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What changed in J.Jill, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of J.Jill, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+309 added−332 removedSource: 10-K (2024-04-04) vs 10-K (2023-03-30)

Top changes in J.Jill, Inc.'s 2024 10-K

309 paragraphs added · 332 removed · 256 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeCompany Overview J.Jill is a national lifestyle brand that provides apparel, footwear and accessories designed to help its customers move through a full life with ease. The brand represents an easy, thoughtful, and inspired style that celebrates the totality of all women and designs its products with its core brand ethos in mind: keep it simple and make it matter.
Biggest changeThe brand represents an easy, thoughtful and inspired style that celebrates the totality of all women and designs its products with its core brand ethos in mind: keep it simple and make it matter. J.Jill offers a high touch customer experience through over 200 stores nationwide and a robust ecommerce platform. J.Jill is headquartered outside Boston.
By focusing on perfecting our fit, improving her experience when shopping extended sizing, and clearly communicating its robust range of sizes, J.Jill continues to meet the most salient needs of its customer: finding her desired fit and products that are uniquely relevant to her with the confidence that J.Jill has what she is looking for in beautiful styles and fabrications.
By focusing on perfecting our fit, improving her experience when shopping extended sizing, and clearly communicating our robust range of sizes, J.Jill continues to meet the most salient needs of its customer: finding her desired fit and products that are uniquely relevant to her with the confidence that J.Jill has what she is looking for in beautiful styles and fabrications.
Additionally, the agents manage the development of samples of merchandise produced in the 7 factories, inspect finished merchandise, ensure the timely delivery of goods and carry out other administrative and oversight functions on J.Jill ’s behalf. J.Jill sources the remainder of its products by interacting directly with suppliers and factories both domestically and abroad.
Additionally, the agents manage the development of samples of merchandise produced in the factories, inspect finished merchandise, ensure the timely delivery of goods and carry out other administrative and oversight functions on J.Jill ’s behalf. J.Jill sources the remainder of its products by interacting directly with suppliers and factories both domestically and abroad.
It is designed with a fabric-first approach, reflected in simple designs, unique artisanal details, interesting textures, soft natural fabrics and dye and wash techniques. Wearever : Wearever is all day refined dressing designed for work, travel and home.
It is designed with a fabric-first approach, reflected in simple designs, unique artisanal details, interesting textures, soft natural fabrics and dye and wash techniques. 4 Wearever : Wearever is all day refined dressing designed for work, travel and home.
All credit card holders receive invitations to exclusive customer events and promotions including special purchase events five times per year, a special offer for her birthday, and a 5% discount when purchases are made on the card. J.Jill promotes the benefits of its credit card to new and existing customers through its various marketing channels.
All credit card holders receive invitations to exclusive customer events and promotions including special purchase events six times per year, a special offer for her birthday, and a 5% discount when purchases are made on the card. J.Jill promotes the benefits of its credit card to new and existing customers through its various marketing channels.
Whether they are buying versatile work, comfortable travel, or premium casual clothes for attending occasions or meeting friends, J.Jill offers its customers a variety of options for all different usage occasions. 4 Pure Jill : The highest expression of the J.Jill brand, Pure Jill reflects the art of understated ease.
Whether they are buying versatile work, comfortable travel, or premium casual clothes for attending occasions or meeting friends, J.Jill offers its customers a variety of options for different usage occasions. Pure Jill : The highest expression of the J.Jill brand, Pure Jill reflects the art of understated ease.
Agents work with approximately 30 suppliers on J.Jill ’s behalf. J.Jill sources its merchandise globally from 11 countries with the top three by volume being India, Indonesia, and Vietnam. No single supplier accounts for more than 20% of merchandise purchased by volume.
Agents work with approximately 40 suppliers on J.Jill ’s behalf. J.Jill sources its merchandise globally from 11 countries with the top three by volume being India, Indonesia, and Vietnam. No single supplier accounts for more than 20% of merchandise purchased by volume.
In Fiscal Year 2022 approximately 80% of its products were sourced through agents and 20% were sourced directly from suppliers and factories. J.Jill works with several primary agents that help it identify quality suppliers and coordinate its manufacturing requirements.
In Fiscal Year 2023 approximately 80% of its products were sourced through agents and 20% were sourced directly from suppliers and factories. J.Jill works with several primary agents that help it identify quality suppliers and coordinate its manufacturing requirements.
In Fiscal Year 2022, the distribution center handled 28 million units, split between 12 million retail (43%) and 16 million direct (57%), and J.Jill believes this facility is sufficient to support its future growth.
In Fiscal Year 2023, the distribution center handled 28 million units, split between 12 million retail (43%) and 16 million direct (57%), and J.Jill believes this facility is sufficient to support its future growth.
Upon receipt, merchandise is further inspected on a test basis for consistency in cut, size and color, as well as for conformity with specifications and overall quality of manufacturing. J.Jill’s sourcing team ensures that the customer has a consistent product and satisfying brand experience regardless of product size, color or collection.
Upon receipt, merchandise is further inspected on a test basis for consistency in cut, size and color, as well as for conformity with specifications and overall quality of manufacturing. J.Jill’s sourcing team ensures that the customer has a consistent product and satisfying brand experience regardless of product size, color or collection. See Item 1A.
J.Jill believes its distinct combination of design, service, quality and value allows it to challenge the competition effectively and believes it differentiates itself based on the strength of its brand, its omnichannel platform, its strong data capabilities, its loyal customer base, its customer-focused product assortment and its highly experienced leadership team.
J.Jill believes its distinct combination of design, service, quality and value allows it to challenge the competition effectively and believes it differentiates itself based on the strength of its brand, its omnichannel platform, its strong data capabilities, its loyal customer base, its customer-focused product assortment and its highly experienced leadership team. See Item 1A.
Total Stores at Stores Stores the End of the Store Open Year Opened Closed Fiscal Year Fiscal Year 2019 11 (6 ) 287 Fiscal Year 2020 — (20 ) 267 Fiscal Year 2021 — (14 ) 253 Fiscal Year 2022 1 (11 ) 243 5 Direct Channel J.Jill’s Direct channel consists of its website and catalog orders.
Total Stores at Stores Stores the End of the Store Open Year Opened Closed Fiscal Year Fiscal Year 2019 11 (6 ) 287 Fiscal Year 2020 — (20 ) 267 Fiscal Year 2021 — (14 ) 253 Fiscal Year 2022 1 (11 ) 243 Fiscal Year 2023 2 (1 ) 244 5 Direct Channel J.Jill’s Direct channel consists of its website and catalog orders.
J.Jill ’s merchandise offering drives consistent sales across seasons with no quarter contributing more than 27% of total annual net sales in Fiscal Year 2022. Competition The women’s apparel industry is highly competitive. J.Jill competes with local, national and international retail chains and department stores, specialty and discount stores, catalogs and internet businesses offering similar categories of merchandise.
J.Jill ’s merchandise offering drives consistent sales across seasons with no quarter contributing more than 26% of total annual net sales in Fiscal Year 2023. Competition The women’s apparel industry is highly competitive. J.Jill competes with local, national and international retail chains and department stores, specialty and discount stores, catalogs and internet businesses offering similar categories of merchandise.
J.Jill reviews and evaluates its store fleet on various factors, including customer demographics within a market, concentration of existing customers, location of existing stores, center tenant quality and mix, rental economics and overall operating performance.
J.Jill reviews and evaluates its store fleet and potential new store locations on various factors, including customer demographics within a market, concentration of existing customers, location of existing stores, center tenant quality and mix, rental economics and overall operating performance.
The J.Jill website also provides customers with a broader range of colors and sizes than available in its stores. Competitive Strengths Distinct, Well-Recognized Brand. The J.Jill brand represents an easy, thoughtful and inspired style that celebrates the totality of all women and fuels her joy and impact with style for all of who she is.
The J.Jill website also provides customers with a broader range of colors and sizes than available in its stores. Competitive Strengths Distinct, Well-Recognized Brand. The J.Jill brand represents an easy, thoughtful and inspired style that celebrates the totality of all women and fuels her joy and impact with style.
The close coordination between its teams ensures that its product and brand message is clearly communicated to its customers across all channels, bringing customers back regularly to see what’s new. Channel J.Jill believes that its customers’ purchasing decisions are influenced by the consistent experience it provides across its sales channels.
The close coordination between its teams ensures that its product and brand message is clearly communicated to its customers across all channels, bringing customers back regularly to see what’s new. Omnichannel Business Model J.Jill believes that its customers’ purchasing decisions are influenced by the consistent experience it provides across its sales channels.
Her average tenure with the J.Jill brand is an industry-leading 10 years. Additionally, as J.Jill retains her over time, she tends to migrate from being a single channel customer to a more valuable omnichannel customer. Omnichannel customers comprised approximately 22% of J.Jill’s active customer base for Fiscal Years 2022, 2021 and 2020.
Her average tenure with the J.Jill brand is an industry-leading 10 plus years. Additionally, as J.Jill retains her over time, she tends to migrate from being a single channel customer to a more valuable omnichannel customer. Omnichannel customers comprised approximately 23% of J.Jill’s active customer base for Fiscal Years 2023 and approximately 22% for Fiscal Years 2022 and 2021, respectively.
The customer contact center is an extension of the J.Jill brand, providing a consistent customer experience at every stage of a purchase across all of its channels. In Fiscal Year 2022, J.Jill managed approximately 3.6 million customer interactions through its in-house customer contact center in Tilton, New Hampshire.
The customer contact center is an extension of the J.Jill brand, providing a consistent customer experience at every stage of a purchase across all of its channels. In Fiscal Year 2023, J.Jill managed approximately 3.4 million customer interactions through its in-house customer contact center in Tilton, New Hampshire.
J.Jill believes that its credit card program encourages customer loyalty, repeat visits and additional spending. In Fiscal Year 2022, 52% of its gross sales were generated by its credit card holders. Sourcing and Supply Strategy To efficiently source its products, J.Jill leverages its longstanding relationships with agents who represent suppliers and factories.
J.Jill believes that its credit card program encourages customer loyalty, repeat visits and additional spending. In Fiscal Year 2023, 46% of its gross sales were generated by its credit card holders. 7 Sourcing and Supply Strategy To efficiently source its products, J.Jill leverages its longstanding relationships with agents who represent suppliers and factories.
J.Jill ’s notable health, welfare and retirement benefits include: • Company subsidized health insurance • Short and long-term disability insurance • 401(k) plan with Company matching contributions • Tuition assistance program • Paid parental leave • Flexible working arrangements • Paid time off programs J.Jill strives to maintain an inclusive environment free from discrimination of any kind, including sexual or other discriminatory harassment.
J.Jill ’s notable health, welfare and retirement benefits include: • Company subsidized health insurance • Short and long-term disability insurance • 401(k) plan with Company matching contributions • Tuition assistance program • Paid parental leave • Flexible working arrangements • Paid time off programs • Associate Compassion Fund providing emergency financial assistance to qualifying associates J.Jill strives to maintain an inclusive environment free from discrimination of any kind, including sexual or other discriminatory harassment.
Of these associates, 293 were employed in its headquarters in Quincy, Massachusetts, 2,400 were employed in its retail stores and field management team, and 291 worked in its distribution and customer contact center and administrative office in Tilton, New Hampshire. The number of associates, particularly part-time associates, fluctuates depending upon seasonal needs.
Of these associates, 298 were employed in its headquarters in Quincy, Massachusetts, 2,507 were employed in its retail stores and field management team, and 286 worked in its distribution and customer contact center and administrative office in Tilton, New Hampshire. The number of associates, particularly part-time associates, fluctuates depending upon seasonal needs.
J.Jill is undertaking initiatives to further develop its website to provide a more personalized shopping experience with more features and services for its customers. The website also provides enhanced capability to engage customers on mobile devices, and improved access to products. Strengthen Omnichannel Capabilities.
J.Jill is undertaking initiatives to further develop its website to provide a more personalized shopping experience with more features and services for its customers. The website also provides enhanced capability to engage customers on mobile devices, and improved access to products. Profitably Expand Our Store Base .
Further, its robust customer database and analytical capabilities allow J.Jill to be focused and strategic in identifying high potential locations and optimizing its store footprint. Store Fleet Optimization J.Jill Stores As of January 28, 2023, J.Jill operated 243 stores across 42 states with approximately half located in lifestyle centers and the remaining in premium malls; all J.Jill stores are leased.
Further, its robust customer database and analytical capabilities allow J.Jill to be focused and strategic in identifying high potential locations and optimizing its store footprint. Retail Channel J.Jill Stores As of February 3, 2024, J.Jill operated 244 stores across 42 states with approximately half located in lifestyle centers and the remaining in premium malls; all J.Jill stores are leased.
