Good morning. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the J.Jill Fourth Quarter 2022 Earnings Conference Call. On today's call are Claire Spofford, President and Chief Executive Officer; and Mark Webb, Executive Vice President Chief Financial Officer and Chief Operating Officer. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] 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 meaning 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. Those 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 March 14, 2023, 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 March 14, 2023. 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 call over to Claire.

Thank you, operator, and hello, everyone. Thank you for your interest in J.Jill. For today's call, I will review highlights of our fourth quarter and full-year performance and provide an update on our strategy before turning the call over to Mark to review our financial performance and outlook in more detail. We are pleased to have delivered stronger-than-expected top and bottom-line results for the fourth quarter. Sales increased 1.7% versus the prior year and adjusted EBITDA came in at $15 million. We believe the actions we took entering the quarter, specifically related to our decision to pull holiday and winter deliveries forward positively impacted our results and supported strong full price selling early in the quarter. Throughout the period, we continue to see little price resistance to unique and novelty styles, to gravitated toward dresses and sweaters, and cozy seasonal styles like Chanel sweaters and versatile occasion options. These results include a slightly higher promotional cadence over the holiday period in order to exit the quarter in a clean inventory position. Our fourth quarter performance capped off a strong year for J.Jill, in which we delivered sales growth of over 5%, as well as an increase in adjusted EBITDA of over 19%, driven by gross margin expansion and disciplined expense management. These results are a testament to the hard work of our teams and the improvements and increased disciplines we've instilled in our operating model over the past two years as we focused on full price selling inventory management and slowing newness. Through the strong execution of these principles, we have reinforced our foundation allowing us to better capitalize on our brand strength and the opportunities that lay ahead. As we look forward to driving profitable growth, we remain encouraged by several important elements of the J.Jill business. We have…

Thank you, Claire, and good morning, everyone. We are very pleased with performance in 2022 as our disciplined profit focused operating model continued to deliver strong results, including healthy cash generation. The fourth quarter ended the year on a strong note with results above our expectations. Total company comparable sales for the fourth quarter increased 5.3%, driven by strength in the stores channel. Total company sales for the quarter were $148 million, up 1.7%, compared to Q4 2021. This performance was better than prior guidance due largely to a better-than-expected January, which was the strongest month in the quarter when compared to prior year. Store sales for Q4 were up over 6% versus Q4 2021 on 4% fewer stores. Traffic and full price average unit retail drove the increase over last year, with the traffic comparison likely benefiting in part due to the impact to traffic last year from the COVID Omicron surge. Direct sales as a percentage of total sales were 50% in the quarter, compared to the fourth quarter of fiscal 2021, direct sales were down 2.5% as sales mixed more to markdown and online returns ticked up slightly. Q4 total company gross profit was $95 million, up $2 million, compared to Q4 2021. Q4 gross margin was 64.4%, up 50 basis points over Q4 2021, driven by about 270 basis points of favorability, which more than offset margin pressure from increased raw material costs and additional markdowns taken in the quarter to ensure clean inventory as we start 2023. SG&A expenses were $87 million, compared to $85 million last year, driven by increases in marketing, store selling costs on higher sales and slightly higher operating hours and G&A overhead. Adjusted EBITDA was $15 million in the quarter, compared to $15.2 million in Q4 2021. For the full-year,…

[Operator Instructions] And your first question comes from the line of Dana Telsey from Telsey Group. Your line is open.

Good morning, everyone, and congratulations on the continued progress and nice results. A couple of questions, as you think about the Welcome Everybody campaign. How do you think of that continuing to evolve Claire as you had mentioned? Is it marketing? Is it influencers? Is it product? What should we see in terms of product as we go through the year? And given the raw material costs, how are you thinking about pricing in ‘23 versus ‘22? And then just on the gross margin side, given the level of promotions in the macro, how are you thinking about promotions given your clean inventories? And on that margin side, how much is freight favorability this year and is there differences as we go through the year along with the impact of raw material costs? Thank you.

