Founded in 1959, J.Jill, Inc. (JILL - Get Rating) is an omnichannel retailer of women’s apparel that operates under the J.Jill brand name in the United States. Given its sequential topline improvement in its last fiscal quarter compared its prior quarter, the stock has gained 66.6% over the past month to close yesterday’s trading session at $8.38. However, JILL is  still struggling to withstand unprecedented challenges in the retail sector caused by the COVID-19 pandemic.

Despite reducing its interest expenses, JILL reported a significant operating loss and declining revenue for the last quarter. In fact, JILL closed nine of its stores in the fourth quarter of its fiscal 2020, closing the quarter with 267 stores. The store closures could well throttle JILL’s growth in the coming months.

While the company plans to revamp its operating model to return to profitability  and improve its cash balance in the long run, the weakness in its current financials might dampen the stock’s performance in the near term.

Click here to checkout our Retail Industry Report for 2021

Here’s what we think could influence JILL’s performance in the near term:

Resurgence of COVID-19 Cases Makes the Prospects Uncertain

Although the nationwide COVID-19  vaccine roll out has raised retailers’ hopes of a near-term return to normal business activity,  a  recent surge in coronavirus cases in 21 states could aggravate the strain on the retail sector. It could extend operational restrictions and, in some cases, cause more  store closures. So, the current scenario for the retail landscape remains uncertain. JILL closed nine stores in its  last reported quarters and  is  struggling to stay afloat.

Weak Financials

JILL’s net sales declined 28.3% year-over-year to $120.43 million in its fiscal  fourth quarter ended January 30.The company’s gross profit decreased 31.3% from its  year-ago value to $68.69 million. It generated a $31.2 million loss from operations  compared to $37.0 million loss in the fourth quarter of fiscal 2019. Also, its net loss was $29.0 million compared to a loss of $38.6 million in the prior-year quarter. However, its interest expenses declined 9.6% year-over-year to $17.7 million over this period.

Mixed Profitability

JILL’s trailing-12-month gross profit margin of 57.7% is 73.4% higher than the industry average 33.3%. However, its trailing-12-month levered free cash flow margin of 1.9% is 72.9% lower than the industry average 6.9%. Its trailing-12-month CAPEX/sales of 1.8% is 25.4% lower than the industry average 2.5%.

Analyst Estimates Show Uncertainty

Analysts expect JILL’s revenue to decline 39.1% in the current year but increase 32% in its fiscal year 2022. Furthermore, its EPS is expected to decline at a rate of 45.5% over the next five years.

POWR Ratings Don’t Indicate Enough Upside

JILL has an overall C rating, which equates to Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight different categories. Among these categories, JILL has a grade of B for Momentum, which is consistent with its  increase in price over the past month.

It has a C grade for Quality, given its mixed profitability.

Jill has a C grade for Sentiment also. This is justified given  analysts’ expectation that its revenue will decrease year-over-year.

Jill is currently ranked #59 of 66 stocks in the B-rated Fashion & Luxury industry. In addition to the grades we’ve  highlighted, one  can check out JILL’s POWR Ratings for Value, Stability, and Growth here.

If you’re looking for better stocks in the Fashion & Luxury industry with an Overall POWR Rating of A or B, you can access them here.

Bottom Line

JILL’s sequential top line improvement has helped the company gain significantly over the past month. Because  the retail sector continues to bear the brunt of the pandemic’s negative effects amid rising COVID-19 cases, its weak financials, unfavorable earnings estimate, and mixed profitability could hamper the stock’s performance in the near term. Hence, we think it could be risky to bet on the stock now.

Click here to checkout our Retail Industry Report for 2021

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JILL shares were trading at $8.49 per share on Friday afternoon, up $0.11 (+1.31%). Year-to-date, JILL has gained 127.61%, versus a 4.83% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...

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