Substantially all of J.Jill’s merchandise is designed in-house, and creating newness through different fabrics, colors, patterns and silhouettes. J.Jill also utilizes launches of its sub-brands, Pure Jill, Wearever, and Fit, to stagger new deliveries, as well as offer web edit capsules and omni refreshes to the seasons.
Substantially all of J.Jill’s merchandise is designed in-house, creating newness through different fabrics, colors, patterns and silhouettes. J.Jill also utilizes the launch of its sub-brands, Pure Jill, Wearever, and Fit, to stagger new deliveries, and offers web edit capsules and omnichannel product refreshes to provide newness throughout each season.
Omnichannel Distribution and Customer Contact Center J.Jill leases its 520,000 square foot distribution and customer contact center in Tilton, New Hampshire. The facility manages the receipt, storage, sorting, packing and distribution of merchandise for its Retail and Direct channels.
Risk Factors for additional discussion related to our risks associated with sourcing and our supply chain. Omnichannel Distribution and Customer Contact Center J.Jill leases its 520,000 square foot distribution and customer contact center in Tilton, New Hampshire. The facility manages the receipt, storage, sorting, packing and distribution of merchandise for its Retail and Direct channels.
J.Jill believes there is an opportunity to improve its productivity by selectively enhancing its assortment in certain product categories, including its Pure Jill and Wearever sub-brands, its Regular, Petite and Tall businesses, and accessories.
J.Jill plans to continue leveraging its insight into customer attributes and behavior, which will guide strategic investments in its business. Enhance Product Assortment. J.Jill believes there is an opportunity to improve its productivity by selectively enhancing its assortment in certain product categories, including its Pure Jill and Wearever sub-brands, its Regular, Petite and Tall businesses, and accessories.
J.Jill has accomplished this by clearly communicating its offerings that align with its vision: to live in a world where the totality of every woman is seen, valued and celebrated.
Brand J.Jill has modernized its value proposition and introduced new customers to its relevant and compelling products through thoughtful, versatile designs that reflect the individuality of its customers. J.Jill has accomplished this by clearly communicating its offerings that align with its vision: to live in a world where the totality of every woman is seen, valued and celebrated.
J.Jill offers a private label credit card program through an agreement with Comenity Capital Bank (“ADS”), formerly known as Alliance Data Systems, under which it owns the credit card receivables.
J.Jill offers a private label credit card program through an agreement (“Credit Card Agreement”) with Comenity Capital Bank (“CCB”), under which CCB owns the credit card receivables.
For Fiscal Year 2022, J.Jill generated approximately 53% of net sales through its Retail channel and approximately 47% of total net sales through its Direct channel. This balanced, omni-channel business model means J.Jill is not over-indexed in either channel and knows where existing and prospective customers are.
For Fiscal Year 2023, J.Jill generated approximately 53% of total net sales through its Retail channel and approximately 47% of total net sales through its Direct channel. This balanced, omnichannel business model means J.Jill meets existing and prospective customers where and how they want to shop.
J.Jill’s profitable store channel is enhanced by store associates who have a unique connection to its customer. Whether calling to help her access its online exclusive products, or celebrating life’s special events in store, J.Jill associates bridge the experience between the channels by reminding her that she can access J.Jill in many ways.
Whether calling to help her access its online exclusive products, or celebrating life’s special events in store, J.Jill associates bridge the experience between the channels by reminding her that she can access J.Jill in many ways. Concurrently, J.Jill remains focused on driving traffic and engagement with its website.
References in this Annual Report to “Fiscal Year 2022” refer to the fiscal year ended January 28, 2023, references to “Fiscal Year 2021” refer to the fiscal year ended January 29, 2022, and references to “Fiscal Year 2020” refer to the fiscal year ended January 30, 2021. Fiscal Years 2022, 2021, and 2020 are comprised of 52 weeks.
References in this Annual Report to “Fiscal Year 2023” refer to the fiscal year ended February 3, 2024, references to “Fiscal Year 2022” refer to the fiscal year ended January 28, 2023, and references to “Fiscal Year 2021” refer to the fiscal year ended January 29, 2022.
Human Capital Attracting, retaining, and developing a diverse pool of talent to drive the success of the J.Jill brand is a key element of its business strategy. As of January 28, 2023, J.Jill employed 1,115 full-time and 1,869 part-time associates.
Risk Factors for additional discussion related to our risks associated with the competition we face. 8 Human Capital Attracting, retaining, and developing a pool of talent with diverse backgrounds and experiences to drive the success of the J.Jill brand is a key element of its business strategy. As of February 3, 2024, J.Jill employed 1,115 full-time and 1,976 part-time associates.
J.Jill has programs in place to provide associates with feedback on performance and professional development planning, and its senior leadership team engages in a formal talent review and development planning process each year. During Fiscal Year 2022 J.Jill promoted approximately 250 associates to higher level positions within the Company.
J.Jill ’s key human capital measures include associate safety, turnover, pay benchmarking and associate professional development. J.Jill has programs in place to provide associates with feedback on performance and professional development planning, and its senior leadership team engages in a formal talent review and development planning process each year.
Although J.Jill’s offices were open throughout Fiscal Year 2022, J.Jill continued to embrace a flexible work model across the organization in accordance with its Optimizing Work and Life (“OWL”) initiative adopted in June 2022. J.Jill ’s key human capital measures include associate safety, turnover, pay benchmarking and associate professional development.
J.Jill considers its relations with its associates to be very good. J.Jill’s offices were open throughout Fiscal Year 2023 as it continued to embrace a flexible work model across the organization in accordance with its Optimizing Work and Life initiative adopted in Fiscal Year 2022.
Concurrently, J.Jill remains focused on driving traffic and engagement with its website. J.Jill plans to continue enhancing the website with value-added services and growing its email file while optimizing its marketing strategies, including increased personalization through social media.
J.Jill plans to continue enhancing the website with value-added services and growing its email file while optimizing its marketing strategies, including increased personalization through social media. J.Jill expects that these improvements will facilitate a more cohesive and seamless shopping experience for its customer, wherever and whenever she chooses to shop.
Information Systems J.Jill uses information systems to support business intelligence and processes across its sales channels. J.Jill continues to invest in information systems and technology to enhance the customer experience and create operating efficiencies including its initiative to upgrade its Point of Sale system.
J.Jill continues to invest in information systems and technology to enhance the customer experience and create operating efficiencies including the completion of the rollout of our new POS system during Fiscal Year 2023 and its initiative to upgrade its OMS system over the next two fiscal years.
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J.Jill offers a high touch customer experience through over 200 stores nationwide and a robust ecommerce platform. J.Jill is headquartered outside Boston. Brand J.Jill has modernized its value proposition and introduced new customers to its relevant and compelling products through thoughtful, versatile designs that reflect the individuality of its customers.
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Fiscal Year 2023 is comprised of 53 weeks and Fiscal Years 2022, and 2021 are comprised of 52 weeks. Company Overview J.Jill is a national lifestyle brand that provides apparel, footwear and accessories designed to help its customers move through a full life with ease.
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J.Jill has been optimizing its fleet the past several years with the goal of closing underperforming locations and improving the overall economic health of the Retail channel. J.Jill will continue to review its fleet on an ongoing basis, balancing closings with select new store openings. The following table shows new store openings and closings since Fiscal Year 2019.
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Following several years of optimizing the fleet through net store closings, J.Jill returned to net store growth in Fiscal Year 2023 with the addition of net one new store. J.Jill will continue to review its fleet for optimization opportunities going forward, while also pursuing net new store openings.
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J.Jill expects that these improvements will facilitate a more cohesive and seamless shopping experience for its customer, wherever and whenever she chooses to shop. J.Jill plans to continue leveraging its insight into customer attributes and behavior, which will guide strategic investments in its business. Enhance Product Assortment.
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The following table shows new store openings and closings since Fiscal Year 2019.
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J.Jill 8 associates are not represented by a labor union and are not party to a collective bargaining agreement. J.Jill considers its relations with its associates to be very good. Throughout the COVID-19 pandemic, J.Jill continued to focus on the health and safety of its associates and customers.
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Following several years of optimizing the fleet through net store closings, J.Jill believes there is an opportunity to strategically add back net 20-25 profitable new stores over the next three to five years. We target new locations primarily in lifestyle centers and premium malls. Strengthen Omnichannel Capabilities.
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Until November 2022, its cross-functional safety team continued to monitor the latest Centers for Disease Control and Prevention (“CDC”) guidelines, maintain appropriate safety protocols, monitor for compliance and make improvements and adjustments where needed. Until December 2022, J.Jill also provided its associates with up to two weeks of emergency paid leave during store closings and for absences related to COVID-19.
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J.Jill’s profitable store channel is enhanced by store associates who have a unique connection to its customer. J.Jill’s Point of Sale (“POS”) system and Order Management System (“OMS”) initiatives further enable its associates in providing a simplified check-out and a frictionless omnichannel shopping experience.
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Pursuant to the Credit Card Agreement, we are eligible to receive reimbursements for costs of marketing programs and royalties based on net sales charged to the private label credit card, as defined in the Credit Card Agreement.
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Information Systems J.Jill uses information systems to support business intelligence and processes across its sales channels.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur business strategy depends in part on our ability to operate retail stores on a profitable basis and if we are not successful in executing our plan, our profitability could be adversely impacted. Our growth strategy depends in part on our ability to open and operate new retail stores on a profitable basis.
Biggest changeIf the performance of our website, catalogs and email declines, or if our overall marketing strategy is not successful, it could have a material adverse effect on our business, financial condition and results of operations. 12 Our growth strategy depends in part on our ability to open and operate new retail stores on a profitable basis, and our ability to identify and close retail stores that are no longer profitable, and if we are not successful in executing our Retail channel strategy to optimize profitability, our growth and profitability could be adversely impacted.
If we fail to comply with these rules or requirements, or if our data security systems are breached or compromised, we may be liable for card issuing banks’ and others’ costs, subject to fines and higher transaction fees and/or lose our ability to accept credit and debit card payments from our customers and process electronic funds transfers or facilitate other types of payments.
If we fail to comply with these rules or requirements, or if our data security systems are breached or compromised, we may be liable for card issuing banks’ and others’ costs, we may be subject to fines and higher transaction fees and/or we may lose our ability to accept credit and debit card payments from our customers and process electronic funds transfers or facilitate other types of payments.
While substantially all of our foreign purchases of our merchandise are negotiated and paid for in U.S. dollars, the cost of our merchandise may be affected by fluctuations in the value of relevant foreign currencies. In addition, we are engaging in growing the amount of production carried out in other developing countries.
While substantially all foreign purchases of our merchandise are negotiated and paid for in U.S. dollars, the cost of our merchandise may be affected by fluctuations in the value of relevant foreign currencies. In addition, we are engaging in growing the amount of production carried out in other developing countries.
Although our inventory shrinkage rates have not been material, or fluctuated significantly in recent years, there can be no assurances that actual rates of inventory loss and theft in the future will be within our estimates or that the measures we are taking will effectively reduce inventory shrinkage.
Although our inventory shrinkage rates have not been material, and have not fluctuated significantly in recent years, there can be no assurances that actual rates of inventory loss and theft in the future will be within our estimates or that the measures we are taking will effectively reduce inventory shrinkage.
As the data privacy and security laws and regulations evolve, we may be subject to more extensive requirements to protect the customer information that we process in connection with the purchases of our merchandise.
As data privacy and security laws and regulations evolve, we may be subject to more extensive requirements to protect the customer information that we process in connection with the purchases of our merchandise.
If the party claiming infringement were to prevail, we could be forced to discontinue the use of the related trademark or design and/or pay significant damages or enter into expensive royalty or licensing arrangements with the prevailing party, assuming these royalty or licensing arrangements are available at all on an economically feasible basis, which they may not be.
If the party claiming infringement were to prevail, we could be forced to discontinue the use of the related trademark or design, pay significant damages and/or enter into expensive royalty or licensing arrangements with the prevailing party, assuming these royalty or licensing arrangements are available at all on an economically feasible basis, which they may not be.
We enter into agreements to manufacture and purchase our merchandise well in advance of the applicable selling season and our failure to anticipate, identify or react appropriately in a timely manner to changes in customer preferences, tastes and trends and economic conditions could lead to, among other 10 things, missed opportunities, excess inventory or inventory shortages, markdowns and write-offs, all of which could negatively impact our profitability and have a material adverse effect on our business, financial condition and results of operations.
We enter into agreements to manufacture and purchase our merchandise well in advance of the applicable selling season and our failure to anticipate, identify or react appropriately in a timely manner to changes in customer preferences, tastes and trends and economic conditions could lead to, among other things, missed opportunities, excess inventory or inventory shortages, markdowns and write-offs, all of which could negatively impact our profitability and have a material adverse effect on our business, financial condition and results of operations.