Thanks, Dana, I'll take the first part and then I'll let Mark speak specifically to the freight impact. The Welcome Everybody campaign is, as we said, we're pleased with the success to-date, it’s really a reflection of the whole brand and the inclusive sizing initiative is part of that. So we are continuing to lean into that. We are seeing some real -- some terrific results in terms of paid social video channels, new channels for us and then some very focused marketing efforts against acquiring customers in the inclusive sizing space and some nice, kind of, return on investment in terms of some of those acquisition channels. So we're continuing to lean into that, we're very focused on it. From a product standpoint, you will see more of the things that we're doing very well in ‘22. We continue to focus on the strength in dresses and unique pieces that you've been voting with her dollars on and saying she's willing to pay for uniqueness and specialness, one of those with our Pure Jill elements capital. We're continuing with that, which really stretches, kind of, the upper boundaries of the brand from a price point standpoint. And yes, I think continuing to do a good job. The team is of translating what's going on in the marketplace for our customer and she seems to be responding to that. With regard to pricing, we are always evaluating our pricing across the assortment. We step back and as we've talked about, we try to take a surgical approach to it and make sure that we -- our pricing appropriately for the consumer and what she's willing to pay for, so we'll continue to do that as a matter of course and just the way we manage the business. And then from a promotional environment standpoint, we feel like the best defense against potentially increasing promo environment is to have great product and to be disciplined with our inventory, so that we don't have to promote more than absolutely necessary, but we continue to stay very vigilant. We watch what's happening competitively and we respond accordingly. But we feel like we have some potential hedges against that promotional environment and that has a lot to do with the freight impact on the P&L coming down, so I'll let Mark speak more specifically to that.

Thanks, Claire. And Dana, thanks for the questions. So the freight, as you mentioned, for the year, freight was headwinds in the first-half of the year 2022 and then tailwinds in the back half. And on a year-over-year basis, it was about neutral from 2021 into 2022, but 2021 was carrying incremental freight, so 2022 is as well. And that is in the range of around 100 basis points or so of incremental freight, which has now largely abated and those tailwinds experienced in the back half of the year will continue through the first-half and then a little bit continuing through the back half and that really is, as Claire mentioned, a hedge for us against the overarching objective to maintain the profitable profile we've achieved to-date coming out of the COVID world and then the rebased operating model, which we're very proud of. So view that as opportunity against the cautious outlook that we expressed in our remarks.

Got it. And any further update on the refinancing of the loans, timing or thoughts there? Thank you.

We put in the press release today, Dana, that we continue to explore options. We've been working on this for some time and continue to do so. I have said before that the business and its evidence in the results for ‘22 generates substantial cash flow and a priority for that is to address the balance sheet, refinance our funded debt and even so still have the opportunity to invest in the business, which are capital guide for 2023 indicated as we're going to continue to invest in technology, the POS project, which is making great progress and some of the store’s investments that we talked about.

Thank you.

Thank you.

Your next question comes from the line of Janet Kloppenburg from JJK Research. Your line is open.

Good morning, everyone. Congratulations on a great year. I was just wondering about the mix of business, I know you said the dresses were forming well, but we're also hearing that casual is coming back a little bit and I wonder what was happening there and active in denim and bottoms? And also, if you could talk a little bit about, sort of, initial response to spraying and if your guidance on comps reflects or your guidance on top line for the first quarter reflects the current trend. And I understand and appreciate last year's tough comparison. Thank you.

Thanks, Janet. Yes, from a mix standpoint, dresses were strong all year last year. And we anticipate that they'll continue to be strong. But we have a great portfolio, our core brand and our sub-brand, so we saw strength in dresses across those -- the core brand and the sub-brands. We saw some nice strength last year in wherever, which is our more -- slightly more refined dressing, which she buys for work, travel, and slightly dressier occasions. And we also saw strength in as I mentioned Pure Jill, we tested and had a small capsule throughout the back half of the year, rotating in on something called Pure Jill elements, which is a little bit more artisanal, beautiful fabrication, special techniques at higher price points since you responded to that. But we are -- we're still a casual brand overall. So the core products in our assortment did well as well. And we -- as we've often talked about, we flex those depending on seasonality and trends that we see in the consumer. But what we did see a little bit of softness in Q4 and in the back half of the year in our fit collection, which is that active piece, it’s a very small part of our business. And so we just, sort of, manage that down a little bit going forward. But we continue to see nice response on some of the trends that we saw coming out of ‘22.

