J.Jill, Inc. Common Stock 2027 Q2 Earnings Call

Please go ahead. Good morning, and thank you for joining us.

Our second quarter results indicate a meaningful step forward and reflect the progress we are making across each of our three strategic priorities: evolving the product assortment, enhancing the customer journey, and advancing the way we work. We are thrilled to have delivered results that exceeded our expectations and represented a significant improvement in trend from the first quarter. This momentum has carried over into the start of the third quarter and gives us confidence to raise our guidance for the year, while strategically deploying tariff refunds to invest in the business. Before we discuss our outlook, let me provide highlights from our second quarter results. Net sales for the second quarter increased compared to last year, supported by an improving trend in our full price business across both stores and direct.

In the direct channel, we continued to enhance the product detail page experience with improved fabric and fit information, as well as richer item-level storytelling. This channel also benefited from increased markdowns given the seasonal sale period. In stores, we saw positive traffic for the quarter where our teams are effectively engaging existing, returning, and new customers with the energy and expertise that differentiate the J.Jill in-store experience. In terms of profitability, we delivered adjusted EBITDA of $20.1 million, excluding the benefit of tariff refunds and the actions we initiated in the quarter to strategically invest in the business. My confidence in the quarter's results goes deeper than the numbers to the source of the progress. From meaningful improvement in customer acquisition and more effective marketing to stronger product execution. The customer file is stabilizing and new to brand acquisition is accelerating. Exactly the combination we have been working towards.

Huge thanks to our teams who are aligned and delivering with speed and precision. With that said, I want to put our progress in context. While we are encouraged by both the direction and momentum, we are still in the early stages of this evolution. Each quarter, we learn more about our customer, sharpen our assortment strategy, and continue to strengthen and build the capabilities that will drive sustainable long-term growth. Let me walk you through our three areas of strategic focus. I'll start with evolving the product assortment. Our Q2 assortment represented continued progress and reinforced important learnings that will directly inform the second half. We saw meaningful strength in a number of categories, particularly outerwear and accessories. Accessories has been a standout as it scales, which we expect to continue into Q3.

We are also very encouraged by the introduction of our Luxe Lounge collection and the relaunch of our denim assortment, which are seeing great early results. In terms of opportunity, customer purchasing behavior and direct feedback point to an appetite for more color and more breadth. We heard this in Q1, and we are taking action that will begin to be seen in our fall and holiday assortments. We anticipate these kinds of learning cycles as we move forward, and I am proud of how the team is incorporating feedback and reacting in real time. We are constantly evaluating the assortment to make sure we are serving both our most loyal existing customers and the newer customers we are attracting into the brand. We are also modernizing our sub-brand portfolio.

We are consolidating the best-selling pieces of the Wearever sub-brand into the core J.Jill assortment in a way that preserves what customers love about it. This is a deliberate decision to simplify our lineup and reallocate investment into areas where we see the most growth potential. For example, Luxe Lounge, which include our travel capsules and denim, an important lifestyle component of the brand, are now building into meaningful categories. Pure Jill, our most iconic sub-brand, known for quality and craftsmanship, remains a priority. Looking ahead to the second half, we are entering it with a stronger and more strategically aligned product framework. Our design and merchandising teams are fully in sync. The early reads on our fall assortments are encouraging, and we expect gradual sequential improvement to continue.

Turning to enhancing the customer journey, this was a standout area in Q2, thanks to the significant progress made by our teams. Our total customer file saw improvement from the start of the year and is showing signs of stabilization from which we have a foundation to grow. That improvement was driven by strong new-to-brand acquisition and continued success reactivating lapsed customers. The profile of our new-to-brand customer is also improving, with a slightly younger customer coming into the file. These are early indicators that our approach to broadening the appeal of the brand is resonating with the evolving J.Jill customer without disrupting the deep relationship we have with our highly loyal base. We are also seeing these new-to-brand customers spend more with us than in recent history, driven by higher average order value and more trips, both of which are encouraging.

Supporting this success is our marketing engine, which is performing well across channels, driving new customer acquisition, and generating stronger returns on our investment. SMS continued its growth trajectory with our subscriber file scaling nicely, and our catalog is delivering improved profitability with disciplined optimization, driving better returns on a more focused circulation base. Our loyalty program is also showing encouraging early signs, with members retaining at a meaningfully higher rate than non-members. Behind that, our marketing team is bringing together J.Jill Credit Card and our loyalty program, J.Jill Inspired Rewards, into a more unified view of the customer, organized around two clear areas of focus, acquisition and retention. Historically, the vast majority of our marketing investment has gone toward existing customers and capturing demand we know is there. We are actively rebalancing this mix toward prospective and reactive customers while building broader brand awareness to drive demand generation.

Looking ahead, we are investing even more into these efforts, deploying tariff refunds into second-half marketing, including at the top and middle of the funnel, an investment this year that we believe will have a continued impact as we move into next year and beyond. On our third pillar, advancing how we work, we continue to strengthen and build the capabilities that will support our business at a higher level over time. We are increasingly leveraging AI-enabled tools to drive efficiencies across the organization, and our teams are utilizing these new tools to increase capacity, improve decision-making, and unlock new ways of working. Our new AI-enabled merchandise planning and allocation system is on track to begin launching later this year and will be an important new tool to support full price selling, which will drive top and bottom-line growth.

In addition to this work, we are also progressing on several investments to enhance our digital platform and personalization technology, both of which will modernize our digital business. Additionally, we are utilizing a portion of the tariff refunds to pull forward the kickoff of exciting technology initiatives into fiscal 2026 that should deliver benefits earlier in 2027. It is important to note that we have made the intentional decision to invest most of the refunds into these strategic initiatives, which we believe improves the customer experience, strengthens the business, and positions us for a more productive 2027. We are also moving forward with a strong team fully in place. The energy across the organization is palpable. This was highlighted in our recent denim launch. The product teams tested new shapes and moved quickly once we saw which resonated most strongly.

Our marketing team developed an integrated influencer campaign that drove exceptional early engagement with nearly 1 million impressions in the campaign's first three days alone. Our stores brought the launch to life with dedicated fit events and activations, and our website team built dedicated content to support it. This is a great proof point of what we can achieve when our product, marketing, stores, and direct teams are fully and seamlessly aligned. With that, I'll turn it over to Mark to speak to the details of our financials and our updated outlook.

Thank you, Mary Ellen, and good morning, everyone. We are very pleased with our second quarter performance, as Mary Ellen reviewed. We delivered sales growth above our guidance and underlying adjusted EBITDA of $20.1 million. This underlying performance excludes the $13.3 million in net tariff refunds received in the quarter, as well as the deliberate decision to begin to invest in strategic initiatives and, to a lesser extent, cover emerging cost pressures from fuel surcharges on shipping. in the second quarter, about $600,000 of the refund was absorbed by these investments and costs. The receipt of the tariff refunds presents an opportunity, and we have made a deliberate decision to invest most into strategic priorities we believe strengthens the business, supports our momentum, and sets us up well for 2027. Both our third quarter and full year outlooks, which I'll discuss in a moment, reflect this decision.