Under the NYSE rules, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a controlled company and may elect not to comply with certain corporate governance requirements, including the requirements that: • a majority of the board of directors consist of independent directors; • the nominating and corporate governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; • the compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and • there be an annual performance evaluation of the nominating and corporate governance and compensation committees.
Under the NYSE rules, a company of which 19 more than 50% of the voting power is held by another person or group of persons acting together is a controlled company and may elect not to comply with certain corporate governance requirements, including the requirements that: • a majority of the board of directors consist of independent directors; • the nominating and corporate governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; • the compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and • there be an annual performance evaluation of the nominating and corporate governance and compensation committees.
Alleged violations of laws, regulations or contractual obligations relating to privacy and data protection, and any relevant claims, may expose us to potential liability, require us to expend significant resources in responding to and defending such allegations and claims, and result in negative publicity and a loss of confidence in us by our customers, all of which could have an adverse effect on our business, financial condition and results of operations.
Alleged violations of laws, regulations or contractual obligations relating to privacy and data protection, and 23 any relevant claims, may expose us to potential liability, require us to expend significant resources in responding to and defending such allegations and claims, and result in negative publicity and a loss of confidence in us by our customers, all of which could have an adverse effect on our business, financial condition and results of operations.
We could also experience operational difficulties with our suppliers, such as reductions in the availability of production capacity, supply chain disruptions, errors in complying with merchandise specifications, insufficient quality control, shortages of fabrics or other raw materials, failures to meet production deadlines or increases in manufacturing costs. We source our imported merchandise from 11 countries.
We could also experience operational difficulties with our suppliers, such as reductions in the availability of production capacity, supply chain disruptions, errors in complying with merchandise specifications, insufficient quality control, shortages of fabrics or other raw materials, failures to meet production deadlines or increases in manufacturing costs. Currently, we source our imported merchandise from 11 countries.
In addition, new and enhanced technologies, including search, web and infrastructure computing services, digital content, and electronic devices, may increase our competition. The internet and other new technologies facilitate competitive entry and comparison shopping, and increased competition may reduce our sales and profits. We strive to offer an omnichannel shopping experience for our customers that enhances their shopping experiences.
In addition, new and enhanced technologies, including search, web and infrastructure computing services, digital content, and electronic devices, may increase our competition. The internet and other new technologies facilitate competitive entry and 11 comparison shopping, and increased competition may reduce our sales and profits. We strive to offer an omnichannel shopping experience for our customers that enhances their shopping experiences.
On the other hand, if we underestimate demand for our merchandise, we may experience inventory shortages resulting in missed sales and lost revenues. Either of these events could significantly affect our operating results and brand image and loyalty. Our profitability may also be impacted by changes in our size assortments, merchandise mix and changes in our pricing.
On the other hand, if we underestimate demand for our merchandise, we may experience inventory shortages resulting in missed sales opportunities and lost revenues. Either of these events could significantly affect our operating results and brand image and loyalty. Our profitability may also be impacted by changes in our size assortments, merchandise mix and changes in our pricing.
Our future growth strategy depends in part on our ability to optimize and profitably operate our stores and to close underperforming stores. We may not be able to optimize our store base by profitably operating stores and closing stores that are unprofitable, and this could have a material adverse impact on our business, financial condition and results of operations.
Our future growth strategy also depends, in part, on our ability to optimize and profitably operate our stores and to close underperforming stores. We may not be able to optimize our store base by profitably operating stores and closing stores that are unprofitable, and this could have a material adverse impact on our business, financial condition and results of operations.
These charter provisions may limit the ability of third parties to acquire control of our company. We are a holding company and rely on dividends, distributions and other payments, advances and transfers of funds from our subsidiaries to meet our obligations. We are a holding company that does not conduct any business operations of our own.
These charter provisions may limit the ability of third parties to acquire control of our company. 20 We are a holding company and rely on dividends, distributions and other payments, advances and transfers of funds from our subsidiaries to meet our obligations. We are a holding company that does not conduct any business operations of our own.
Furthermore, economic conditions in certain regions may also be affected by natural disasters, such as hurricanes, tropical storms, earthquakes, and wildfires; public health crises; and other major unforeseen events. Adverse economic changes could reduce consumer confidence and could thereby negatively affect our operating results.
Furthermore, economic conditions in certain regions may also be affected by natural disasters, such as hurricanes, tropical storms, earthquakes, and wildfires; public health crises; and other major unforeseen events. Adverse macroeconomic changes could reduce consumer confidence and could thereby negatively affect our operating results.
We obtain a significant amount of traffic via search engines and, therefore, rely on search engines such as Google, Yahoo! and Bing. Search engines frequently update and change the logic that determines the placement and display of results of a user’s search, such that the purchased or algorithmic placement of links to our site can be negatively affected.
We obtain a significant amount of traffic via search engines and rely on search engines such as Google, Yahoo! and Bing. Search engines frequently update and change the logic that determines the placement and display of results of a user’s search and the purchased or algorithmic placement of links to our site can be negatively affected.
The projections of future cash flows used in these analyses require the use of judgment and a number of estimates and projections of future operating results. If actual results differ from our estimates, additional charges for asset impairments may be required in the future. If future impairment charges are significant, our reported operating results would be adversely affected.
The projections of future cash flows used in these analyses require the use of judgment and a number of estimates and projections of future 25 operating results. If actual results differ from our estimates, additional charges for asset impairments may be required in the future. If future impairment charges are significant, our reported operating results would be adversely affected.
In addition, pursuant to Section 404 of the Sarbanes-Oxley Act, as amended, we are required to furnish a report by 27 management and our independent registered public accounting firm is required to attest to, among other things, the effectiveness of our internal control over financial reporting.
In addition, pursuant to Section 404 of the Sarbanes-Oxley Act, as amended, we are required to furnish a report by management and our independent registered public accounting firm is required to attest to, among other things, the effectiveness of our internal control over financial reporting.
Closing a store, for even a brief period to permit relocation, would reduce the revenue contribution of that store. Additionally, the revenue and profit, if any, generated at a relocated store may not equal the revenue and profit generated at the previous location. Long-term leases can limit our flexibility to move a store to a new location.
Closing a store, for even a brief relocation period, would reduce the revenue contribution of that store. Additionally, the revenue and profit, if any, generated at a relocated store may not equal the revenue and profit generated at the previous location. Long-term leases can limit our flexibility to move a store to a new location.
As a result, we are subject to U.S. data protection laws and regulations at both the federal and state levels. The legislative and regulatory landscape for data protection continues to evolve, and in recent years there has been an increasing focus on privacy and data security issues.
As a result, we are subject to U.S. data protection laws and regulations at both the federal and state levels. The legislative and regulatory landscape for data protection continues to evolve, and in recent years there has been an increasing focus on privacy and data security.
If we are unable to maintain the relationships with our suppliers and agents and are unexpectedly required to change suppliers or agents, or if a key supplier or agent is unable or unwilling to supply acceptable merchandise in sufficient quantities on acceptable terms, we could experience a significant disruption in the supply of merchandise.
If we are unable to maintain good relationships with our suppliers and agents and are unexpectedly required to change suppliers or agents, or if a key supplier or agent is unable or unwilling to supply acceptable merchandise in sufficient quantities on acceptable terms, we could experience a significant disruption in the supply of merchandise.
If one or more of these analysts cease coverage of our company or fail to publish 23 reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
Litigation matters may include, among other things, government and agency investigations, employment, commercial, intellectual property, tort, advertising and stockholder claims. We cannot predict with certainty the outcomes of these legal proceedings and other contingencies.
Litigation matters may include, 26 among other things, government and agency investigations, employment, commercial, intellectual property, tort, advertising and stockholder claims. We cannot predict with certainty the outcomes of these legal proceedings and other contingencies.
Further, it is unclear how the laws and regulations relating to the collection, process and use of personal data will further develop in the United States, 25 and to what extent this may affect our operations in the future.
Further, it is unclear how the laws and regulations relating to the collection, process and use of personal data will further develop in the United States, and to what extent this may affect our operations in the future.
Furthermore, many of our expenses and investments are fixed, and we may not be able to adjust our spending in a timely manner to compensate for any unexpected shortfall in our net sales results.
Furthermore, many of our expenses and investments 13 are fixed, and we may not be able to adjust our spending in a timely manner to compensate for any unexpected shortfall in our net sales results.
The following factors could affect our stock price: • our operating and financial performance; • quarterly variations in the rate of growth (if any) of our financial indicators, such as net income per share, net income and revenues; • the public reaction to our press releases, our other public announcements and our filings with the SEC; • strategic actions by our competitors; • changes in operating performance and the stock market valuations of other companies; • announcements related to litigation; • our failure to meet revenue or earnings estimates made by research analysts or other investors; • changes in revenue or earnings estimates, or changes in recommendations or withdrawal of research coverage, by equity research analysts; • speculation in the press or investment community; • sales of our common stock by us or our stockholders, or the perception that such sales may occur; • changes in accounting principles, policies, guidance, interpretations or standards; • additions or departures of key management personnel; • actions by our stockholders; • the COVID-19 pandemic and other epidemics, disease outbreaks, or public health emergencies; • general market conditions; • domestic and international economic, legal and regulatory factors unrelated to our performance; and • the realization of any risks described under this “Risk Factors” section, or other risks that may materialize in the future.
The following factors could affect our stock price: • our operating and financial performance; • quarterly variations in the rate of growth (if any) of our financial indicators, such as net income per share, net income and revenues; • the public reaction to our press releases, our other public announcements and our filings with the SEC; • strategic actions by our competitors; • changes in operating performance and the stock market valuations of other companies; • announcements related to litigation; • our failure to meet revenue or earnings estimates made by research analysts or other investors; • changes in revenue or earnings estimates, or changes in recommendations or withdrawal of research coverage, by equity research analysts; • speculation in the press or investment community; • sales of our common stock by us or our stockholders, or the perception that such sales may occur; • changes in accounting principles, policies, guidance, interpretations or standards; • additions or departures of key management personnel; • actions by our stockholders; • epidemics, pandemics, disease outbreaks, or public health emergencies; • general market conditions; • domestic and international economic, legal and regulatory factors unrelated to our performance; and • the realization of any risks described under this “Risk Factors” section, or other risks that may materialize in the future.
Competition for such qualified individuals and wage increases by other retailers could require us to pay higher wages to attract a sufficient number of employees. We are 26 also dependent upon temporary personnel to adequately staff our stores and distribution and customer contact center, with heightened dependence during busy periods such as the holiday season.
Competition for such qualified individuals and wage increases by other retailers could require us to pay higher wages to attract a sufficient number of employees. We are also dependent upon temporary personnel to adequately staff our stores and distribution and customer contact center, with 24 heightened dependence during busy periods such as the holiday season.
Sales through our Direct channel, of which our ecommerce business constitutes the vast majority, accounted for approximately 47% of our total net sales for Fiscal Year 2022. Our business, financial condition and results of operations are dependent on maintaining our ecommerce business and expanding this business is an important part of our strategy to grow through our omnichannel operations.
Sales through our Direct channel, of which our ecommerce business constitutes the vast majority, accounted for approximately 47% of our total net sales for Fiscal Year 2023. Our business, financial condition and results of operations are dependent on maintaining our ecommerce business and expanding this business is an important part of our strategy to grow through our omnichannel operations.
Any failure by a third party to provide services for which we have contracted on a timely basis or within expected service level and performance standards could result in a disruption of our business and have an adverse effect on our business, financial condition and results of operations.
Any failure by a third party to provide services for which we have contracted on a timely basis or within expected service levels and performance standards could result in a disruption of our business and have an adverse effect on our business, financial condition and results of operations.
Our failure to successfully address and respond to these risks and uncertainties could negatively impact sales, increase costs, diminish our growth prospects and damage the reputation of our brand, each of which could have a material adverse effect on our business, financial condition and results of operations.
Our failure to successfully address and respond to these risks and uncertainties related to our ecommerce business could negatively impact sales, increase costs, diminish our growth prospects and damage the reputation of our brand, each of which could have a material adverse effect on our business, financial condition and results of operations.
We typically occupy our stores under operating leases with terms of up to ten years, which may include options to renew for additional multi-year periods thereafter. We depend on cash flow from operations to pay our lease expenses.
We typically occupy our stores under operating leases with terms of up to 10 years, which may include options to renew for additional multi-year periods thereafter. We depend on cash flow from operations to pay our lease expenses.
Any significant interruption in the operations of our Tilton distribution and customer contact center, our third-party distribution, fulfillment or transportation providers, for any reason, including natural disasters, accidents, inclement weather, technology system failures, work stoppages, slowdowns or strikes or other unforeseen events and circumstances could delay or impair our ability to receive orders and to distribute merchandise to our stores and/or our customers.
Any significant interruption in the operations of our Tilton distribution and customer contact center, our third-party distribution, fulfillment or transportation providers, for any reason, including natural disasters, accidents, inclement weather, technology system failures, work stoppages, slowdowns or strikes or other unforeseen events and circumstances could delay or impair our ability to receive orders and to distribute merchandise to our stores and/or our Direct customers and could impair our ability to respond to customer outreach.
