Thank you for standing by. My name is Krista and I will be your conference operator today. At this time, I would like to welcome everyone to the J.Jill First Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there'll be a question-and-answer session. [Operator Instructions] Thank you. I will now turn the conference over to Claire Spofford, Chief Executive Officer and President. Claire?

Thank you, operator, and hello, everyone. Thank you for joining us this morning. I'll begin with an overview of highlights from our first quarter and progress on our initiative, and we'll then turn the call over to Mark to discuss our financial results and outlook in more detail before we open the call for questions. Before we dive in, I want to emphasize where J.Jill is today and how far we've come in strengthening our foundation and positioning the brand for long-term success. As we have discussed before, J.JILL has incredible brand equity with a very loyal customer base that we delight with our product offerings that generate consistent demand, and we serve them through our balanced omni-channel model. Over the past three-plus years, through careful planning, disciplined inventory management, and a focus on full-price selling, we have not only driven strong financial results, but have enabled a stronger foundation to tell our brand and product story while fostering our loyal customer base and welcoming new customers to the brand. We refined our product assortment, leveraging a quality, fabric-first approach, and driven differentiation in our products and sub-brands, positioning them to meet a broad spectrum of end uses for our customer. Our relevant product and engaging customer experience have enabled strong full price selling and driven best-in-class margins and profitability. In addition, we have modernized our brand and value proposition to be more relevant and inclusive and optimize our marketing mix for efficiency and productivity, yielding strong customer acquisition economics that are scalable. The strength of our results to-date gives us further confidence in the future of the J.Jill brand and business. We are now at a pivotal inflection point where we are leaning in and making strategic investments to realize the brand's full growth potential longer-term. We are investing…

Thank you Claire and good morning everyone. As Claire discussed, we were very pleased with our first quarter performance, with total company comp sales up 3.1%, driven by a strong finish to the quarter leading into the important Mother's Day holiday period in early May. Our disciplined business model delivered comp sales growth, healthy gross margins, growth in adjusted EBITDA, and solid pre-cash flow during the first quarter. As previously announced, early in the second quarter, we leveraged this strength and voluntarily paid down $58 million of debt, which when combined with the scheduled amortization payment made in April, reduced principal outstanding by about $60 million. And we also announced the initiation of the first ordinary dividend program since the company's IPO in 2017. These actions are a direct result of our operating performance and demonstrate the confidence we have in our business model going forward and our commitment to strengthening the balance sheet and driving total shareholder returns. Now I'll provide details on results for the first quarter. As previously mentioned, total company comparable sales for the first quarter increased 3.1%, driven by the Direct Channel. As a reminder, the total company comp calculation shifts last year to align like-for-like weeks, in addition to adjusting for other non-comparable events between this year and last. Total company sales for the quarter were about $162 million, up 7.5% compared to Q1 2023. This performance was driven by approximately $7 million dollars of benefit due to the calendar shift compared to reported Q1 2023, as well as full price mix and higher average unit retails contributing to the positive comp. Store sales for Q1 were up about 4% compared to Q1 2023, driven primarily by the calendar shift and improved conversion rates during the quarter. Direct sales as a percentage of total…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Ryan Meyers with Lake Street Capital Markets. Please go ahead.

Hey, good morning, guys. Thank you for taking my questions. First one for me, just wondering if you can maybe talk a little bit about what you've seen traffic trends look like, and maybe kind of how you expect that to trend throughout the rest of this year.

Thanks, Ryan. I think I mentioned in my remarks that we saw traffic justly absolutely strengthen over the course of the quarter. Traffic in the retail channel was challenged in the first part of the quarter due to just a [wet late] (ph) spring, but we saw nice recovery and traffic patterns improving over the course of the quarter and saw some strengths coming into this quarter. We haven't commented on traffic expectations for the remainder of the year.

Okay got it, but you know that being said it seems like your core customer you know is more I guess aware of kind of the demand environment and seems like demand continues to be, let's just say, stronger now than it was at the beginning of the year. Is that kind of a right way to think about it?

Yeah, yeah, and we saw strength from our best customer segments throughout the quarter with really nice full price penetration as you see in the margin performance and you know real strength in the heart of our season leading up to Mother's Day.

Okay got it and then just one more for me, as you guys have dialed into the marketing a little bit more. You know, have you seen this flow through in any new to brand customers? Or maybe, comment on kind of how you guys have seen that trend.

Yeah, as we talk about, we're really focused on bringing new customers into the brand. We, you know, we think relative to some of the other competitors in the marketplace, we have low awareness and we have an opportunity to really introduce the brand to new people. And we've had some really nice traction with particularly with things like our inclusive sizing initiative, our workwear at it, things like that that are focused on bringing customers in who are at the lower end of our target demographic which also just feeds the health of the file for the future.

Got it. Thank you for taking my questions.

Thanks, Ryan.

Your next question comes from the line of Dana Telsey with Telsey Group. Please go ahead.

