Thank you for standing by. My name is Pam and I will be your conference operator today. At this time, I would like to welcome everyone to the J.Jill, Inc. Q4 2024 Earnings Conference Call. 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 19, 2025, 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 19, 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 jjill.com. I would now turn the conference over to Claire Spofford, CEO and President. You may begin.

Good morning. Thank you everyone for joining us. As many of you know, this will be my final earnings call as CEO before my retirement. And before I dive into our results and progress over the past year, I just want to express my gratitude for the support from our teams and all of our stakeholders during my tenure with J.Jill. It has been a privilege to lead this remarkable organization. And with the strengthened foundation and disciplined operating principles in place, I am confident that the team is well positioned to begin to lean into its next chapter of growth under Mary Ellen Coyne's leadership. Mary Ellen will be joining the company on May 1st and brings significant experience in women's apparel retail, most recently serving as CEO of J.McLaughlin. Under her leadership, the company grew its store count, expanded its assortment to include new product categories and enhanced e-commerce capabilities. I believe Mary Ellen will be a great compliment to J.Jill's strong leadership team. She shares the same admiration we all have for the brand, the incredible loyal customer base we serve and the balanced omni-channel model we operate. In addition, I know that she shares our team's strong belief in the opportunities that lie ahead to further scale the business through new store growth, expanding brand awareness and leveraging the systems and capabilities we've invested in over the past three years. While we navigate through today's uncertain environment, my conviction in the team remains unwavering. I look forward to watching with pride as they continue to innovate and achieve new heights of success in the coming years. The foundation we've built together is solid and I have every confidence in J.Jill's future trajectory. Now let me walk you through highlights from the fourth quarter and full year,…

Thank you, Claire, and good morning, everyone. Q4 and full year 2024 results again demonstrate the benefits and resilience of the J.Jill brand and business model. Our approach to operating the business with tight discipline, generating, investing and distributing meaningful amounts of cash and beginning to plant the seeds for profitable growth were all evident in 2024. For the year, we delivered sales of approximately $611 million. Full year comp sales growth of positive 1.5%. Gross margin of 70.4%. Adjusted EBITDA of $107 million. Adjusted net income per diluted share of $3.47 and free cash flow of $47 million. All while opening eight net new stores, initiating the first ordinary dividend program and first share buyback program since the company's 2017 IPO, strengthening the balance sheet by paying down debt and making significant progress updating foundational technology systems. As we look forward to 2025, our teams remain focused on executing our operating model. As seen in our press release this morning, our outlook for 2025 takes into account the continuing consumer and macro uncertainty Claire mentioned in her remarks as well as the near-term impact of adverse weather experienced in February and the implementation of the new order management system, which initiated last week and is making great progress. Given these considerations, we are prudently planning the business in 2025 and still expect to continue to generate strong cash flow further supporting our capital priorities and commitment to total shareholder return strategies as evidenced by the increase in our quarterly dividend announced today. Regarding the OMS project, last week was the earliest possible date we had identified for implementation and we were very pleased that our teams were ready to do so. As part of the plan, we brought down the e-commerce site last week for just over 24 hours…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Janine Stichter with BTIG. Please go ahead.

Hi. Good morning and congrats, Claire, on your retirement. I was hoping you could parse out some of the Q1 headwinds that you're seeing, whether it's weather, consumer sentiment, I think you broke out the OMS implementation. Just help us understand the moving pieces there and maybe where you're trending right now versus how you're thinking about the quarter? And then within that, I would love to hear more about what your survey work is showing around how your consumer is feeling right now. Thank you.

Sure. Thanks, Janine. I appreciate the question. Q1 headwinds, yes, as we sort of delineated in both of our comments, it was a slower start to the quarter. February was definitely impacted by weather in addition to what we're seeing in terms of consumer sentiment, our most recent survey showed a market level -- increased level of concern versus a year ago at the same time with regard to, I think, just what's going on with the market and the geopolitical situation in general. So we did see that in speaking to our consumers. And then the third piece is really the OMS cutover, which Mark commented, we were able to take advantage of our first sort of viable window to cut over and the teams did just an incredible job on the project to-date. We're still in the middle of the implementation, but it's going very well. So that has created a lot of noise in the first half of March as well. So those three elements definitely are all considered in our Q1 guide and are significant headwinds for the Q1 outlook.