We are also subject to payment card association operating rules, including data security rules, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply.
We are also subject to payment card association operating rules, including data security rules, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply with such rules.
In particular, the level of customer traffic and volume of customer purchases through our Direct channel, which accounted for approximately 47% of our net sales for Fiscal Year 2022, is substantially dependent on our ability to provide a content-rich and user-friendly website, widely distributed and informative catalogs, a fun, easy and hassle-free customer experience and reliable delivery of our merchandise.
In particular, the level of customer traffic and volume of customer purchases through our Direct channel, which accounted for approximately 47% of our total net sales for Fiscal Year 2023, is substantially dependent on our ability to provide a content-rich and user-friendly website, widely distributed and informative catalogs, a fun, easy and hassle-free customer experience and reliable delivery of our merchandise.
Risks Related to Our Indebtedness The terms of our priming credit agreement, subordinated term loan credit agreement and asset-based revolving credit facility restrict our operational and financial flexibility, which could adversely affect our ability to respond to changes in our business and to manage our operations.
Risks Related to Our Indebtedness The terms of our term loan credit agreement and asset-based revolving credit facility restrict our operational and financial flexibility, which could adversely affect our ability to respond to changes in our business and to manage our operations.
A substantial portion of our merchandise is imported from other countries, see “— Interruptions in our foreign sourcing operations and the relationships with our suppliers and agents could disrupt production, shipment or receipt of our merchandise, which would result in lost sales and could increase our costs.” If commercial transportation is curtailed or substantially delayed, our business may be adversely impacted, as we may have difficulty shipping merchandise to our distribution and customer contact center and stores, as well as fulfilling catalog and website orders.
A substantial portion of our merchandise is imported from other countries, see “ Interruptions in our third-party, foreign sourcing operations and the relationships with our suppliers and agents could disrupt production, shipment or receipt of our merchandise, which would result in lost sales and increased our costs.” If commercial transportation is curtailed or substantially delayed, our business may be adversely impacted, as we may have difficulty shipping merchandise to our distribution and customer contact center and stores, as well as fulfilling catalog and website orders.
We also rely on third parties to process credit card transactions, perform ecommerce and social media activities and retain data relating to our financial position and results of operations, strategic initiatives and other important information.
We also rely on third parties to host our website, process credit card transactions, perform ecommerce and social media activities and retain data relating to our financial position and results of operations, strategic initiatives and other important information.
If a third party is able to circumvent our security measures, they could destroy or steal valuable information or disrupt our operations. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.
If a third party can circumvent our security measures, they could destroy or steal valuable information or disrupt our operations. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.
The strategic use of our customer data base, including interactions with our customers, marketing efforts and analysis of customer behavior, rely on the collection, retention and use of customer data and may be affected by these laws and regulations and their interpretation and enforcement.
The strategic use of our customer database, including interactions with our customers, marketing efforts and analysis of customer behavior, rely on the collection, retention and use of customer data and may be affected by these laws and regulations and their interpretation and enforcement.
Risks Related to Ownership of Our Common Stock We are a “smaller reporting company” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”) and are taking advantage of reduced disclosure requirements applicable to “smaller reporting companies,” which could make our common stock less attractive to investors and make it more difficult to compare our performance with other public companies.
We are a “smaller reporting company” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”) and are taking advantage of reduced disclosure requirements applicable to “smaller reporting companies,” which could make our common stock less attractive to investors and make it more difficult to compare our performance with other public companies.
Our inability to manage our inventory levels, size assortments and merchandise mix, including with respect to our omnichannel retail operations, could have a material adverse effect on our business, financial condition and results of operations.
Our ability to manage our inventory levels, size assortments and merchandise mix, including with respect to our omnichannel retail operations, could have a material adverse effect on our business, financial condition and results of operations.
If a significant amount of our goodwill and identifiable intangible assets were deemed to be impaired, our business, financial condition and results of operations could be materially adversely affected. Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial results or financial condition.
If a significant amount of our goodwill and identifiable intangible assets were deemed to be impaired, our business, financial condition and results of operations could be materially adversely affected. More broadly, other changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial results or financial condition.
Although some level of inventory shrinkage is an unavoidable cost of doing business, if we were to experience higher rates of inventory 19 shrinkage or incur increased security costs to combat inventory theft, it could have a material adverse effect on our business, financial condition and results of operations.
Although some level of inventory shrinkage is an unavoidable cost of doing business in our industry, if we were to experience higher rates of inventory shrinkage or incur increased security costs to combat inventory theft, it could have a material adverse effect on our business, financial condition and results of operations.
We do not own or operate any manufacturing facilities and therefore depend upon independent third-party suppliers for the manufacturing of all of our merchandise, primarily through the use of agents. In Fiscal Year 2022, approximately 80% of our products were sourced through agents and approximately 20% were sourced directly from suppliers and factories.
We do not own or operate any manufacturing facilities and therefore depend upon independent, third-party suppliers for the manufacturing of all our merchandise, primarily through our use of buying agents. In Fiscal Year 2023, approximately 80% of our products were sourced through agents and approximately 20% were sourced directly from suppliers and factories.
Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of e-commerce, mobile banking and other technology-based products and services by us and our customers.
Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of ecommerce, mobile banking and other technology-based products and services by us and our customers.
General Risk Factors Risks Related to Information Security Material damage to, or interruptions in, our information systems could have a material adverse effect on our business, financial condition and results of operations, and we may be exposed to risks and costs associated with protecting the integrity and security of our customers’ information.
Risks Related to Information Security Material damage to, or interruptions in, our information systems could have a material adverse effect on our business, financial condition and results of operations, and we may be exposed to risks and costs associated with protecting the integrity and security of our customers’ information.
Risks Related to Intellectual Property Matters We may be unable to protect our trademarks and other intellectual property rights. We believe that our trademarks and service marks are important to our success and our competitive position due to their name recognition with our customers. We devote substantial resources to the establishment and protection of our trademarks and service marks.
Risks Related to Intellectual Property Matters Being unable to protect our trademarks and other intellectual property rights. We believe that our trademarks and service marks are important to our success and our competitive position due to their name recognition with our customers. We devote substantial resources to the establishment and protection of our trademarks and service marks.
Dependence on our ecommerce business and the continued growth of our Direct and Retail channels subjects us to certain risks, including: • the failure to successfully implement new systems, system enhancements and internet platforms; 11 • the failure of our technology infrastructure or the computer systems that operate our website and their related support systems, causing, among other things, website downtimes, telecommunications issues or other technical failures; • the reliance on third-party computer hardware/software providers; • rapid technological change; • liability for online content; • violations of federal, state, foreign or other applicable laws, including those relating to data protection; • credit card fraud; • cyber security and vulnerability to electronic break-ins and other similar disruptions; and • diversion of traffic and sales from our stores.
Dependence on our ecommerce business and the continued growth of our Direct channel subjects us to certain risks, including: • the failure to successfully implement new systems, system enhancements and internet platforms; • the failure of our technology infrastructure or the computer systems that operate our website and their related support systems, causing, among other things, website downtimes, telecommunications issues or other technical failures; • the reliance on third-party computer hardware/software providers; • the failure to provide a content-rich and user friendly website; • rapid technological change; • liability for online content; • violations of federal, state, foreign or other applicable laws, including those relating to data protection; • credit card fraud; • cyber security and vulnerability to electronic break-ins and other similar disruptions; and • diversion of traffic and sales from our stores.
We occupy our stores under long-term leases, which are subject to future increases in occupancy costs and which we may be unable to renew or may limit our flexibility to move to new locations. We lease all of our store locations, our corporate headquarters and our distribution and customer contact center.
We occupy our stores under long-term leases, which are subject to future increases in occupancy costs, which we may be unable to renew on favorable terms and which may limit our flexibility to move to new locations. We lease all of our store locations, our corporate headquarters and our distribution and customer contact center.
We depend in part throughout our operations on the secure transmission of confidential information over public networks. In addition, security breaches can also occur as a result of non-technical issues, including vandalism, catastrophic events and human error. Our operations may further be impacted by security breaches that occur at third-party suppliers.
We depend in part on the secure transmission of confidential information over public networks throughout our operations. In addition, security breaches can also occur due to non-technical issues, including vandalism, catastrophic events and human error. Our operations may further be impacted by security breaches that occur at third-party suppliers.
These requirements do not apply to us as long as we remain a controlled company. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.
These requirements will not apply to us for so long as we remain a controlled company. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.
Such systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches and natural disasters. Damage or interruption to our information technology systems may require a significant investment to fix or replace the affected system, and we may suffer interruptions in our operations in the interim.
Such systems are subject to damage or interruption from 22 power outages, computer and telecommunications failures, computer viruses, security breaches and natural disasters. Damage to or interruption of our information technology systems may require a significant investment to fix or replace the affected system, and we may suffer interruptions in our operations as a result.
We depend on our ecommerce business and failure to successfully manage this business and deliver a seamless omnichannel shopping experience to our customers could have an adverse effect on our growth strategy and our business, financial condition and results of operations.
Dependence on our ecommerce business and failure to successfully manage this line of business and deliver a seamless omnichannel shopping experience to our customers could have an adverse effect on our growth strategy and our business, financial condition and results of operations.
Risks Related to Legal, Regulatory and Compliance Matters If we are unable to design, implement and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act, it could have a material adverse effect on our business and stock price. As a public company, we have significant requirements for enhanced financial reporting and internal controls.
If we are unable to design, implement and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act, it could have a material adverse effect on our business and stock price. As a public company, we have significant requirements for enhanced financial reporting and internal controls.
Local land use, local zoning issues, environmental regulations, governmental permits and approvals and other regulations may affect our ability to find suitable retail locations and also influence the cost of leasing them. We also may have difficulty negotiating real estate leases for new stores on acceptable terms.
In addition to competition with other retailers and businesses for suitable retail locations, local land use, local zoning issues, environmental regulations, governmental permits and approvals and other regulations may affect our ability to find suitable retail locations and also influence the cost of leasing them. We also may have difficulty negotiating real estate leases for new stores on acceptable terms.
We could also be required to pay substantial damages. Such infringement claims could harm our brand. In addition, any payments we are required to make and any injunction we are required to comply with as a result of such infringement could have a material adverse effect on our business, financial condition and results of operations.
Such infringement claims could harm our brand. In addition, any payments we are required to make and any injunction we are required to comply with as a result of such infringement could have a material adverse effect on our business, financial condition and results of operations.
As use of social media becomes more prevalent, our susceptibility to risks related to social media increases. The immediacy of social media precludes us from having real-time control over postings made regarding us via social media, whether matters of fact or opinion.
As use of social media becomes more prevalent, our susceptibility to risks related to social media increases. The immediacy of social media and prevalence of user generated content precludes us from having real-time control over postings made regarding us via social media, whether matters of fact or opinion.
Some of the factors that might affect a supplier’s ability to ship orders of our merchandise in a timely manner or to meet our quality standards are outside of our control, including inclement weather, natural disasters, political and financial instability, including the conflict in Ukraine and the surrounding region, and the related sanctions, legal and regulatory developments, strikes, health concerns regarding infectious diseases (such as the outbreak of COVID-19), and acts of terrorism.
Some of the factors that might affect a supplier’s ability to ship orders of our merchandise in a timely manner or to meet our quality standards are outside of our control, including inclement weather, natural disasters, negative global climate patterns, political and financial instability, including the conflict in Ukraine and in the Middle East and the surrounding regions, and related 15 sanctions, legal and regulatory developments, strikes, health concerns regarding infectious diseases (such as the outbreak of COVID-19), and acts of terrorism.
TowerBrook Capital Partners LP (“TowerBrook”) controls a majority of the voting power of our outstanding voting stock, and as a result we are a controlled company within the meaning of the NYSE corporate governance standards.
TowerBrook controls a majority of the voting power of our outstanding voting stock, and as a result we are a controlled company within the meaning of the NYSE corporate governance standards.
Changes to estimates related to our property, fixtures and equipment or operating results that are lower than our current estimates at certain store locations may cause us to incur impairment charges on certain long-lived assets, which may adversely affect our results of operations.
Risks Related to Legal, Regulatory, Accounting and Compliance Matters Changes to estimates related to our property, fixtures and equipment or operating results that are lower than our current estimates at certain store locations may cause us to incur impairment charges on certain long-lived assets, which may adversely affect our results of operations.
The growth in the number of our retail stores could also draw customers away from our direct business and if our competitors open stores with similar formats, our retail store format may become less unique and may be less attractive to customers as a shopping destination.
The growth in the number of our retail stores could also draw customers away from our Direct channel offerings, including ecommerce and catalogs, and if our competitors open stores with similar formats, our retail store format may become less unique and may be less attractive to customers as a shopping destination.