Hi, Good morning, everyone and nice to see the progress. As you think about the store sales, which had a significant uptick in the first quarter from the fourth quarter, was it traffic? Was it all regions? Was it any specific categories? And then on the margins with the gross margin up certainly more than expected. And Mark you had mentioned that better margins even on some of the markdowns, any change in process of what you're doing there and driving that better margin even on markdown merchandise. And lastly, with the Red Sea impact on inventory levels, how much of an increase do you see inventory at the end of Q2, and is there any changes you're making going forward given the issues in the Red Sea? Thank you.

Thanks, Dana. I'll take the first one and then let Mark comment on the other two. So, the first quarter performance was definitely driven by AUR, full price penetration. I think we just spoke to the traffic trends, but again, really heartened to see the response to the product assortments at full price, driving the margin performance, particularly in what we talk about all the time as sort of our holiday, which is Mother's Day, the big heart of the season.

And, Dana, I would add, I'll [comment] (ph) to the next two questions, but I would add that conversion was also strong in the stores in the first quarter, which is very encouraging and in part driven by some of the benefits we would expect to see from the POS, which is a much greater uptake of the online orders that are available to customers now in a much more seamless and efficient transaction. So really, really good to see that metric in the stores as well and gives us confidence again in the investments in POS and some of the benefits to come. The next question on the gross margin, yeah, look, it's still really great to be driving the results that we're seeing at full price. The fact that the markdown margin was one of the drivers to the margin is, I would call it a derivative benefit of our disciplined operating model, where the inventory buys, you know, bought deliberately with discipline, selling through well at full price. The markdowns present a natural opportunity to yield better as well. And you're seeing a result of that sort of flow through into the markdown margin in Q1. And that will continue. That's again, a derivative benefit of the full price sort of operating model that we've been working hard to instill in the business and are now very competent in. With respect to the Red Sea, we did call it out because the issues in the Red Sea first cropped up sort of at the very beginning of the calendar year and the reactions that the global shipping companies took to figure out how to reroute any deliveries that would have been going through that region, added time. And we in expectation of our big important summer floor…

Thank you.

Thanks, Dana.

Your next question comes from the line of Dylan Carden with William Blair. Please go ahead.

Okay, thanks. Yeah, just kind of curious, I know it's small, but the new stores that you've kind of targeted, can you speak to how those might compare to your existing fleet regionally, sort of target demographic, and then more broadly, this idea that you're sort of the best kept secret. You know, how do you penetrate deeper into your core customer and how -- maybe even if you have a sense of it, how that's changed as far as sort of awareness of that group through time. Thanks.

I'll start, Dylan, with the stores. The good news is with respect to the stores, in the last several years, we've closed from our peak about 40 stores. And a lot of those decisions were made during the pandemic and they were in response to an uncertain environment and as well as economics underneath the deals. The markets where we were from a customer perspective, we are still very confident in the customers that are in those markets and the opportunity with respect to revenues when we start to re-enter some of these markets. And a large number of our -- disclosed 20 to 25 net new store opening target that we've had out there for a while. A lot of those, and Claire moved forward a little bit today in her remarks, a large percentage of those are re-entry markets. And so of those 20 to 25 or up to 50 in the five-year mark, a lot of those are lower-hanging fruit reentries. And what we've seen when we reenter markets is that we do open right back very close to our peak sales in the stores that we had operating previously with a better operating model and economic model underneath it. So that's kind of a big part of the confidence that we have in looking at the sort of national distribution of our fleet and where we see some of the low-hanging fruit opportunities and how we get comfortable with those proformas that we would be looking at. And we have some proof points with some of the stores that we've opened along the way that support that, which is encouraging. And with that, I think I'll turn it to Claire.

Thanks, Mark. Thanks, Dylan. So, with regard to the brand and brand awareness, we know we have a big opportunity. I think we feel great about where we are right now from a profitability standpoint, from a product standpoint. The teams are doing just a terrific job of putting the right product assortments together and marketing them effectively. And -- so now we're really kind of shining the spotlight and leaning in on the marketing a little bit different level than we have to-date. You'll see the One Wardrobe. No Limits. Campaign that we launched at the end of the quarter really ramped in Q2, and we think that -- that's just a great, it's a great campaign that speaks to what our brand's all about, the versatility of our product and we think that -- that's going to help move the needle. We have tracking mechanics in place to understand kind of where we are from a brand awareness standpoint and we'll track that over time. But feel like the time is now to get more energy into that brand awareness effort. And so you'll see it hopefully in a lot of places.

Yep, thank you very much, Claire.

Your next question comes from the line of Jonna Kim with TD Cowan. Please go ahead.

Thank you for taking my question. Could you just talk about some initiatives you are doing to drive high or full price selling given the macro still remains volatile in your assumptions for the remainder of the year. And also, just on the customer acquisition front, you mentioned your customers being more at the younger end of your target age group. What are some initiatives you are doing to acquire more younger consumers to your base? Thank you.

