Alright. Thank you all for being here. We have Mary Ellen Coyne, CEO, and Mark Webb, CFO of J.Jill. I'm going to read a disclaimer here, to the extent that I have it. So just to remind everyone, we may talk or reference forward-looking statements. I would refer everyone to the IR website in regards to disclaimers around that. Let's begin.
Great.
Out of the gates, you're eight months in. I think it's important for new management always sort of just sort of thinking through, talking about your thought process in joining the company, and kind of what you found early days as far as your approach to managing the business.
Sure. Well, thanks, Dylan. Great to be here.
Yeah.
Yeah, I have always had an appreciation for J.Jill as a brand and tremendous respect for the customer that we serve. So when I joined the organization, it was really based on those things, right? It's a great brand. It has an unbelievable, loyal customer. It also has an incredible, solid operating model. But I also joined because I saw tremendous opportunity. And as we look and what we've learned over the last eight months, it's focusing on the basics. It's around product and product evolution. It's around marketing and how we are galvanizing a team aligned around a single vision to grow our customer base, to really engage the customer we have, gain more share of wallet, to re-engage customers who may be shopped and have not recently, and most importantly, to bring new people into the brand.
So we know in order to do that, it's critical to have an evolution of our product and our marketing. And initial steps to that we're very excited about are some talent that we brought onto the team in terms of a chief merchandising officer and most recently, in November, a chief growth officer. So super excited for that setup.
Sticking to all that, I guess maybe the place to start in that discussion is just 2025. Can you kind of debrief, obviously, a lot of those decisions before your time? Can you kind of debrief on what happened last year, some of the softness in your own demand, and kind of what needs to change go forward?
Sure. So 2025, I think we all know, was a difficult year in terms of consumer sentiment. It certainly was an incredibly difficult year once the tariff announcements were made. But for us, we know that we also had some misses in the product. And so as we move forward, what we did in the second half of 2025 was really try to test and learn, really lean into some things and understand what would work for our consumer as we moved forward. So in terms of product, that was certain categories, certain yarns, going after cashmere programs, going after sleep, testing things we know we can build upon in the future. And for marketing, it's really thinking about how we're rebalancing the mix, thinking about how we can pull back on catalog, which is historically our largest marketing vehicle as a brand that was launched with a catalog.
But really, what are the exciting things we can do in digital, which in the third quarter, we proved that we could attract a new, younger customer at a very profitable rate. So that's super exciting. And I think lastly, really just thinking through our processes and the way we're working. And what that will do for us in 2026 is, as we've tested into a few platforms that are using AI, really thinking about the technology roadmap, the AI roadmap, and how we can just work smarter and be more efficient as a team.
From a product standpoint, I mean, you and I have spoken a little bit about sort of some of the staleness in the offering. I guess when does new product flow through? What are the major sort of benefits in what you've done now as opposed to what happened in 2025?
Yeah, so I think the good news is what we've seen, certainly in Q4, is that newness is trending, right? So sales are outpacing inventory when we have something new. So we know that that's what the customer is looking for. We've heard that from her in the surveys we've done and in the time we spend in stores. So as we look to 2026, sort of end of first quarter heading into second, you'll see the evolution in the product. And I underscore that it really is an evolution, right? It's really moving forward in a very methodical way that will truly take our loyal customer base and have them be excited about it once again, because we know that she's fallen off, and then re-engaging and embracing new. And we're excited. Again, there's categories we're leaning into that have just been underserved.
So as we look at this customer and lifestyle brand and we think about over time, we have become a very casual assortment. And what we're looking to do is to say we can really own more share of her closet. We're known for quality. We're known for versatility. We'll lean into those pieces, but we'll always have something new so she knows it's modern and relevant.
It's a good segue. Maybe just for people that don't know, can you sort of describe your customer, sort of who you're targeting and where she is right now in the world?
Sure. This is my favorite thing to talk about because we have the most amazing customer segment, and having spent a lot of most of my career really engaging with this customer, it's super exciting, so our customer is defined as 45+, an affluent female, household income over $150,000. She is, for the most part, very well educated, and she is at a point in her life where she has time to spend on herself, whether it was that she had focused on a career that she's now successful in managing, or she has raised her children and they are now out of the house. She has time and money to spend on herself. She loves to engage. She's loyal to a brand when she finds one. And everything you're reading now says she feels better about herself in her 50s than she did in her 20s.
So it's an amazing, amazing market to be in. And we're thrilled that that's our base.