We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock.
We may issue preferred stock with terms that could adversely affect the voting power or value of our common stock.
If our business does not generate sufficient cash flow from operating activities to fund these expenses, we may not have sufficient cash available to address other aspects of our business or we may be unable to service our lease expenses, which could materially harm our business.
If our business does not generate sufficient cash flow from operating activities to fund these expenses associated with adding new retail locations, we may not have sufficient cash available to address other aspects of our business or we may be unable to service our lease expenses, which could materially harm our business.
The protection of our data, which includes both potential cyber-attacks as well as any potential failure to comply with data protection laws and regulations, could subject us to sanctions and damages and could harm our reputation and business. We collect and process personal data as part of our business.
The protection of our data involves a variety of risks, including both potential cyber-attacks as well as any potential failure to comply with data protection laws and regulations, any of which could subject us to sanctions and damages and could harm our reputation and business. We collect and process personal data as part of our business.
Our goodwill and indefinite-lived intangible assets, which consist of goodwill from the controlling interest in the company held by JJill Holdings, Inc. and JJill Topco Holdings, LP, and our trade name, represented a significant portion of our total assets as of January 28, 2023.
Our goodwill and indefinite-lived intangible assets, which consist of goodwill from the controlling interest in the company held by JJill Holdings, Inc. and JJill Topco Holdings, LP, and our trade name, represented a significant portion of our total assets as of February 3, 2024.
If we experience damage to our reputation or loss of consumer confidence, we may not be able to retain existing customers or acquire new customers, which could have a material adverse effect on our business, financial condition and results of operations. Increased usage of social media poses reputational risks.
If we experience damage to our reputation or loss of consumer confidence, we may not be able to retain existing customers or acquire new customers, which could have a material adverse effect on our business, financial condition and results of operations.
Also, others may assert rights in, or ownership of, our trademarks and other intellectual property and we may not be able to successfully resolve these types of conflicts to our satisfaction. We may be subject to liability if we infringe upon the intellectual property rights of third parties. Third parties may sue us for alleged infringement of their proprietary rights.
Also, others may assert rights in, or ownership of, our trademarks and other intellectual property and we may not be able to successfully resolve these types of conflicts to our satisfaction. We may be subject to liability if we infringe upon the intellectual property rights of third parties.
In addition, costs and potential problems and interruptions 24 associated with the implementation of new or upgraded systems and technology, such as our new point of sale system or with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of our operations.
In addition, costs and interruptions associated with the implementation of new or upgraded systems and technology, such as our new POS system or with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of our operations.
In addition, we could be required to expend significant resources to change our business practices or modify our service offerings in connection with the protection of personally identifiable information, which could have a material adverse effect on our business, financial condition and results of operations.
In addition, we could be required to expend significant resources to change our business practices or modify our service offerings in connection with the protection of personally identifiable information, which could have a material adverse effect on our business, financial condition and results of operations. The impact of privacy breaches at service providers could severely damage our business and reputation.
It is difficult to predict when or for how long any of these conditions can affect our business and a prolonged economic downturn could have a material adverse effect on our business, financial condition and results of operations.
It is difficult to predict when or for how long any of these conditions can affect our business and a prolonged economic downturn could have a material adverse effect on our business, financial condition and results of operations. Disruption in the economy may further affect our business, results of operations, liquidity, and financial results.
The Subordinated Lenders have been issued warrants under the Subordinated Term Loan Facility. On May 31, 2021, the Company chose to issue 272,097 additional shares of Common Stock under the Priming Facility. As a result of this choice and because of the antidilution provision under the warrant agreement, the warrants became exercisable into 3,820,748 shares of common stock.
On May 31, 2021, the Company chose to issue 272,097 additional shares of Common Stock under the prior Priming Facility. As a result of this choice and because of the antidilution provision under the warrant agreement, the warrants became exercisable into 3,820,748 shares of common stock.
We have a substantial amount of indebtedness under our Credit Agreements, and the scheduled maturity dates of our Credit Agreements are in close proximity to each other.
Having a substantial amount of indebtedness under our Credit Agreements which matures in the near term, and the scheduled maturity dates are in close proximity to each other. We have a substantial amount of indebtedness under our Credit Agreements, and the scheduled maturity dates of our Credit Agreements are in close proximity to each other.
We rely on third parties to provide services in connection with certain aspects of our business, and any failure by these third parties to perform their obligations could have an adverse effect on our business, financial condition and results of operations.
Any of these events could have a material adverse effect on our reputation, business, financial condition and results of operations. 16 Relying on third parties to provide services in connection with certain aspects of our business, and any failure by these third parties to perform their obligations could have an adverse effect on our business, financial condition and results of operations.
As of January 28, 2023, we had $221.9 million aggregate principal amount of borrowings under the Credit Agreements. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures or to sell assets, seek additional capital or restructure or refinance our indebtedness.
As of February 3, 2024, we had $168.4 million aggregate principal amount of borrowings under the Credit Agreements. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to 18 reduce or delay investments and capital expenditures or to sell assets, seek additional capital or restructure or refinance our indebtedness.
(as successor to Jill Holdings LLC), Jill Acquisition LLC, certain subsidiaries from time to time party thereto, the lenders party thereto and CIT Finance LLC as the administrative agent and collateral agent (as amended, the “ABL Credit Agreement” and, such facility, the “ABL Facility” and, together with the Priming Facility and the Subordinated Term Loan Facility, the “Credit Facilities” and, the agreements governing such facilities, the “Credit Agreements”), each contain, and any additional debt financing we may incur would likely contain, covenants that restrict our operations, including limitations on our ability to, among other things, incur additional indebtedness, create liens on assets, make investments, loans or advances, engage in mergers, consolidations, sales of assets and purchases, pay dividends and distributions, enter into transactions with affiliates, and make payments in respect of junior indebtedness.
(as amended, the “ABL Credit Agreement” and, such facility, the “ABL Facility” and, together with the Term Loan, the “Credit Facilities” and, the agreements governing such facilities, the “Credit Agreements”), each contain, and any additional debt financing we may incur would likely contain, covenants that restrict our operations, including limitations on our ability to, among other things, incur additional indebtedness, create liens on assets, make investments, loans or advances, engage in mergers, consolidations, sales of assets and purchases, pay dividends and distributions, enter into transactions with affiliates, and make payments in respect of junior indebtedness.
The extent to which COVID-19 and other epidemics, disease outbreaks, or public health emergencies will impact our business, liquidity, financial condition, cash flows and results of operations, depends on numerous evolving factors that we may not be able to accurately predict or assess.
The extent to which economic disruptions caused by pandemics, epidemics, or public health emergencies will impact our business, liquidity, financial condition, cash flows and results of operations, depends on numerous evolving factors that we may not be able to accurately predict or assess.
The stock markets in general have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock.
The stock markets in general have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock and an active liquid and orderly trading market for our common stock may not be maintained.
We compete with local, regional, national and international retail chains and department stores, specialty and discount stores, catalogs, internet and ecommerce businesses offering similar categories of merchandise.
The women’s apparel industry is highly competitive. We compete with local, regional, national and international retail chains and department stores, specialty and discount stores, catalogs, internet and ecommerce businesses offering similar categories of merchandise.
If securities or industry analysts do not publish research or reports about our business or publish negative reports, our stock price could decline. The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business.
To remain competitive, we may be required to offer discounted, free or other more competitive shipping options to our customers, which may result in declines in our shipping and handling fees and increased shipping and handling expenses.
To remain competitive, we may be required to offer discounted, free or other more competitive shipping options to our customers, which may result in declines in our shipping and handling fees charged to customers and an increase in the shipping and handling expenses paid by us.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe current terms of our leases expire as follows: Fiscal Years Lease Terms Expire Number of Stores 2023 – 2025 138 2026 – 2028 86 2029 – 2031 17 2032 and later 2 The table below sets forth the number of retail stores by state that we operated as of January 28, 2023.
Biggest changeThe current terms of our leases expire as follows: Fiscal Years Lease Terms Expire Number of Stores 2023 – 2025 106 2026 – 2028 113 2029 – 2031 20 2032 and later 5 The table below sets forth the number of retail stores by state that we operated as of February 3, 2024.
Some of the leases also contain early termination options, which can be exercised by us or the 28 landlord under certain conditions. The leases also generally require us to pay real estate taxes, insurance and certain common area costs. We renegotiate with landlords to obtain more favorable terms as opportunities arise.
Some of the leases also contain early termination options, which can be exercised by us or the landlord under certain conditions. The leases also generally require us to pay real estate taxes, insurance and certain common area costs. We renegotiate with landlords to obtain more favorable terms as opportunities arise.
Number Number Number State of Stores State of Stores State of Stores Alabama 5 Kentucky 2 New York 12 Arizona 5 Louisiana 5 North Carolina 9 Arkansas 3 Maine 1 Ohio 8 California 21 Maryland 6 Oklahoma 3 Colorado 5 Massachusetts 10 Oregon 5 Connecticut 6 Michigan 8 Pennsylvania 13 Delaware 1 Minnesota 6 Rhode Island 1 Florida 10 Mississippi 2 South Carolina 5 Georgia 10 Missouri 4 Tennessee 8 Idaho 1 Nebraska 1 Texas 15 Illinois 12 Nevada 2 Utah 1 Indiana 3 New Hampshire 1 Virginia 8 Iowa 2 New Jersey 11 Washington 5 Kansas 2 New Mexico 1 Wisconsin 4
Number Number Number State of Stores State of Stores State of Stores Alabama 5 Kentucky 2 New York 12 Arizona 5 Louisiana 5 North Carolina 9 Arkansas 3 Maine 1 Ohio 8 California 21 Maryland 6 Oklahoma 3 Colorado 5 Massachusetts 11 Oregon 5 Connecticut 7 Michigan 8 Pennsylvania 13 Delaware 1 Minnesota 6 Rhode Island 1 Florida 10 Mississippi 2 South Carolina 5 Georgia 10 Missouri 4 Tennessee 8 Idaho 1 Nebraska 1 Texas 15 Illinois 12 Nevada 2 Utah 1 Indiana 3 New Hampshire 1 Virginia 7 Iowa 2 New Jersey 11 Washington 5 Kansas 2 New Mexico 1 Wisconsin 4 28
The average size of our stores is approximately 3,700 square feet. All of our retail stores are leased from third parties and new stores historically have had terms of ten years. The weighted-average remaining lease term is 5.3 years. A portion of our leases have options to renew for periods up to five years.
The average size of our stores is approximately 3,700 square feet. All of our retail stores are leased from third parties and new stores historically have had terms of ten years. The weighted-average remaining lease term is 2 years. A portion of our leases have options to renew for periods up to five years.
We consider these properties to be in good condition and believe that our facilities are adequate for operations and provide sufficient capacity to meet our anticipated future requirements. As of January 28, 2023, we operated 243 stores in 42 states. Of these stores, approximately half are located in lifestyle centers and half in premium malls.
We consider these properties to be in good condition and believe that our facilities are adequate for operations and provide sufficient capacity to meet our anticipated future requirements. As of February 3, 2024, we operated 244 stores in 42 states. Of these stores, approximately half are located in lifestyle centers and half in premium malls.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThis number does not include beneficial owners whose shares are held of record by banks, brokers and other financial institutions. Reverse Stock Split On November 4, 2020, the Company announced a 1-for-5 reverse stock split effective November 9, 2020. The Company’s shareholders received one share for every five shares held prior to the effective date.
Biggest changeThis number does not include beneficial owners whose shares are held of record by banks, brokers and other financial institutions. Dividends We did not pay any dividends on our common stock during Fiscal Years 2023, 2022 and 2021 and do not have any current plans to pay a cash dividend on our common stock for the foreseeable future.
Securities Authorized for Issuance Under Equity Compensation Plans Information regarding our equity compensation plans is set forth in Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters. Item 6. [Reserved] 31
Securities Authorized for Issuance Under Equity Compensation Plans Information regarding our equity compensation plans is set forth in Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.
The graph assumes $100 was invested in each of the Company’s common stock, the S&P 500 Index and the S&P Retail Index as of the market close on March 9, 2017. Such returns are based on historical results and are not intended to suggest future performance.
The graph assumes $100 was invested in each of the Company’s common stock, the S&P 500 Index and the S&P Retail Index as of the market close on February 2, 2019. Such returns are based on historical results and are not intended to suggest future performance. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—General.” 30 Performance Graph The following graph shows a comparison from March 9, 2017 (the date our common stock commenced trading on the NYSE) through January 28, 2023, of the cumulative total return for our common stock, the S&P 500 Index and an S&P Retail Index.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—General.” 30 Performance Graph The following graph shows a comparison from February 2, 2019 through February 3, 2024, of the cumulative total return for our common stock, the S&P 500 Index and an S&P Retail Index.
