January 21, 2022
Good morning, Retail readers, and happy Friday!
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Situational awareness: Peloton shares are up today, after plunging yesterday (more on that below).
1 big thing: J.Jill's finance hill
Women's clothing retailer J.Jill may refinance its long-term debt, which totals a little more than $200 million, to relax or remove tightened covenants, CFO Mark Webb tells me.
Why it matters: A number of retailers took on debt or amended existing agreements in 2020 to help them survive. Now in recovery mode, they want to adjust the stricter terms.
- Checkers and Rally's and a handful of other restaurants and retailers have recently told me they hope to address capital structures this year.
Details: The aim of removing or relaxing some covenants was described by Webb as opportunistic and subject to market conditions.
- Leverage is currently 2x EBITDA, though J.Jill would like to lower that figure.
By the numbers: The merchant's ability to refinance hinges on its improved performance, including:
- Net sales up about 46% to approximately $440 million through the first three quarters of 2021, from close to $300 million for the year-prior period.
- Positive adjusted EBITDA of nearly $77 million through three quarters compared to a loss of about $34 million for the year-earlier period.
- Guidance of $88 million to $99 million for the full fiscal year.
Between the lines: "We’ve been really focused on disciplined inventory management," CEO Claire Spofford tells me.
- That includes a shift to full-priced selling rather than carrying a lot of markdown from season to season, she said.
- It's a switch from a focus on growing the top line via promotional activity such as sales.
- Instead, J.Jill is introducing new styles on a regular basis to keep a steady flow of customers coming through the doors (versus the uneven peaks and valleys of foot traffic it experienced before).
Of note: The actions Spofford mentioned have improved gross profit margin and EBITDA.
- The company also rejiggered its marketing to reposition slightly to digital from print to save money, though catalogs and direct mailings remain important.