Great. And then maybe just one more on the OMS benefits. As you think about the benefits from the omnichannel capabilities, help us parse out what those look like? How they phase beginning in the back half of the year? And if you have any sense of how you've quantified those in your guidance? Thank you.

Hi, Janine. It's Mark. The OMS project, as Claire just mentioned and I mentioned in my remarks, we're extremely pleased to be able to execute it this sort of early in the year, in this first window of opportunity. The benefits that a new system like this bring are some operating efficiencies for sure. But really the kind of more interesting and what we're looking forward to in the back half of the year as we implement and bring up new omni capabilities, the first of which will be shipped from store that should start to yield benefits both on the sales line because it allows you to fulfill orders that were not fulfillable in the past to some extent. And then it also does help provide some margin benefit, given you're able to yield a little bit better what might have been destined for markdown at some point in its life cycle of better either full price margin or a better earlier markdown margin. So those benefits were excited to bring up in the back half of the year. The systems are large and are far reaching. And a large swath of team members have worked on this for a year and they've done such a great job. They're in the process of still bringing up capabilities and testing and making sure that all the interfaces and the data links are as we expect, and it's all going well. And once we're stabilized and trained on the new system, et cetera, we'll start to bring up those new capabilities in the back half of the year.

Great. Thanks so much.

Thanks, Janine.

Your next question comes from Ryan Meyers from Lake Street Capital Markets. Please go ahead.

Hey, good morning, guys. Thank you for taking my questions. First one for me and Mark I think you commented on this just a little bit in your prepared remarks, but kind of walk us through the cadence of gross margin for the year? How we should be thinking about that and what we should be calling out there?

Sure, Ryan. Thanks. Good question. So the guidance really when we think about our guidance for the year, the last year, Q1 was by far our most difficult comparison. This year will be our most difficult comparison against last year. It was a very strong start to the year. That strength continued into Q2 before experiencing quite a slowdown late in Q2 at that sort of end of June into July period where we started to see the consumer soften and price sensitivity become a bigger issue. And that sort of trended forward and as Claire mentioned trended into Q1 so far this year. And then exacerbated a little bit by weather which was year-over-year more adverse in February and then obviously the callout that we had on the OMS implementation. The margin guide on the year assumes about flat and we called out that the Q1 in particular in first half in general will experience headwinds in part due to the difficult comparisons to last year and the fact that we're embedded in that is that we're cycling this consumer challenge against a very strong full price driven consumer last year at least through that sort of middle part or end part of Q2 last year. And then at the back half of the year, when we start to cycle freight, which we experienced freight challenges this year in Q2 through the end of the year, the bigger impacts were in Q2 and Q4 as we reacted to the initial issues in the Red Sea and that impacted Q2. And then in Q4, as we were enacting mitigation strategies for port strikes, there's a bit more freight in Qs 2 and 4, but really, the opportunity as we start to cycle, the expectation that the consumer sort of stays where it is through the end of the year, but we cycle it starting in late Q2 and then we get some of those benefits from freights because ocean freight rates have normalized. I always knock on wood because I say that and then you never know if something can happen. But right now we're seeing trends continue to improve. And then we have the OMS benefits that I just mentioned starting to provide some benefit in the back half as well.

Okay. Got it. I think that makes sense. And then the other question for me is that it sounds like you guys are seeing some success kind of with marketing initiatives and digital customers. Just wondering if you can comment on the overall traffic trends and maybe how you can drive some of these digital customers into the stores or if you guys have begun to see any of that.