And how does the marketing shift work? I mean, you mentioned you forget how many catalogs you do a year, but it's not insignificant. It's like 12, right?
It's more than 12 today.
Yeah. So sort of reallocating some of those dollars, can you sort of just develop that a little bit more, how AI maybe sort of plays into it, or sort of how you find and target your customer go forward?
Sure. So I think we're really focused on addressing full funnel, right? So top, mid, bottom of funnel. Catalog certainly drives revenue. But when you think about driving awareness as you evolve the brand, you have to be playing in other areas. So digital is a tremendous opportunity for us across all of the platforms. Social media and influencer will be something we'll be leaning very heavily into in 2026 with some learnings from 2025, as will broadcast. We did broadcast television and found that the reach was really incredible for the spend. So we'll be looking at all of those too. As we look to evolve, and we've chosen this imagery that you're seeing around the room.
You're very close to your customer. It's one real asset of your business. And so is this something that you've heard from them that they're sort of looking for from the brand, sort of a newness and sort of a different way to sort of speak to them?
Yes, we have heard this. Through customer surveys we do, and through store visits we do, and through sort of very intimate focus groups we do.
Yeah. Let's bring you in. 2025, you'd kind of come into that year. We were talking to clients then about sort of some of the growth. You were very much on offense. Can you kind of speak to, well, maybe even sort of the role of the chief growth officer, kind of what the growth outlook is over a longer horizon, store growth's a piece of that, sort of touch on the different dynamics of how the business grows?
Sure. Sure. Do you want to hit the chief growth officer first, or maybe after I?
Sure. I mean, we brought in the chief growth officer for a few reasons. One, we found the most amazing talent in Viv Rettke. But also, growth is our mantra, right? Returning this brand to growth, slow, measured, consistent growth is the mantra. And so Viv will come in, and we are working on the long-term strategy. We are working on our AI roadmap with Viv. And she is also really focused on our e-commerce business and bringing that forward, bringing the experience forward.
And I would reiterate, we've spent many years shoring up the foundation of the business, shoring up the balance sheet for sure in a very, very strong place. It is now about transitioning into growth. And stores are one part of that. We're still very excited about the store opportunity. Our store investments return very healthily. On average, they're around about a three-year payback, and they do about a 30% cash-on-cash return. And that's a combination of markets that are out there that we can re-enter that we've exited previously. They tend to achieve those metrics faster. And then the new markets, which are also very attractive to us, maybe take a little bit longer, but we're getting a lot of learnings around that. We have a great balanced fleet today. We're about 50% lifestyle center, 50% mall.
Going forward, we tend to be prejudiced towards lifestyle centers as the opportunity to grow. Not that we would turn away a very good, strong regional mall at the right economics. They will be in the mix. We have a host of re-entry markets in front of us that get us excited, and we had some level of post-COVID resettling of some of the demographics with the Sunbelt being a primary recipient. We're actually now seeing, and we opened stores in Florida, in Atlanta, in Texas, The Carolinas for sure. There are still opportunities in those markets. We're also seeing some interesting opportunities in the Midwest, honestly. It's almost perhaps maybe an affordability play back into the Midwest, and we've got some stores opening at the end of the year in Minneapolis and Ohio as an example of that, so stores for sure is a growth opportunity.
The consumer for us, Mary Ellen outlined how attractive the customer demographic is. Part of that educated profile and where she is in her life, she's also incredibly engaged, aware, and can be concerned about where the macro world is, and we saw that in 2024. She pulled back pretty dramatically in the July time frame, which is when both tickets of the presidential election cycle had quite a bit of their own noise going on, and that was a bit concerning for her, at least in the way that she slowed down a bit for us at that time period. It then normalizes itself out coming out of 2024. It was back to sort of a normal place. We were excited about that. I think we were all here last year talking a little bit about that enthusiasm of sort of the normalization.
And then we saw a significant pullback in April, right? And that sort of unfortunately has persisted for us throughout 2025. We view that cautiously, that being the consumer, the macro consumer. We view that cautiously right now. We're not calling a normalization or a return to euphoria anytime soon. At some point, it is going to normalize. It does with our customer, the reasons that Mary Ellen gave. And at that point, there will be an inflection to that becoming a tailwind for us. But right now, we're planning conservatively into 2026 on the back of that. But that will be in conjunction with the product, the assortment evolutions. The inventory buyers are going to be conservative to begin with.