The following table sets forth the high and low sales prices of our common stock as reported on the NYSE for the Fiscal Years 2022 and 2021 quarters ended, respectively: Fiscal Year 2022 Fiscal Year 2021 High Low High Low First $ 17.00 $ 12.47 $ 10.77 $ 3.71 Second $ 20.72 $ 15.14 $ 24.10 $ 8.81 Third $ 20.80 $ 15.45 $ 24.50 $ 14.75 Fourth $ 27.52 $ 20.04 $ 20.89 $ 13.70 Holders of Record As of January 28, 2023, there were approximately 48 holders of record of our common stock.
The following table sets forth the high and low sales prices of our common stock as reported on the NYSE for the Fiscal Years 2023 and 2022 quarters ended, respectively: Fiscal Year 2023 Fiscal Year 2022 High Low High Low First $ 30.36 $ 22.75 $ 17.00 $ 12.47 Second $ 25.00 $ 18.85 $ 20.72 $ 15.14 Third $ 29.91 $ 21.49 $ 20.80 $ 15.45 Fourth $ 32.26 $ 23.06 $ 27.52 $ 20.04 Holders of Record As of February 3, 2024, there were approximately 25 holders of record of our common stock.
Removed
All share and per share amounts have been adjusted retroactively to reflect the reverse stock split.
Removed
In connection with the reverse stock split, the Company’s Certificate of Incorporation was amended to reduce the number of authorized shares of common stock to 50,000,000, and proportional adjustments were made to the Company’s 2017 Omnibus Equity Incentive Plan and Employee Stock Purchase Plan, including the number of shares of common stock available for issuance under such plans and the number of shares of common stock underlying outstanding awards granted pursuant to such plans.
Removed
In accordance with the terms of the warrants issued to the Subordinated Lenders, the number of shares of common stock issuable upon exercise of each warrant was also proportionately adjusted to give effect to the reverse stock split. Dividends Since its initial public offering, the Company has paid one cash dividend.
Removed
On April 1, 2019, a cash dividend of approximately $50.2 million was paid to the shareholders of J.Jill, Inc. and was considered a special cash dividend.
Removed
Recent Sales of Unregistered Securities On September 30, 2020, pursuant to the Priming Credit Agreement, the Company issued 656,717 shares of common stock to the lenders party to the Priming Credit Agreement, and pursuant to the Subordinated Term Loan Facility, the Company issued 3,720,109 warrants to purchase 3,720,109 shares of common stock to the Subordinated Lenders (after giving effect to the 1-for-5 reverse stock split described herein).
Removed
The common stock issuance and the warrant issuance were undertaken in reliance upon the exemptions from registration provided by Regulation D and Section 4(a)(2) of the Securities Act, respectively. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAlthough the stores were temporarily closed and the Company lost revenues as a result, we continued to incur certain expenses, such as payroll and rent; therefore, ratios and other items may not be comparable to our Fiscal Year 2022 and 2021 financial results. 34 Results of Operations Fiscal Year Ended January 28, 2023 compared to Fiscal Year Ended January 29, 2022 The following table summarizes our consolidated results of operations for the periods indicated: For the Fiscal Year Ended Change from Year Ended January 29, 2022 to the Year (in thousands) January 28, 2023 January 29, 2022 Ended January 28, 2023 Dollars % of Net Sales Dollars % of Net Sales $ Change % Change Net sales $ 615,268 100.0 % $ 585,206 100.0 % $ 30,062 5.1 % Costs of goods sold 193,218 31.4 % 190,770 32.6 % 2,448 1.3 % Gross profit 422,050 68.6 % 394,436 67.4 % 27,614 7.0 % Selling, general and administrative expenses 341,903 55.6 % 335,716 57.4 % 6,187 1.8 % Impairment of long-lived assets 1,413 0 % — — 1,413 100.0 % Operating income 78,734 12.8 % 58,720 10.0 % 20,014 34.1 % Fair value adjustment of derivative — — 2,775 0.5 % (2,775 ) (100.0 )% Fair value adjustment of warrants - related party — — 56,984 9.7 % (56,984 ) (100.0 )% Interest expense, net 15,946 2.6 % 17,057 2.9 % (1,111 ) (6.5 )% Interest expense, net - related party 4,114 0.7 % 2,029 0.3 % 2,085 102.8 % Income (loss) before provision for income taxes 58,674 9.5 % (20,125 ) (3.4 )% 78,799 391.5 % Income tax provision 16,499 2.7 % 8,018 1.4 % 8,481 105.8 % Net income (loss) $ 42,175 6.9 % $ (28,143 ) (4.8 )% $ 70,318 249.9 % Net Sales Net sales for Fiscal Year 2022 increased $30.1 million or 5.1%, to $615.3 million from $585.2 million for Fiscal Year 2021.
Biggest changeThe following table summarizes our consolidated results of operations for the periods indicated: For the Fiscal Year Ended Change from Year Ended January 28, 2023 to the Year (in thousands) February 3, 2024 January 28, 2023 Ended February 3, 2024 Dollars % of Net Sales Dollars % of Net Sales $ Change % Change Net sales $ 604,661 100.0 % $ 615,268 100.0 % $ (10,607 ) (1.7 )% Costs of goods sold 177,261 29.3 % 193,218 31.4 % (15,957 ) (8.3 )% Gross profit 427,400 70.7 % 422,050 68.6 % 5,350 1.3 % Selling, general and administrative expenses 341,161 56.4 % 341,903 55.6 % (742 ) (0.2 )% Impairment of long-lived assets 189 0.0 % 1,413 0.2 % (1,224 ) (86.6 )% Operating income 86,050 14.2 % 78,734 12.8 % 7,316 9.3 % Loss on debt refinancing 12,702 2.1 % — 0.0 % 12,702 100.0 % Interest expense, net 22,909 3.8 % 15,946 2.6 % 6,963 43.7 % Interest expense - related party 1,074 0.2 % 4,114 0.7 % (3,040 ) (73.9 )% Income before provision for income taxes 49,365 8.2 % 58,674 9.5 % (9,309 ) (15.9 )% Income tax provision 13,164 2.2 % 16,499 2.7 % (3,335 ) (20.2 )% Net income $ 36,201 6.0 % $ 42,175 6.9 % $ (5,974 ) (14.2 )% Net Sales Net sales for Fiscal Year 2023 decreased $10.6 million or 1.7%, to $604.7 million from $615.3 million for Fiscal Year 2022.
These taxes are reported on a net basis and are thereby excluded from revenue. The Company sells gift cards without expiration dates to customers. The Company does not charge administrative fees on unused gift cards.
These taxes are reported on a net basis and are thereby excluded from revenue. Gift Cards The Company sells gift cards without expiration dates to customers. The Company does not charge administrative fees on unused gift cards.
Key elements of cash provided by operating activities were (i) net income of $42.2 million, (ii) adjustments to reconcile net income to net cash provided by operating activities of $35.4 million, primarily driven by $25.8 million of depreciation and amortization, and (iii) the use of cash from net operating assets and liabilities of $3.1 million, primarily driven by accounts payable and operating lease assets and liabilities, partially offset by changes in merchandise inventory and prepaid expenses and other current assets.
Key elements of cash provided by operating activities were (i) net income of $42.2 million, (ii) adjustments to reconcile net income to net cash provided by operating activities of $35.4 million, primarily driven by $25.8 million of depreciation and amortization, and (iii) the use of 37 cash from net operating assets and liabilities of $3.1 million, primarily driven by accounts payable and operating lease assets and liabilities, partially offset by changes in merchandise inventory and prepaid expenses and other current assets.
Cost is calculated using the weighted average method of accounting, and includes the cost to purchase merchandise from our manufacturers, duties, tariffs, inbound freight and commissions. 39 In the normal course of business, we record inventory reserves by applying estimates, based on past and projected sales performance, to the inventory on hand.
Cost is calculated using the weighted average method of accounting, and includes the cost to purchase merchandise from our manufacturers, duties, tariffs, inbound freight and commissions. In the normal course of business, we record inventory reserves by applying estimates, based on past and projected sales performance, to the inventory on hand.
As a holding company, our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries, which may 37 further restrict our ability to pay dividends as a result of restrictions on their ability to pay dividends to us under our debt agreements and under future indebtedness that we or they may incur.
As a holding company, our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries, which may further restrict our ability to pay dividends as a result of restrictions on their ability to pay dividends to us under our debt agreements and under future indebtedness that we or they may incur.
The effective tax rate during Fiscal Year 2022 differs from the federal statutory rate of 21.0% due primarily to the impacts of (i) state and local income taxes, (ii) executive compensation limitations, (iii) valuation allowance changes, and(iv) tax return to provision adjustments.
The effective tax rate for Fiscal Year 2022 differs from the federal statutory rate of 21.0% due primarily to the impacts of (i) state and local income taxes, (ii) executive compensation limitations, (iii) valuation allowance changes, and (iv) tax return to provision adjustments.
During Fiscal Year 2022, the Company recorded impairment charges of $0.6 million related primarily to a right-of-use asset relating to revised sublease assumptions of one floor of the corporate headquarters located in Quincy, Massachusetts that was vacated in July 2019 and $0.8 million due to the Company ’ s revised outlook on future cash flows at certain store locations.
During Fiscal Year 2022, the Company recorded impairment charges of $0.6 million related primarily to a right-of-use asset relating to revised sublease assumptions of one floor of the corporate headquarters located in Quincy, Massachusetts that was vacated in July 2019 and $0.8 million due to the Company’s revised outlook on future cash flows at certain store locations.
The most significant estimates and assumptions inherent in this approach are the preparation of revenue forecasts, selection of the royalty and discount rates, and selection of the terminal year multiple. 40 We did not record any impairment losses related to the trade name during Fiscal Year 2022 and 2021.
The most significant estimates and assumptions inherent in this approach are the preparation of revenue forecasts, selection of the royalty and discount rates, and selection of the terminal year multiple. We did not record any impairment losses related to the trade name during Fiscal Years 2023, 2022 and 2021.
If the carrying amount exceeds the reporting unit’s fair value, a goodwill impairment charge is recognized for the amount in excess, not to exceed the total amount of goodwill allocated to that reporting unit. During Fiscal Year 2022 and 2021, we did not record any impairment to our goodwill.
If the carrying amount exceeds the reporting unit’s fair value, a goodwill impairment charge is recognized for the amount in excess, not to exceed the total amount of goodwill allocated to that reporting unit. During Fiscal Years 2023, 2022 and 2021 we did not record any impairment to our goodwill.
Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Fiscal Year 2021 Form 10-K, which was filed with the United States Securities and Exchange Commission on April 13, 2022. Overview J.Jill is a national lifestyle brand that provides apparel, footwear and accessories designed to help its customers move through a full life with ease.
Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Fiscal Year 2022 Form 10-K, which was filed with the United States Securities and Exchange Commission on March 30, 2023. Overview J.Jill is a national lifestyle brand that provides apparel, footwear and accessories designed to help its customers move through a full life with ease.
Adjusted EBITDA, represents net income (loss) plus net interest expense, provision (benefit) for income taxes, depreciation and amortization, equity-based compensation expense, goodwill and indefinite-lived intangible assets impairment, write-off of property and equipment, fair value adjustments, and other non-recurring expenses, primarily consisting of outside legal and professional fees associated with certain non-recurring transactions and events.
Adjusted EBITDA, represents net income (loss) plus net interest expense, provision (benefit) for income taxes, depreciation and amortization, equity-based compensation expense, goodwill and indefinite-lived intangible assets impairment, write-off of property and equipment, loss on debt refinancing, adjustment for exited retail stores, fair value adjustments, and other non-recurring expenses, primarily consisting of outside legal and professional fees associated with certain non-recurring transactions and events.
(g) Represents items management believes are not indicative of ongoing operating performance. In Fiscal Years 2021 and 2020, these expenses are primarily composed of incremental one-time costs related to COVID-19. Items Affecting the Comparability of our Results of Operations Impairment losses.
(g) Represents items management believes are not indicative of ongoing operating performance. In Fiscal Year 2023 and Fiscal Year 2022, these expenses are primarily composed of legal and advisory costs. Fiscal Years 2021 expenses are primarily composed of incremental one-time costs related to COVID-19. Items Affecting the Comparability of our Results of Operations Impairment losses.
Each of the Priming Credit Agreement, the Subordinated Term Loan Credit Agreement and the ABL Credit Agreement also has certain financial covenants (see Note 9. Debt to the audited consolidated financial statements included in this Annual Report). As of January 28, 2023, the Company is in compliance with all such covenants.
Each of the Term Loan Credit Agreement and the ABL Credit Agreement also has certain financial covenants (see Note 9. Debt to the audited consolidated financial statements included in this Annual Report). As of February 3, 2024, the Company is in compliance with all such covenants.
