leaning into technology capabilities that will enable us to work smarter, faster, and more effectively. This includes building a strategic technology roadmap, incorporating opportunities for AI implementation in order to accelerate growth, gain efficiencies, and improve the customer experience. We're fostering a corporate culture that isn't just about process improvement. but about the agility and urgency needed to capitalize on the opportunities ahead of us. The teams did a great job in executing the implementation of OMS and we are pleased to share that we launched the new ship from store capabilities well ahead of plan and in time for the fall and winter season launches. As we continue to evolve the brand and progress forward, we are in the office collaborating with one another There's a palpable energy across the organization. In summary, I believe through the actions and strategies we are putting in place, we are addressing the right priorities, enabling us to build on the strengths of our proven operating model while capitalizing on the areas that will drive sustainable, profitable growth. With that said, we are continuing to operate in a very dynamic and uncertain environment. particularly as it relates to inflation and tariffs. In response, our team is leveraging our strong relationships with vendor partners and staying nimble and responsive as we navigate the evolving macro landscape. As we look toward 2026 and beyond, we are excited to write the next chapter, building a stronger, more agile business to deliver enhanced shareholder value. I look forward to updating you on our progress. Now, I'll turn it over to Mark for a detailed review of our financial performance.

Thank you, Mary Ellen, and good morning, everyone. Following a challenging start to the second quarter, we were encouraged that sales trends stabilized and improved into June and July. We remained committed to our disciplines during the quarter, assessing slow-moving inventory units and taking action when necessary resulting in improved end of quarter inventory levels compared to the end of Q1. And we rolled out Ship From Store, our first omnichannel capability post-OMS Go Live, extending it to the entire fleet during the month of July. Our operating model continues to demonstrate its strength and resilience, generating $17 million of free cash flow in the quarter, resulting in end of quarter cash on the balance sheet of $46 million. Now, let me provide more details on our second quarter results. Total company sales for the quarter were about $154 million, down 0.8% compared to Q2 2024. Total company comparable sales for the quarter were down 1%. Store sales for Q2 were up 0.4% compared to Q2 2024, driven by three net new stores in the quarter compared to last year. and direct sales, which represented about 46% of total sales in the quarter, were down about 2% compared to second quarter of fiscal 2024. As mentioned, sales trends improved each month of the second quarter. This was in part due to positive customer response to the summer sale in July, which helped clear markdown goods and end the quarter with clean inventories. Q2 total company gross profit was about $105 million, down about $4 million compared to Q2 2024. Q2 gross margin was 68.4%, down about 210 basis points versus Q2 2024, driven primarily by a higher mix of markdown sales and higher full price promotional rates as we took action and successfully moved the liable inventory we carried into the quarter. Gross margin rate was also pressured by approximately 50 basis points related to tariffs. SG&A expenses for the quarter were about $89 million compared to approximately $86 million last year. The increase was driven by higher store expenses, driven by net new stores, and higher occupancy costs on lease renewals. higher shipping expenses, non-recurring costs, and higher marketing expenses, partially offset by lower management incentive accruals and OMS-related costs, which were slightly below last year at about $300,000 for the quarter. Adjusted EBITDA was $25.6 million in the quarter compared to $30.2 million in Q2 2024. Interest expense was $2.7 million in Q2 compared to $3.7 million last year. Adjusted net income per diluted share was 81 cents compared to $1.05 last year, which reflected an average weighted diluted share count of 15.3 million shares this year versus 15.1 million shares last year. We repurchased 68,000 shares for approximately $1 million in second quarter, bringing year-to-date repurchases to 255,000 shares for $4.5 million and resulting in approximately one cent benefit to reported second quarter adjusted diluted EPS. As of September 3rd, we have approximately $20 million remaining on the $25 million share repurchase authorization. We also paid our quarterly dividend of eight cents per share on July 9th, and as announced on August 27th, our board approved payment of the Q3 dividend on October 1st to shareholders of record as of September 17th. Please refer to today's press release for reconciliations of non-GAAP financial measures to their most comparable GAAP financial measures. Turning to cash flow, for the quarter, we generated about $19 million of cash from operations, resulting in ending cash of about $46 million. Looking at inventory, We successfully cleared excess inventory units during the quarter, ending second quarter with inventories about flat to last year, excluding the incremental costs associated with tariffs, including the costs of tariffs in both on hand and in transit inventory. Total reported inventory is up about 5% compared to end of second quarter last year. Capital expenditures for the quarter were about $3 million compared to $2 million last year. Investments were focused primarily on stores and the project to launch ship and store capabilities, which rolled out during the quarter and are now active in all stores across the fleet. We are excited to have this Omni capability enabled. It will help drive sales growth and support gross margins as previously unfulfillable demand is fulfilled. With respect to store count, we closed two stores during the second quarter. we did not open any new stores in the quarter resulting in end of quarter store count of 247 stores compared to 244 stores at end of Q2 last year. Now turning to our outlook. Under the current global trade agreements, we now have more visibility to the impact of tariffs on our cost of goods sold and our working levers to mitigate the impact as much as possible. While there remains some uncertainty with how all of these actions by us and others across the industry will impact the U.S. consumer, we are providing certain guidance metrics for the third quarter of fiscal 2025 as detailed today in our press release. For third quarter, we expect adjusted EBITDA to be in the range of $18 to $22 million. This range assumes sales will be about flat to down low single digits for the quarter and comps will be down in the low to mid single digits. Gross margins are assumed to be down compared to last year, more than experienced in Q2, driven primarily by tariff pressure. With respect to tariffs, rates for our largest sourcing countries have landed on average around 20%, with India now at 50%. This compares to our prior assumption of 10% on all countries and 30% on China. Given these elevated rates, our guidance for the third quarter assumes approximately $5 million of incremental impact from tariffs, net of vendor negotiated offsets. We would assume a similar level going forward on a quarterly basis should current tariff policies remain in place. As Mary Ellen mentioned, we are working multiple levers to mitigate the impact as much as possible, including negotiating savings offsets with our vendors, adjusting on-order quantities, and strategically reviewing promotion and pricing strategies to drive higher average unit retails. With respect to capital expenditures for the year, we continue to expect spend of between $20 and $25 million. And regarding store count, we still expect to open between one and five net new stores this year, with two new stores planned to open toward the end of the third quarter. As demonstrated year to date, the business continues to generate strong free cash flow, and we remain committed to our strategies to support total shareholder returns, which includes paying our dividend, repurchasing shares, and paying down debt. As previously mentioned, we announced our quarterly dividend of $0.08 per share payable on October 1st to shareholders of record on September 17th. We have repurchased approximately 255,000 shares year to date, including the repurchase of 68,000 shares in Q2 for about $1 million. We will continue to opportunistically repurchase shares under the remaining $20 million of our $25 million authorization. And with funded debt currently sitting at $70 million on the balance sheet with plenty of term remaining, we have ample flexibility and will continue to opportunistically evaluate refinancing options. Importantly, as Mary Ellen mentioned in her remarks, we are encouraged by the opportunities in front of us. We will continue to operate the business with discipline and are committed to making strategic investments this year to sharpen our brand voice through evolved and focused product assortments, and a refined marketing approach to build our customer file and drive profitable growth. Thank you. I will now hand it back to the operator for questions.