When we start to see the green shoots and we start to see the consumer coming back, we stand ready to invest on the back of that to drive growth.
This is a leading question, but did some of that initial customer feedback from a demand standpoint result in you sort of leaning into proven winners a little bit more from a merchandising standpoint? Was that part of the issue to some extent?
It could. When you go on the cycle of a sort of surprise slowdown and you start to pull down your inventories in relation to it, you're going to distill around a core assortment. So probably some element of that embedded in there.
I know you're still cautious on the overall outlook, but do you feel this customer is in an altogether better or at least more normalized, stable place kind of heading into 2026? Or are you still getting feedback from the survey work to suggest there's still some unease out there?
I think our approach right now is how long does the current state of news flow stay in place, right? So what we have seen is even if it just stays at the current level, at some point that becomes the new normal, and that's enough. I think there's still a few curveballs being thrown out there to the American public. And it's leading us to remain cautious. We'll position our first half of the year inventory buys similar to how we positioned the back half of 2025, which is down in the mid-single digits. So that's kind of how we're anniversarying through. And then we stand ready to react as things hopefully when and if they start to improve.
Yes, from a product assortment, we definitely see opportunity to continue to encourage newness, which I think to your earlier comment had fallen off, right? We were really leaning into best-selling things year after year after year. So exciting that we know what those are and we can protect those, but exciting they'll be much more open to buy to lean into new.
Again, in sort of concerted feedback with the consumer.
Yes.
I think that's something that I just don't want missed here because I think you do a very good job. Well, you do constant survey work, right? And you're kind of very close to this customer in many ways. I think people need to appreciate.
Customer feedback and store feedback. We spend a lot of time with our store managers, DMs, regionals on the phone, in person, understanding, showing them the product, getting their response, showing them things in advance.
It sort of bleeds into a conversation on the competitive landscape. Sort of who else is out there, the general health of the competitive set, if you will?
Yeah. So we would say our closest competition, certainly the KnitWell Group when you think about Ann Taylor, Loft, Talbots, Chico's. And what we saw, especially when you think about fourth quarter, is their actions do impact our business to a certain degree.
Promotionally.
They were so promotional, very deep, very early, and to levels we would never go to. But your consumer is seeing that every day. So it does have an impact.
Yeah. And does that?
Product sells, good product sells all. And so when you think about product evolution, and when you can drive full-price product and reduce the days that you're promotional, that's obviously the goal.
So if we're a point away from the nitpickiness of sort of next quarter this year, even thinking about kind of the structural level of growth that you would anticipate, let's start there. Make our way down to P&L. I guess that's a CFO question.
It's going to be both. We've talked about it. Direct-driven with some of the initiatives around direct supported by the product and the marketing initiatives that Mary Ellen talked about.
Yeah. We're not looking to take any big swings, right? We're looking for consistent growth, and I think when you think about just categories growth, growth within the categories we do today, leaning into categories where we're very, very small today that we can scale, things like accessories. When you talk about building lifestyle, building outfits, building your basket and your AOV, we're excited about those things in the short term, and then the thought is, where do we go from there after that, and that's what's exciting, but we have a lot of opportunity in front of us just working on the things that we do today that we know have room for growth.
And another thing I really want people to appreciate as well is that you don't kind of mention the competitive set being more promotional. You protect the brand in a way that you will let comp go negative for the sake of gross margin, right? I mean, you will protect the cash flow dynamics of the business in a way to be an overall more profitable business for over a longer horizon.
What I would say is because this business throws off so much free cash, it allows us the opportunity to really, really take action, really straighten some things out, really lean in, test, and then be able to move forward with knowing the backdrop of how solid the foundation is, how high the margins are, and the cash flow is always strong.
And I would add, on the margin right now with the tariff structure and everything else, we're not interested in just blanket raising prices to then promote into that because that has a long-lasting tail and really protecting the value equation of the brand through strategic price increases, which Mary Ellen and the merchant teams lead to really suss out where they believe in the assortment there's value opportunities at a higher price point. That's been more of our approach because getting into a constant promo cycle, we would rather position the inventories lean and preserve the margin through that time period because that's the full-price customer that leads you out in your growth trajectory.
Just because you mentioned it, can you kind of speak to tariff mitigation? I know that's sort of what you're talking about this, but.
Yeah. Tired of talking about it. People are asking about what's going to happen tomorrow in the Supreme Court.
The one I hate is if it goes away, what happens, right? Yeah. I mean, who knows?