Yes. I think, Ryan, we did point out that traffic was a little challenged Q4 and into Q1. I think that's a reflection of the broader sort of macro environment in the consumer sentiment. That said we're always testing and learning and identifying channels that are most effective for driving traffic. I did mention, I think, on the last call as well and I referred to it in my remarks that we've been testing some geotargeted marketing efforts, specifically focused at driving traffic to stores. And we saw some nice results from that in the back half of last year that we're going to continue to test into and plan on expanding in 2025. So it's a constant evolution, a constant testing and learning and monitoring what marketing channels are delivering what for us, both in terms of traffic, new customer acquisition and overall brand awareness. So we will work the full mix and continue to do so.

Okay. Great. Thank you.

Your next question comes from Jonna Kim with TD Cowen. Please go ahead.

Yes. On the promotions, what you're embedding in the guide and what you've seen quarter-to-date on that front? And then obviously you have a pretty strong group of core top customer of who are loyal to you. Have you seen any notable changes within that cohort or any characteristics that need to be highlighted as you continue to observe that core for your business? That will be helpful. Thank you so much.

Sure. Thanks, Jonna. I'll start best customers tend to be just a hallmark of this business and this brand. We continue to see really strong performance from our best customer cohorts last year, both in terms of transactions and also just spend per customer for the year. So that continues to just be a really strong dynamic in this business and one that we very much appreciate. And then from a promotional standpoint, I'll turn it to Mark. But as always, we try to balance delivering our top line goals and our inventory position goal coming out of every period with as strategic and surgical and promotional approach as we can.

Yes. And we'll continue with that, Jonna. But that said, the consumer and where they're at is we've mentioned is a bit more price sensitive, particularly in our direct channel. And so we will continue and have assumed that sort of the baseline continues or trend line continues forward and with the need to be surgically promotional as we have been as well as decisive and taking action to mark down to keep the inventories where we want them to be going forward.

Got it. Thank you so much.

Your next question comes from Marni Shapiro with The Retail Tracker. Please go ahead.

Hey, guys. Claire, congratulations. We're going to miss you. I'm going to miss chatting about product with you. Could we talk about a couple of things. The first is I know price sensitivity, I think you said began in July of last year, which aligned from my notes with when a lot of retailers became more promotional. And I'm curious, as I watched the run of promotions through the mall and online this first quarter. How are you thinking, you guys are a full-priced retailer. So I guess how are you thinking about the rest of the year promotionally? Is it harder to not participate in that? So how do you plan that, I guess, in this environment?

Thanks, Marni. I'm sure you'll have fun talking about product with Mary Ellen as well. She'll be excited to take that on. So, yes, price sensitivity, the promotional environment. We do -- we are very, very focused, as you know, and we talk about all the time on supporting our full-price business in yielding the best maintained margins that we can. That said, the consumer has been volatile. For quite a period of time, we did see it come on more strongly in July and into August last year and continue somewhat through the back half of the year. We continue to take the same approach to promotions. We are -- we plan them in a balanced way to deliver our objectives. And then, to some extent, we sometimes have to respond to what's going on with our consumer, things that don't work as well as we anticipated they didn't. We never have -- one never has an assortment that all works exactly right. But we take action in season to move through things before the end of the period, before the end of the season, and we'll continue to do that. Just monitoring, trying to be as tight as we can on it, but planning generally a flat and consistent approach to promotional cadence.

And Marni, I would just add to that. It's a hallmark, we believe, of the operating model that the teams really do come with that very disciplined approach to managing the promo against the markdown and then the yield opportunity within it. I think in a year like 2024 where things became challenging. As you mentioned and we've mentioned, really starting in that July time period to deliver a 70.4% margin for the year despite playing in a very promotional environment. And I think we think is demonstrative of the operating model and that will continue as we go forward. Targeted category promos, where we can. We do play in the times of the year, sometimes reluctantly at the larger promo sort of beyond categories and box offers like in Q4, but we'll continue with the discipline and that's embedded in the guidance that we've provided.

Great. Thanks, guys.

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

Hi, everyone. And Claire best of luck. I wanted to touch base on differences between stores and digital, what did you see from the customer there? Is it a different category performance also along with regional trends? And then Mark I see that you extended the facility anything about how we should think about the cadence of quarters with that or just in general how you're thinking about the shaping of the year? Thank you.