We may assess our goodwill for impairment initially using a qualitative approach to determine whether conditions exist to indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value.
During those years when a quantitative assessment is not performed initially, we assess our goodwill for impairment using a qualitative approach to determine whether conditions exist to indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value.
Changes in assumptions and estimates used in the impairment analysis, or future results that vary from assumptions used in the analysis, could affect the estimated fair value of long-lived intangible assets and could result in impairment charges in a future period. Recent Accounting Pronouncements See Note 3.
We believe our assumptions are reasonable based on available information. Changes in assumptions and estimates used in the impairment analysis, or future results that vary from assumptions used in the analysis, could affect the estimated fair value of long-lived intangible assets and could result in impairment charges in a future period. Recent Accounting Pronouncements See Note 3.
These fair value adjustments were due to the increase in J.Jill’s stock price from January 30, 2021 through May 31, 2021. Effective May 31, 2021, these liabilities were reclassified to equity because from that date they can only be settled by exercise of the warrants into common stock. Our Fiscal Year 2021 results include fair value adjustments totaling $59.8 million.
Effective May 31, 2021, these liabilities were reclassified to equity because from that date they can only be settled by exercise of the warrants into common stock. Our Fiscal Year 2021 results include fair value adjustments totaling $59.8 million. See Note 14.
The Company’s COGS, and consequently gross profit, may not be comparable to those of other retailers, as inclusion of certain costs vary across the industry. The variability in COGS is due to raw materials, transportation and freight costs.
The timing and level of markdowns are driven by customer acceptance of our merchandise. The Company’s COGS, and consequently gross profit, may not be comparable to those of other retailers, as inclusion of certain costs vary across the industry. The variability in COGS is due to raw materials, transportation and freight costs.
The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for Fiscal Years 2022 and 2021. For the discussion comparing the Fiscal Years 2021 and 2020, refer to Part II, Item 7.
Fiscal Year 2023 is comprised of 53 weeks and Fiscal Years 2022, and 2021 are comprised of 52 weeks. The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for Fiscal Years 2023 and 2022. For the discussion comparing the Fiscal Years 2022 and 2021, refer to Part II, Item 7.
Higher net income for Fiscal Year 2022 was offset by the increase in cash used for working capital of $14.9 million compared with Fiscal Year 2021.
Net income for Fiscal Year 2023 was offset by the increase in cash used for working capital of $12.9 million compared to Fiscal Year 2022.
Impairment losses are recorded to the extent that the carrying value of the indefinite-lived intangible asset exceeds its fair value. We measure the fair value of our trade name using the relief-from-royalty method, which estimates the present value of royalty income that could be hypothetically earned by licensing the brand name to a third party over the remaining useful life.
We measure the fair value of our trade name using the relief-from-royalty method, which estimates the present value of royalty income that could be hypothetically earned by licensing the brand name to a third party over the remaining useful life.
We expect capital expenditures in the next twelve months to support opening of new stores, store design/ remodels, and system upgrades and maintenance projects. Off Balance Sheet Arrangements We are not a party to any off balance sheet arrangements.
We may also engage in capital markets transactions from time to time subject to the discretion of our Board. We expect capital expenditures in the next twelve months to support opening of new stores, store design/ remodels, and system upgrades and maintenance projects. 38 Off Balance Sheet Arrangements We are not a party to any off balance sheet arrangements.
Working capital cash uses consisted of lower cash inflows relating to prepaid expenses and other current assets of $8.3 million driven primarily by the lower collection of income tax receivables in the current year, and accrued expenses and other current liabilities of $4.4 million due mainly to the impact of product returns, partially offset by the timing of other accruals, and accounts payable of $4.4 million and accounts receivable of $3.2 million due to the timing of payments.
Working capital cash uses consisted of lower cash inflows relating to prepaid expenses and other current assets of $10.8 million driven primarily by lower collection of income tax receivables in the current year, and accrued expenses and other current liabilities of $8.2 million mainly due to lower accrued employee compensation and other accruals, partially offset by the impact of product returns, and inventories of $8.1 million due to increased inventory in-transit.
Certain of our competitors and other retailers may calculate total company comparable sales differently than we do. As a result, the reporting of our total company comparable sales may not be comparable to sales data made available by other companies. Number of stores reflects all stores open at the end of a reporting period.
Certain of our competitors and other retailers may calculate total company comparable sales differently than we do. Our comparable sales are based on a 52-week period. As a result, the reporting of our total company comparable sales may not be comparable to sales data made available by other companies.
During Fiscal Year 2020, we performed quantitative assessments which resulted in goodwill impairment of $17.9 million. This analysis contains uncertainties because it requires us to make assumptions and to apply judgments to estimate industry economic factors and the profitability of future business strategies.
During Fiscal Year 2023, we performed a quantitative assessment of goodwill. This analysis contains uncertainties because it requires us to make assumptions and to apply judgments to estimate industry economic factors and the profitability of future business strategies.
The notes to the financial statements included elsewhere in this Annual Report provide additional information. 38 We believe our sources of liquidity, namely operating cash flows and credit facility capacity will continue to be adequate to meet our contractual obligations, working capital and capital expenditure requirements, finance anticipated expansion and strategic initiatives, and fund debt maturities for the foreseeable future.
We believe our sources of liquidity, namely operating cash flows and ABL Facility capacity will continue to be adequate to meet our contractual obligations, working capital and capital expenditure requirements, finance anticipated expansion and strategic initiatives, and fund debt maturities for the foreseeable future.
Cash Flow Analysis The following table shows our cash flows information for the periods presented: For the Fiscal Year Ended (in thousands) January 28, 2023 January 29, 2022 January 30, 2021 Net cash provided by (used in) operating activities $ 74,425 $ 74,999 $ (34,811 ) Net cash used in investing activities (15,067 ) (5,474 ) (3,805 ) Net cash (used in) provided by financing activities (8,262 ) (37,975 ) 21,496 Net Cash provided by Operating Activities Net cash provided by operating activities during Fiscal Year 2022 decreased $0.6 million as compared to Fiscal Year 2021.
Cash Flow Analysis The following table shows our cash flows information for the periods presented: For the Fiscal Year Ended (in thousands) February 3, 2024 January 28, 2023 January 29, 2022 Net cash provided by operating activities $ 63,313 $ 74,425 $ 74,999 Net cash used in investing activities (16,934 ) (15,067 ) (5,474 ) Net cash used in financing activities (71,260 ) (8,262 ) (37,975 ) Net Cash provided by Operating Activities Net cash provided by operating activities during Fiscal Year 2023 decreased $11.1 million compared to Fiscal Year 2022.
Our Fiscal Year 2020 results include fair value adjustments totaling $5.2 million. See Note 14. Net Income (Loss) Per Share , in the notes to the financial statements included elsewhere in this Annual Report, for additional information on these fair value adjustments. COVID-19 impact.
Net Income (Loss) Per Share , in the notes to the financial statements included elsewhere in this Annual Report, for additional information on these fair value adjustments. COVID-19 impact. Our Fiscal Year 2021 financial results were significantly impacted by COVID-19.
On April 15, 2022, we entered into an Amendment No. 5 to our ABL Credit Agreement (the “ABL Amendment”), by and among the Company, Jill Acquisition LLC, J.Jill Gift Card Solutions, Inc., Jill Intermediate LLC, the other guarantors party thereto, the other lenders party thereto and CIT Finance LLC, as the administrative agent and collateral agent.
On May 10, 2023, the Company entered into Amendment No. 6 to our ABL Credit Agreement, by and among the Company, J.Jill Gift Card Solutions, the other guarantors party thereto, the other lenders party thereto, and CIT Finance LLC, as the administrative agent and collateral agent.
The effective tax rate for Fiscal Year 2021 differs from the federal statutory rate of 21.0% due primarily to the impacts of (i) nondeductible fair value adjustments of the warrants and derivative, (ii) state and local income taxes, (iii) executive compensation limitations, and (iv) valuation allowance adjustments related to state and local income taxes. Refer to Note 13.
The effective tax rate during Fiscal Year 2023 differs from the federal statutory rate of 21.0% due primarily to the impacts of (i) state and local income taxes, (ii) executive compensation limitations, and (iii) valuation allowance changes. Refer to Note 13 . Income Taxes to the consolidated financial statements for additional income tax information.
Net cash provided by operating activities during Fiscal Year 2021 was $75.0 million.
Net cash provided by operating activities during Fiscal Year 2022 was $74.4 million.
Determining the fair value of long-lived assets requires management judgment and relies upon the use of significant estimates and assumptions, including future sales, our margins and cash flows, current and future market conditions, discount rates applied, useful lives and other factors. We believe our assumptions are reasonable based on available information.
During Fiscal Year 2021, we did not record any impairments related to right-of-use assets and leasehold improvements. Determining the fair value of long-lived assets requires management judgment and relies upon the use of significant estimates and assumptions, including future sales, our margins and cash flows, current and future market conditions, discount rates applied, useful lives and other factors.
We estimate the fair value of an asset group based on the present value of estimated future cash flows, calculated by discounting the cash flow projections used in the previous step. We assessed the carrying value of our customer list as described above and determined that an impairment loss of $2.6 million was required during Fiscal Year 2020.
We estimate the fair value of an asset group based on the present value of estimated future cash flows, calculated by discounting the cash flow projections used in the previous step. During Fiscal Year 2023, we assessed the carrying values of right-of-use assets and property and equipment as described above.
Our two reporting units applicable to goodwill impairment assessments are defined as our Direct and Retail sales channels. Examples of impairment indicators that would trigger an impairment assessment of goodwill between annual evaluations include, among others, macro-economic conditions, competitive environment, industry conditions, changes in our profitability and cash flows, and changes in sales trends or customer demand.
Examples of impairment indicators that would trigger an impairment assessment of goodwill between annual evaluations include, among others, macro-economic conditions, competitive environment, industry conditions, changes in our profitability and cash flows, and changes in sales trends or customer demand. The Company’s policy is to perform a quantitative analysis of goodwill every three years.
Our Fiscal Year 2022 and 2020 results include impairment charges of $1.4 million for long-lived assets (operating lease right-of-use asset, leasehold improvements and furniture, fixtures and equipment) and $66.3 million for long-lived assets (operating lease right-of-use asset and leasehold improvements), goodwill and intangible assets, respectively. See Note 6. Goodwill and Other Intangible Assets and Note 7.
Our Fiscal Year 2023 results include $0.2 million of impairment charges for long-lived assets (leasehold improvements and furniture, fixtures and equipment), and our Fiscal Year 2022 results include $1.4 million of impairment charges for long-lived assets (operating lease right-of-use asset, leasehold improvements and furniture, fixtures and equipment). Fair value adjustments .
Income Tax Provision The income tax provision for Fiscal Year 2022 was $16.5 million compared to $8.0 million for Fiscal Year 2021. Our effective tax rates were 28.1% and (39.8)%, respectively.
The increase was driven by higher interest rates. Income Tax Provision The income tax provision for Fiscal Year 2023 was $13.2 million compared to $16.5 million for Fiscal Year 2022. Our effective tax rates were 26.7% and 28.1%, respectively.
At the time of sale, the Company records an estimated sales reserve for merchandise returns based on historical prior returns experience and expected future returns.
Sales Return Reserve The Company has a return policy where merchandise returns will be accepted within 90 days of the original purchase date. At the time of sale, the Company records an estimated sales reserve for merchandise returns based on historical prior returns experience and expected future returns.
Each fiscal year generally is comprised of four 13-week fiscal quarters, although in the years with 53 weeks, the fourth quarter represents a 14-week period. The fiscal year ended January 28, 2023 (“Fiscal Year 2022”), fiscal year ended January 29, 2022 (“Fiscal Year 2021”) and fiscal year ended January 30, 2021 (“Fiscal Year 2020”) are all comprised of 52 weeks.
Each fiscal year generally is comprised of four 13-week fiscal quarters, although in the years with 53 weeks, the fourth quarter represents a 14-week period.
We review our inventory levels on an ongoing basis to identify slow-moving merchandise and use markdowns to liquidate these products. Changes in the assortment of our products may also impact our gross profit. The timing and level of markdowns are driven by customer acceptance of our merchandise.
Costs of goods sold (“COGS”) includes the direct costs of sold merchandise, inventory shrinkage, and adjustments and reserves for excess, aged and obsolete inventory. We review our inventory levels on an ongoing basis to identify slow-moving merchandise and use markdowns to liquidate these products. Changes in the assortment of our products may also impact our gross profit.
Net Cash used in Investing Activities Net cash used in investing activities during Fiscal Year 2022 was $15.1 million, an increase of $9.6 million as compared to Fiscal Year 2021, representing purchases of property and equipment related investments in stores and information systems.
Net Cash used in Investing Activities Net cash used in investing activities during Fiscal Year 2023 was $16.9 million, an increase of $1.9 million as compared to Fiscal Year 2022, representing increased purchases of property, equipment, software and technology-related investments, primarily relating to the new point of sale system.
