The Rebound Tops Out For J. Jill
J. Jill, Inc (NYSE: JILL) reported a fantastic FQ4 and even gave fairly robust guidance but it is not, we think, enough to sustain a rally. While the company was able to grow revenue from last year and widen its margin the outlook for this year is tepid at best. The company is not expecting any declines or weakness but the guidance is barely better than flat on a sequential basis and suggests the rebound has topped out.
The worst part about the guidance is that business is not expected to top the pre-COVID levels and there are still headwinds blowing against company progress. A large part of the company’s success has been reorganization to include store closures. The company is planning to close 10 stores this year and that will be an impact on revenue. Add in the fact consumer spending will come under pressure due to rising inflation and pain at the pump and we just don’t think now is the right time to get into specialty retailers in highly competitive niches.
J. Jill Pops On Strong Results, Outlook Weighs
J Jill had a great quarter and produced $145.15 in net revenue. This is up 15.3% from last year and beat the Marketbeat.com consensus by 220 basis points but down significantly in the 2-year (2020) and 3-year (2019) comparisons. Total comps are up 19.7% driven by in-store traffic and offset by a decline in DTC. DTC sales fell -8.8% due to a decline in eCommerce but still accounts for more than 52% of the net. Moving down, the news is even better with gross margins improving by 710 basis points, SG&A declining and operating margins reversing last year’s loss. On the bottom line, the $0.25 in GAAP EPS compares very well to last year’s loss of $2.81 while the adjusted $0.15 beat by $0.18.
The guidance is where the report gets sticky. The company issued guidance for the Q1 period as up 11% to 14% YOY which reads well at first glance. However, when doing the math, this amounts to a range tightly bracketing the Q4 results and that is not the range the market wanted or needs to see if a rally in share prices is going to take place. The upshot is that trading at 8X its earnings outlook, it is already in the bargain basement so price action may not fall far if it can’t hold on to the $15 handle.
Insiders And Institutions Put A Bottom In J. Jill, Inc
The insider activity in J.Jill, Inc isn’t robust but it is telling. Four major insiders including the director and CEO purchased shares in 2021 within a week or so of each other and these are the only transactions for the year. The week in question coincides with a strong support level that has been in play ever since and that action is bolstered by the institutions. The institutions bought about 8.5% of the market cap over the last year with a large portion of those purchases made in the Q3 2021 through Q1 2022 time frame. Their holdings amount to about 23% of the float and growing, with another 3.1% or so held by the insiders.
The Technical Outlook: J.Jill Is Moving Sideways Fast
Shares of J.Jill have been moving sideways within a fairly tight range for months and look like they may continue that action for the near term at least. If price action falls below the $15.40 region we see it finding support near $13.30. If price action bounces from here it is likely resistance will set in around the $16.80 level. This may continue indefinitely, or until there is a change in the outlook either economically or for this company specifically.
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