Sure, Jonna, thank you. So full price selling, given the macro environment, is continuing to manage the business the way we've been managing the business, which is being very disciplined with our inventory purchases, really I think doing a great job of telling our full price story, product story, brand story, supporting that in both channels and then promoting as little as we can. You know, we know we live in the women's apparel space, and so some level of promotion is inevitable, but we really try to be as narrow and shallow and short-lived as possible with our promotions, which has yielded to-date really strong best-in-class maintained margins for this category. And so that's working for us. We're going to continue to do that. Obviously it depends on continuing to deliver great product and delivering a great experience for our customer both online and in store. And when we do, she's willing to pay full price for that product and she's very loyal to us. So we are going to keep operating the way we're operating and then with regard to the new-to-brand, yeah we talked about our target being sort of 45 to 65 bringing people in at the younger end of that demo has to do a lot with the way we position our products, the way we segment our marketing efforts, the creative that we put forward, and then the marketing channels that we use, with an emphasis on social channels, digital and performance marketing, being really kind of focused and disciplined with that segmentation and targeting. But also a lot of this brand work we think is exciting and relevant to that younger end of the target demo. So lots of effort and energy behind all of that.

Got it. Thank you very much.

Your next question comes from the line of Marni Shapiro with Retail Tracker. Please go ahead.

Thanks. Hey guys, congratulations. The stores have looked really beautiful. It sounds like the business is in a different place right now from listening to you guys that you're very comfortable with bringing customers in with the product, with markdowns, it feels like the base of the business is very solid, and this is what's fueling your ability to sort of invest in whether it's technology, marketing, and everything. I'm curious internally, is the team feeling that? Did it suddenly all just gel? Because even in your stores, it feels like the sales associates, there's just a different -- for lack of a better word, a different vibe in there. And then, Mark, you made a comment just about better online stores. I think you were talking about them in-store. And as you roll out new systems and new technologies, is there a greater opportunity there to use your sales associates as sort of like in-store influencers to help build and wardrobe for the people who are coming in stores. You could just talk a little bit about that.

Sure, I'll take the first piece and then hand it over to Mark. Thanks, Marni. The business is in a place, as I just mentioned, where we feel like we're ready to step on the gas a little bit and that's been trending over time over the past few years you know we feel at this level of profitability, we can make these investments that they are strategic investments with a nice expected ROI. The vibe is great. It's always great when you've got good business and the teams, our teams are terrific. First of all, I can't say enough about the strength of our team and the way our teams work together and that translates you know through the stores, through the DC, through the home-office and I think it is reflected in you know the energy that we're feeling. So appreciate you saying that and recognizing that. And when you are in the stores and you've got great product to sell and your customer's happy, you're going to be happy.

Yeah. And Marni, I would just tack onto that. It's been a lot of deliberate, very hard work on behalf of the teams to get here. So that does show up, I think, when it starts to really show reliable results. In addition to the investments that you mentioned, it also, I think it's maybe a testament to where we are in this performance that we haven't had a question on the capital structure or anything today, which is, I think, a good thing. But I have to mention, right, it also -- we mentioned it a couple of times in our remarks. And it also fuels our ability to strengthen the financial foundation of the company, which we demonstrated earlier this month, well actually last month in May with the pay down of the debt and leaving us with $108 million of principal outstanding as of that date, the May 10th date, and $28 million still of cash on the books. So call it $80 million of net debt. And I think it's now, even more feasible for us to start at an objective to get to net cash in the not too distant future. Not putting a timeline on that right now, but feel like that's just going to continue to delever the business, which is an important and we think strong signal for an apparel retailer to continue to push into. So that is sort of, and then the dividend of course that we initiated is another sign of our confidence and we don't want to give that any short change because that was a really important step for us to take and we think is hopefully a demonstration of our commitment to driving total shareholder returns. And we'll continue as a company to think about that…

That's great. And can I ask you guys to follow up also just about some of the younger consumers that you're bringing into the store? I know there are other brands that her first kind of step into the brand is through accessories. You guys dabble in accessories a little bit more online than in store. It's usually on a front table or someplace, but it's not a big story. Even online it's not a big story, but there's a good assortment in certain sub-segments especially. Have you thought about, I'm curious what your customer, the younger customer comes in to buy first, and have you thought about magnifying some of the accessories as that kind of entry point into the brand?

Thanks, Marni. It's a great question. You know, accessories are important to the business in the sense that they help complete the outfit. Our customers love being outfitted with our teams, and we try to make that happen, obviously online as well as in store by suggesting the selling and the accessories and things. We do have a broader assortment of accessories online. We have a broader assortment in general online, but footwear is not available in the stores, things like that. Accessories aren't an especially important acquisition category for us the way it may be for other brands. Our acquisition categories are the things that we're really known for and I think recently some of our novelties and our more fashion forward elements, but also some of our core franchises. So the linen shirt and the cotton gauze, twin set dressing that we've got now definitely is a fan kind of the full demographic and is relevant and appealing to that younger end of the target demographic as well.

That's great. Thanks, guys. I'll take the rest offline.

Thanks, Marni.

That concludes our question-and-answer session. And with that, that does conclude today's conference call. Thank you for your participation, and you may now disconnect.