J.Jill bucks the trend with turnaround

J.Jill, the women's apparel banner is executing a turnaround as a distressed retailer in an increasingly difficult macro environment.

Why it matters: As default risk increases for the retail industry as a whole, J. Jill is charting a path to healthier margins through tight inventory management and changing how it introduces products.

Catch up fast: The company struggled to stay solvent during the pandemic, just three years after its 2017 IPO.

• In February 2021, CEO Claire Spofford joined and took on the task to turn things around.
• J.Jill's Q1 results showed progress, with net sales increasing nearly 22% and comparable sales growing almost 24%.

Yes, but: The company isn't completely out of the woods given its B3 rating, as B ratings are considered speculative and are subject to very high credit risk, Moody's says.

Details: "We continue to be very focused on disciplined inventory management and full-price selling, and we are fine if we sell out of things and we move on to the next flow of newness," Spofford tells Axios.

• J.Jill previously had 12 floor sets a year, promoting products with 30% off out of the gate.
• Now the company lets the product do the work of attracting customers and then strategically marks down slow-selling items.
• Between changeovers of floor sets, the brand releases capsule collections to ensure a constant flow of new products, yielding an uptick in consistent traffic.

By the numbers: Per Q1 results, J.Jill's gross profit was nearly $110 million, an increase of 25% year over year from about $88 million, while gross margin stood at 69.7% compared with 68% for the same period a year ago.

• And adjusted EBITDA almost doubled to more than $31 million from close to $17 million year over year.

Yes, and: Rating agency Moody's has taken notice of J.Jill's financial improvement, with an upgrade to Caa1 last October and another to B3 in April.

• According to Moody's calculations, J.Jill's adjusted debt to EBITDA ratio is 3.1x.
• The "operational discipline put in place" over the past year will help J.Jill deal with headwinds like inflation and supply chain disruption, the ratings agency says.

What's next: J.Jill just unveiled a new ad campaign and shopping experience it calls Welcome Everybody, a size-inclusive offering with price parity across sizes.

Editor's note: The date Claire Spofford joined J.Jill as CEO was corrected.