For us, we have mitigation strategies are to first work with vendors, and we have a great vendor base, long-standing relationships. They have helped offset a fairly large chunk of tariffs, and we believe from our industry sources and what we know out there that that's probably in line with the industry, maybe even a little bit better on behalf of our vendors participating with us on covering tariffs. What we've indicated is that net of that participation, we have about $20 million of COGS, elevated COGS that we then work to strategically price, which we just talked about, to offset. We will look to some level of engineering, but similar to not wanting to buy up into a promo, we do not and are adamantly protecting quality in the assortment. We're vigilant to our vendors, and we're vigilant to our own actions to preserve quality.
We will engineer where it makes sense to engineer without sacrificing quality. And then India is still an open question on where the tariff will ultimately land. We've gotten incredible support from a vendor community in India that is very severely and really impacted by this, right? So they've provided incredible support to their clients. It can't go on forever. But so there's some strategic look at some JV opportunities that are out there with some of those vendors into lower-cost countries and some on-the-margin country of origin migration that we would put in. That tariff load of $20 million, it's important to note, $8 million of that is in 2025's COGS. And then 2026, we'll anniversary that in because it really started in a little way hitting the P&L in Q2. And then we had about $2.5 million in Q3.
We expect about $5 million per quarter on a run rate. Another $12 million will be sort of the bogey we're looking at for 2026 to work through at this point.
I don't think people actually appreciate that, but it is really much of front half 2026.
Very much of first half, a little bit of Q3.
I think we're now starting to realize that. But it sounds like you're not approaching it from just a pure blanket price standpoint.
No.
No. Very strategic in places where we think the consumer will really respond. And again, the more new things you have, the less precedent you have for setting the pricing.
Exactly. All right. And then I think a real positive part of the story is sort of the actual uses of cash. So can you kind of speak to, in this normalized environment, or your strategy around buybacks, you issued a dividend, how you plan to kind of do both of those go forward? And if there's any sort of remaining balance sheet maneuvers you can take?
We have sort of four priorities with the uses of cash. The first one is investing in the business and that's what we've been talking about. It's store growth, it's the marketing, and it's technology, which we're equally excited about building on the technology initiatives we've executed and completed the last couple of years and putting in some of the front-end systems that can leverage a better foundational system. Now, as we go forward, we're excited about that as well, but that's first priority. Second priority for us has been the balance sheet. Our balance sheet is incredibly strong now, so we just refinanced our debt in December. We announced that we refinanced. The quantum of the note is $75 million. That's sub one times gross leverage. It's well below 1x net leverage, so there's just not as much priority right now.
I'm always going to keep it number two because you got to keep a focus on a very strong balance sheet, but it's very strong right now. Third is total shareholder return. So we have the dividend you mentioned. We launched an ordinary dividend program in late 2024 and then a share repurchase authorization. We have a $25 million authorization. The dividend was started intentionally at a very manageable place. We know and the board knows in making these decisions that a dividend to be meaningful needs to be sustainable, perpetuity sustainable, if that's yet a word anymore.
Unless you have a pandemic.
Pandemics throw everything into there, but needs to be sustainable. Ideally, over time, it's increasing. The board demonstrated at the beginning of this year increasing the dividend 14%. Nothing more to say on that other than it's an awareness, and that's kind of how we thought about launching the dividend. And then the repurchase authorization of $25 million is authorized through the end of 2026. And as of the end of Q3, we still had $18 million remaining on that authorization. So plenty to go there. Fourth priority, and it's fourth for a reason, but M&A at some point, our model produces a lot of cash. We are relatively in the universe today, smaller company. We have an opportunity to think about very prudently strategic M&A that helps us broaden our customer base, helps us grow the business overall. And that's something that's the fourth priority for us.
And it's a target-rich environment, theoretically. Can we just end on, we're out of time, but if you'll indulge us 10 seconds? Just the holiday. You've already announced results, but does the sort of performance to holiday give you hope for 2026? Are you kind of seeing things incrementally in the business to sort of provide some inflection?
It does. Listen, we've learned some things from holiday where we did tests, and we know it's all about product. Where the first delivery was not resonating with the customer, it's tough. When we dropped the second delivery and she responded much more positively, we were able to go back and then give new guidance, which we're very excited about. So yeah, this testing, learning, reading what she wants, but going back to re-energizing this brand, this is what we're focused on right now inside and out, right? Getting the team galvanized behind a vision that will then translate to what the consumer sees and responds to as we evolve it over the next 12 months.