With all the doom and gloom surrounding the apparel sector - particularly, brick and mortar retailers - it might seem odd to be bullish on a women's apparel company. But that is what I am going to do in this note. I believe women's retailer J. Jill has upside. First, a description of the company:
"J.Jill, Inc. (J.Jill) operates as a specialty retailer in the women’s apparel industry. J.Jill is a women’s apparel brand focused on customer in the 40-65 age segment. The Company operates an integrated omni-channel platform that is diversified across its retail stores, Website and catalogs. It operates in the retail and direct channels segment. Its direct channel consists of its Website and catalog orders. As of January 28, 2017, it operated 275 stores in 43 states. The Company also offers a range of footwear and accessories, including scarves, jewelry and hosiery. Its products are marketed under the J.Jill brand name and sold through its direct and retail channels. It offers two sub-brands as extensions of its brand aesthetic: Pure Jill and Wearever. Its Website provides customers with access to the J.Jill product offering and features content, including updates on new collections and guidance on how to wear and wardrobe its styles."
J. Jill is not a fast growing retailer that will take over the world. Revenue growth over the last year was a meek (perhaps reasonable) 13.7%. Consensus pegs revenue growth over the next year at 9.9%, and 8.8% the following year. The big positive here is that it is a retailer with a laser sharp focus on profitability. Here's the key detail:
J.Jill focuses on females in the 40-65 age group. Their customer base has some very desirable characteristics. As they described in their S1: "Our customer is 40-65 years old, is college educated and has an annual household income that exceeds $150,000. She engages across both our direct and retail channels and is highly loyal, as evidenced by the fact that approximately 70% of our gross sales is pro forma 2015 came from customers that has been shopping with J. Jill for at least five years."
In their 10K, J.Jill describes why they are different:
1) Distinct, well recognized brand
2) Industry leading Omni-channel business
3) Data-centric approach that drives consistent profitability and mitigates risk
4) Affluent and loyal customer base
5) Customer-focused product assortment
6) Highly experienced leadership team, delivering superior results
J.Jill currently has 275 stores in 43 states. They project that they could potentially increase their store base by about a 100 over the long run. But this is not the reason you want to invest in this company. The reason you want to invest is because this retailer has good economics, which will grow EPS nicely over the next decade or so - if business holds up. The latter is always a consideration in fashion retailer, so that will have a big influence on shareholder returns too.
And business is holding up well. Company comparable sales were up 11.2% over 2016.
J. Jill was taken private and recently IPO'd. It is saddled with $267 million of debt, so as they pay down these obligations, value should accrue to equity holders. In addition, there may even be share repurchases in the future, if all goes to plan.
The stock currently trades for 14X NTM EPS, which seems reasonable but not excessively cheap. However, with steady profitable growth (through SSS growth and opening new stores), J. Jill might be able to compound the bottom line at 20% for some time going forward - given favorable economics.
It's worth going long here IMO at $13.6 per share and a market cap of $600MM. This could provide a decent, albeit not spectacular return, over the next few years...
"J.Jill, Inc. (J.Jill) operates as a specialty retailer in the women’s apparel industry. J.Jill is a women’s apparel brand focused on customer in the 40-65 age segment. The Company operates an integrated omni-channel platform that is diversified across its retail stores, Website and catalogs. It operates in the retail and direct channels segment. Its direct channel consists of its Website and catalog orders. As of January 28, 2017, it operated 275 stores in 43 states. The Company also offers a range of footwear and accessories, including scarves, jewelry and hosiery. Its products are marketed under the J.Jill brand name and sold through its direct and retail channels. It offers two sub-brands as extensions of its brand aesthetic: Pure Jill and Wearever. Its Website provides customers with access to the J.Jill product offering and features content, including updates on new collections and guidance on how to wear and wardrobe its styles."
J. Jill is not a fast growing retailer that will take over the world. Revenue growth over the last year was a meek (perhaps reasonable) 13.7%. Consensus pegs revenue growth over the next year at 9.9%, and 8.8% the following year. The big positive here is that it is a retailer with a laser sharp focus on profitability. Here's the key detail:
J.Jill focuses on females in the 40-65 age group. Their customer base has some very desirable characteristics. As they described in their S1: "Our customer is 40-65 years old, is college educated and has an annual household income that exceeds $150,000. She engages across both our direct and retail channels and is highly loyal, as evidenced by the fact that approximately 70% of our gross sales is pro forma 2015 came from customers that has been shopping with J. Jill for at least five years."
In their 10K, J.Jill describes why they are different:
1) Distinct, well recognized brand
2) Industry leading Omni-channel business
3) Data-centric approach that drives consistent profitability and mitigates risk
4) Affluent and loyal customer base
5) Customer-focused product assortment
6) Highly experienced leadership team, delivering superior results
J.Jill currently has 275 stores in 43 states. They project that they could potentially increase their store base by about a 100 over the long run. But this is not the reason you want to invest in this company. The reason you want to invest is because this retailer has good economics, which will grow EPS nicely over the next decade or so - if business holds up. The latter is always a consideration in fashion retailer, so that will have a big influence on shareholder returns too.
And business is holding up well. Company comparable sales were up 11.2% over 2016.
J. Jill was taken private and recently IPO'd. It is saddled with $267 million of debt, so as they pay down these obligations, value should accrue to equity holders. In addition, there may even be share repurchases in the future, if all goes to plan.
The stock currently trades for 14X NTM EPS, which seems reasonable but not excessively cheap. However, with steady profitable growth (through SSS growth and opening new stores), J. Jill might be able to compound the bottom line at 20% for some time going forward - given favorable economics.
It's worth going long here IMO at $13.6 per share and a market cap of $600MM. This could provide a decent, albeit not spectacular return, over the next few years...
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