And Claire I would -- sorry Claire I would talk about the guidance and what's embedded. Every quarter has its important weeks and its less important weeks and no disrespect to February. But I would say in Q1, February is not typically one of the more important months and weeks, it’s weather impacted a lot of the time and you're coming out of the January efforts that everybody is putting into ending their fiscal year. I would say it's not disregarded, but it's not the driver and there are big important weeks left in the quarter. The primary backdrop to the guidance we provided is sort of the caution we have on the macro consumer just given the macroeconomic uncertainty. And then that comparison which you mentioned last year coming out of the end of 2021, Q1 of ‘22 was a very strong quarter. So those two things lead us to what we believe to be the prudent guide that we provided for Q1.

And when you think about the promotional environment, Claire, both for the fourth quarter and now, can you just talk about any incremental pressure you’ve been -- you experienced in the fourth quarter or that you're seeing now?

Sure. So fourth quarter, I think, I mentioned in my remarks, we made the decision to move our holiday assortment up and that gave more full price selling for the big promotional weekends. We went into the promotional weekends trying to hold our promo cadence on a year-over-year basis. And that was sort of our posture over Black Friday, Cyber Monday. And then we did indicate that we needed to promote a little bit more surgically during December to move through a couple of categories that were turning a little more slowly. We did that in – and, you know, with the intention of coming out of the quarter in the right inventory position and as clean as we could. January was strong for us. We had real strength. January tends to be a more markdown driven month in the quarter and we saw real strength in markdowns in January and ended, sort of, on a strong note from that perspective and again in the inventory position we wanted to end in.

Okay. But you're not feeling like the department stores or any of your specialty store competitors or e-com platforms like have heated up their promotional activity and that forced your hand?

Obviously, we watch all of that, but it's not forcing our hands. We had a very strong Q1 last year with a low promo level and we're hoping to be able to anniversary that, but we are not naive to the fact that there's -- there are a lot of macroeconomic dynamics out there and we always keep an eye on the competitive environment as well.

Thank you and congratulations again.

Thanks, Janet.

Thanks, Janet.

Your next question comes from the line of Daniel Lupo from Jefferies. Your line is open.

Hey, thank you for taking the question and nice quarter. Just looking at the CapEx guidance pretty meaningful step-up, and kind of normalizing back to pre-COVID level. So you mentioned like three or four buckets with the POS systems, the maintenance CapEx technology and some growth CapEx. Can you maybe quantify these buckets a little bit further? And as we try to reconcile store count remaining flat with CapEx stepping up, how do we think about maybe the cadence of leases coming through and maybe the potential sizes of closures? Thank you.

Thanks, Daniel. Yes, so the capital guide of $18 million to $20 million you're right. We spent $15 million this year. We're quite honestly excited to return to investing in the business and primarily investing in some of these very important foundational systems, the POS being, sort of, the first element of that and very excited to invest there. And it will really upgrade and bring current our store and omni opportunities around the point of sale. So that is a very large project. We've been executing it as I mentioned through 2022 and we'll begin to pilot it and roll it out with being true to our cautious approach to things, we'll be rolling it out and piloting it through 2023 in the coming months. And very excited about that. The store investments are both refreshes, as well as some new stores, Claire mentioned, to -- that are more excited about in the coming weeks. And no further guidance on that other than say that we stand ready to invest in stores as the economics come together in the way that we need them to support this very important channel for us. And then the technology bucket that we mentioned is really about business process, support and more business intelligence type investments than we've had previously. So from our perspective, it's a manageable level of investment. The business generates significant cash flow and these are really investments that strengthen foundations and help us pivot as we do to the profitable growth profile we want to obtain in the coming years.

Got it. That's very helpful. And then lastly, as we kind of head into 2023, you mentioned inventories in a good starting position. Can you maybe comment a little bit further on the working capital picture and maybe how nimble you can be in adjusting working capital to further protect to the downside if there is any sort of rapid change in the economic environment?

Yes. The purchases that we've sort of entered the year, the purchasing mindset, I guess, I would call it, is one of caution given the macroeconomic conditions. Claire, mentioned best offense is defense or best defense is offense, I just get those two messed up. But that includes a very cautious absolute level of inventory investment and that's reflected in the way that we enter the year and the go forward profile is going to continue to be one of a conservative investment in inventory. The flexibility at this point in the year is marginal to the middle of the year and a bit more room to flex both down, but as well as up. Should conditions improve into the back half of the year really into late Q3, Q4 timeframe.

Got it. That's very helpful. Thanks for the time today. Nice quarter.

Thanks, Daniel.

Thanks, Daniel.

And this ends our Q&A session and does conclude today's conference call. Thank you for your participation. You may now disconnect.