Thanks, Dana. Appreciate it. I will miss you as well. So first of all, for the quarter, the difference between stores and digital, the stores continued to be more full-price oriented than digital. The digital channel continues to be the place where our customer looks for more promotional business and shifted more into markdown than they did in the store channel over the course of the quarter. And that's emblematic of the way those channels typically perform, but under pressure when we see a shift to markdowns, that's more pronounced in the direct-to-consumer channel. And then regional trends really tracked with seasonality a little bit, but more with weather channel challenges as we went through the end of Q4 and into the beginning of Q1. But other than that, no material differences from a regional standpoint.

And Dana, with respect to the repurchase authorization, we were pleased to get started in Q4, but really started late in the quarter with the authorization and just the open windows that we had. We'll continue to be opportunistic and prudent as we go forward. But it really did just get started at the end of Q4 and will continue. As of the end of the quarter, we still have $24.5 million or so remaining on the authorization.

Thank you.

Your last question comes from Corey Tarlowe with Jefferies. Please go ahead.

Great. Thanks and good morning. I guess, Claire, could you talk a little bit about product that worked in the quarter? And maybe as the weather improved, more specifically, where you saw some green shoots. So I'd just be interested to hear if you saw any improvement there? And then, Mark, just on inventory, could you maybe walk us through how you're thinking about the shape of that curve throughout the rest of the year as we think about sort of where you finished Q4? And maybe how you're planning for the remainder of the year? Thanks.

Sure. Thanks, Corey. So in Q4, I think, as I mentioned in my script, saw strength in bottoms, which is great because that is a category that we're leaning into as we move into '25 and see good potential there. It was supported by our iconic marketing campaign and just a really concerted effort on behalf of the team to really refresh and support our bottoms business. Jackets were also strong in the quarter, and sleep was strong, although it's a relatively small business. We saw a really, really nice bump in sleep, which was kind of fun to see as well. We had challenges. We continue to see challenges in dresses over the course of the quarter, that was a year-long issue for us in 2024. Obviously, in Q4, dresses become a lot less important for us. We're not an occasion dress business, but that's something we're watching closely as we move into 2025 and adjusted our point of view on that as we move into spring summer season when dresses do become more important again as a category. And then sweaters were challenged, and we saw a shift into markdowns and sweaters over the course of Q4. We're seeing that continue into Q1. And as the customer kind of responds more to wear-now product as opposed to moving early into true spring business. As I said, February was challenged by a few factors in March. The first half has been a little bit clouded by just the OMS cutover and some of the dynamics associated with that, but we are certainly hopeful that the weather will break across the country and we'll start to see some real energy in those more spring forward categories.

And Corey, with respect to inventory. So the reported inventories that the single biggest driver of reported inventories from second quarter of 2024 on, where our actions taken to ship about a week early our goods to mitigate the essentially weak delay that occurred when shipping lanes through the Red Sea essentially where rerouted around Africa. So that's been the single biggest driver. And what we've tried to do is show what the sort of normalized inventory would be through our remarks at the end of Q4, for example, that was up 3% at the end of the quarter versus the reported up 15%. And that 3% was driven in part by the strategy that Claire just mentioned around bottoms, a bit of a higher mix of bottoms in the assortment as we exited the year. And then just given the overall trend that we've been talking about with respect to the consumer and the weather, et cetera, there's clearly the actions that we're taking indicate that we have a bit too much inventory. But again part of our hallmark is managing that with discipline on the buy and then managing it with discipline through the yield curve. To go forward, if nothing else changes with respect to shipping lanes, then we will start to anniversary that one week ownership at the end of Q2 and that's where things should start to normalize versus last year. And I start normalization at flat to maybe a little up given that we're adding new stores and ultimately pushing for sales growth in the year. But overall, the discipline maintains and that reported inventory issue will still be at the end of Q1 to similar magnitudes we've seen from Q2 last year cycling through to Q1 of this year and then it will become apples-to-apples Q2 on.

Great. Very helpful. Thank you so much. Best of luck.

Thanks.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.