We recommend that you review the reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure, and the calculation of the resultant Adjusted EBITDA margin below and not rely solely on Adjusted EBITDA or any single financial measure to evaluate our business. 33 Reconciliation of Net Income (Loss) to Adjusted EBITDA and Calculation of Adjusted EBITDA Margin The following table provides a reconciliation of net income (loss) to Adjusted EBITDA and the calculation of Adjusted EBITDA margin for the periods presented: For the Fiscal Year Ended (in thousands) January 28, 2023 January 29, 2022 January 30, 2021 Statements of Operations Data: Net income (loss) $ 42,175 $ (28,143 ) $ (139,404 ) Fair value adjustment of derivative — 2,775 1,005 Fair value adjustment of warrants - related party (a) — 56,984 4,214 Interest expense, net 15,946 17,057 17,695 Interest expense, net - related party 4,114 2,029 534 Income tax provision (benefit) 16,499 8,018 (48,162 ) Depreciation and amortization 25,761 29,258 33,696 Equity-based compensation expense (b) 3,505 2,610 2,160 Write-off of property and equipment (c) 267 940 969 Impairment of goodwill and intangible assets — — 32,520 Adjustment for exited retail stores (d) (250 ) (1,755 ) (1,444 ) Impairment of long-lived assets (e) 1,413 — 33,777 Transaction costs (f) — — 21,914 Other non-recurring items (g) 7 2,013 2,820 Adjusted EBITDA $ 109,437 $ 91,786 $ (37,706 ) Net sales $ 615,268 $ 585,206 $ 426,730 Adjusted EBITDA margin 17.8 % 15.7 % (8.8 )% (a) The fair value adjustment of warrants increased due to the increase in J.Jill’s stock price since January 30, 2021.
The following table provides a reconciliation of net income (loss) to Adjusted EBITDA and the calculation of Adjusted EBITDA margin for the periods presented: For the Fiscal Year Ended (in thousands) February 3, 2024 January 28, 2023 January 29, 2022 Statements of Operations Data: Net income (loss) $ 36,201 $ 42,175 $ (28,143 ) Add back: Depreciation and amortization 22,931 25,761 29,258 Income tax provision 13,164 16,499 8,018 Interest expense, net 22,909 15,946 17,057 Interest expense - related party 1,074 4,114 2,029 Adjustments: Fair value adjustment of derivative — — 2,775 Fair value adjustment of warrants - related party (a) — — 56,984 Equity-based compensation expense (b) 3,762 3,505 2,610 Write-off of property and equipment (c) 70 267 940 Loss on debt refinancing (d) 12,702 — — Adjustment for exited retail stores (e) (767 ) (250 ) (1,755 ) Impairment of long-lived assets (f) 189 1,413 — Other non-recurring items (g) 2 7 2,013 Adjusted EBITDA $ 112,237 $ 109,437 $ 91,786 Net sales $ 604,661 $ 615,268 $ 585,206 Adjusted EBITDA margin 18.6 % 17.8 % 15.7 % (a) The fair value adjustment of warrants increased due to the increase in J.Jill’s stock price.
Merchandise Inventory Inventory consists of finished goods merchandise held for sale to our customers. Inventory is stated at the lower of cost or net realizable value.
This gift card breakage is recognized as revenue over the time period established by the Company’s historical gift card redemption pattern. Merchandise Inventory Inventory consists of finished goods merchandise held for sale to our customers. Inventory is stated at the lower of cost or net realizable value.
The increase in net sales was due to total company comparable sales increase of 6.5%. Net sales benefited from higher full-price sales as compared to Fiscal Year 2021. Our Direct channel was responsible for 46.8% of our net sales in Fiscal Year 2022 compared to 49.8% in Fiscal Year 2021.
The decrease in net sales was due to total company comparable sales decrease of 1.4%. Our Direct channel was responsible for 46.5% of our net sales in Fiscal Year 2023 compared to 46.8% in Fiscal Year 2022. Our Retail channel was responsible for 53.5% of our net sales in Fiscal Year 2023 and 53.2% in Fiscal Year 2022.
Interest Expense, net Interest expense, net consists of interest expense on the Credit Facilities, partially offset by interest earned on cash. Interest expense for Fiscal Year 2022 increased by $1.0 million, or 5.2%, to $20.1 million from $19.1 million for Fiscal Year 2021. The increase was driven by higher interest rates.
The Company did not incur any gain or loss on debt refinancing for Fiscal Year 2022. Interest Expense, net Interest expense, net consists of interest expense on the Credit Facilities, partially offset by interest earned on cash. Interest expense for Fiscal Year 2023 increased by $3.9 million, or 19.6%, to $24.0 million from $20.1 million for Fiscal Year 2022.
In Fiscal Year 2020, we determined that an impairment loss of $12.0 million was required. This analysis contains uncertainties because it requires us to make assumptions and to apply judgments to estimate industry economic factors and the profitability of future business strategies.
During Fiscal Year 2023, we performed a quantitative assessment of our trade name. This analysis contains uncertainties because it 40 requires us to make assumptions and to apply judgments to estimate industry economic factors and the profitability of future business strategies.
In connection with closing stores, we incur store-closing costs. Store-closing costs primarily consist of lease termination penalties and costs of transporting inventory and fixtures to other store locations. These pre-opening and store-closing costs are included in selling, general and administrative expenses and are generally incurred and expensed within 30 days of opening a new store or closing a store.
In connection with closing stores, we incur store-closing costs. Store-closing costs primarily consist of lease termination penalties and costs of transporting inventory and fixtures to other store locations.
The maturity date of the Subordinated Term Loan Facility is November 8, 2024. Loans under the Subordinated Term Loan Facility bear interest at the Borrower’s election at (1) Base Rate (as defined in the Subordinated Term Loan Facility) plus 11.00% or (2) LIBOR plus 12.00%, with a minimum LIBOR per annum of 1.00%.
Loans under the Term Loan Credit Agreement bear interest at the Borrower’s election at (1) Base Rate (as defined in the Term Loan Credit Agreement) plus 7.00% or (2) Adjusted Term SOFR (as defined in the Term Loan Credit Agreement) plus 8.00%, with Adjusted Term SOFR subject to a floor rate of 1.00%.
Future Cash Requirements We enter into contractual obligations in the ordinary course of business that may require future cash payments. Such obligations include merchandise inventories, marketing, including catalog production and distribution, payroll, store occupancy costs and capital expenditures associated with opening new stores, remodeling existing stores and upgrading information systems.
Such obligations include merchandise inventories, marketing, including catalog production and distribution, payroll, store occupancy costs and capital expenditures associated with opening new stores, remodeling existing stores and upgrading information systems. The notes to the financial statements included elsewhere in this Annual Report provide additional information.
The Company paid $19.7 million in cash for income taxes during Fiscal Year 2022 and received a tax refund of approximately $10.3 million relating to prior years.
The Company paid $19.7 million in cash for income taxes during Fiscal Year 2022 and received tax refunds of approximately $10.3 million relating to prior years. Liquidity and Capital Resources General Our primary sources of liquidity and capital resources are cash and cash equivalents generated from operating activities and availability under our asset-based revolving credit facility agreement (the “ABL Facility”).
Our trade name is reviewed at least annually to determine whether events and circumstances continue to support an indefinite, useful life. We evaluate our trade name annually at year end for potential impairment, or whenever events or changes in circumstances indicate that its carrying value may not be recoverable.
Our trade name is reviewed at least annually to determine whether events and circumstances continue to support an indefinite, useful life.
These net cash uses were partially offset by higher cash inflows from inventories of $3.4 million due to decreased inventory levels and the net change in operating lease assets and liabilities of $2.1 million. Net cash provided by operating activities during Fiscal Year 2022 was $74.4 million.
These net cash outflows were partially offset by higher accounts payable of $12.4 million and lower accounts receivable of $3.2 million due to the timing of payments. Net cash provided by operating activities during Fiscal Year 2023 was $63.3 million.
(d) Represents non-cash gains associated with exiting store leases earlier than anticipated. (e) Represents impairment of long-lived assets related primarily to the right-of-use assets and leasehold improvements. (f) Represents items management believes are not indicative of ongoing operating performance. In Fiscal Year 2020, these expenses are primarily composed of legal and advisory costs.
(d) Represents loss on the repayment of Priming Term Loan Credit Agreement (the “Priming Credit Agreement”) and the Subordinated Term Loan Credit Agreement (the “Subordinated Credit Agreement”) (e) Represents non-cash gains associated with exiting store leases earlier than anticipated. (f) Represents impairment of long-lived assets related primarily to right-of-use assets and leasehold improvements.
In connection with opening new stores, we incur pre-opening costs.
Number of stores reflects all stores open at the end of a reporting period. In connection with opening new stores, we incur pre-opening costs.
The increase in compensation and benefits was primarily due to a $2.2 million increase in hourly and part-time wages and salaries expense, and a $0.8 million increase in benefits expense. 35 Fair Value Adjustments Fair value adjustments consist of the mark-to-market of warrants and derivative liabilities related to the debt restructuring consummated on September 30, 2020.
Fair value adjustments consist of the mark-to-market of warrants and derivative liabilities related to the debt restructuring consummated on September 30, 2020. These fair value adjustments were due to the increase in J.Jill’s stock price from January 30, 2021 through May 31, 2021.
The increase is driven by a $4.2 million increase in marketing costs, $3.1 million increase in compensation and benefits, a $1.4 million increase in shipping costs, and a $0.9 million increase in equity-based compensation expense, offset by a $3.5 million decrease in depreciation and amortization.
The decrease is driven by a $2.8 million decrease in depreciation and amortization, and a $1.1 million decrease in shipping expenses. The decrease was partially offset by a $1.6 million increase in software application hosting and maintenance expenses and a $1.6 million increase in compensation expenses.
Gross Profit and Cost of Goods Sold Gross profit for Fiscal Year 2022 increased $27.6 million, or 7.0%, to $422.1 million from $394.4 million for Fiscal Year 2021.
We operated 244 and 243 retail stores at the end of these same periods, respectively. Gross Profit and Cost of Goods Sold Gross profit for Fiscal Year 2023 increased $5.4 million, or 1.3%, to $427.4 million from $422.1 million for Fiscal Year 2022.
Capitalization At January 28, 2023, long-term debt consisted of the following: Carrying Value of Debt January 28, 2023 Priming Facility (principal of $201,349) 198,941 Subordinated Term Loan Facility (principal and paid-in kind interest of $20,548) 9,719 Less: Current portion (3,424 ) Net long-term debt $ 205,236 The Company had no short-term borrowings under the Company’s ABL Facility as of January 28, 2023.
Capitalization At February 3, 2024, long-term debt consisted of the following: Carrying Value of Debt February 3, 2024 Term Loan Facility (principal of $168,438) 155,948 Less: Current portion (including ECF payment) (35,353 ) Net long-term debt $ 120,595 The Company had no short-term borrowings under the Company’s ABL Facility as of February 3, 2024.
The gross margin for Fiscal Year 2022 was 68.6% compared to 67.4% for Fiscal Year 2021, largely driven by favorable promotional rates and the increase in Retail channel sales accompanied by strong full price sales in the same channel.
The gross margin for Fiscal Year 2023 was 70.7% compared to 68.6% for Fiscal Year 2022, largely driven by favorable freight costs and strong full price sales. Selling, General and Administrative Expenses Selling, general and administrative expenses for Fiscal Year 2023 decreased $0.7 million, or 0.2%, to $341.2 million from $341.9 million for Fiscal Year 2022.
Accordingly, estimates of future sales prices require management judgment based on historical experience, assessment of current conditions and assumptions about future transactions. We have not made significant changes to our assumptions during the periods presented in our consolidated financial statements included elsewhere in this Annual Report, and estimates have not varied significantly from historically recorded amounts.
Accordingly, estimates of future sales prices require management judgment based on historical experience, assessment of current conditions and assumptions about future transactions.
Gross profit is equal to our net sales less costs of goods sold. Gross profit as a percentage of our net sales is referred to as gross margin. 32 Costs of goods sold (“COGS”) includes the direct costs of sold merchandise, inventory shrinkage, and adjustments and reserves for excess, aged and obsolete inventory.
These pre-opening and store-closing costs are included in selling, general and administrative expenses and are generally incurred and expensed within 30 days of opening a new store or closing a store. 32 Gross profit is equal to our net sales less costs of goods sold. Gross profit as a percentage of our net sales is referred to as gross margin.
Key elements of cash provided by operating activities were (i) net loss of $28.1 million, (ii) adjustments to reconcile net income to net cash provided by operating activities of $91.3 million, primarily driven by the noncash change in fair value of warrants, depreciation and amortization, and (iii) a source of cash from net operating assets and liabilities of $11.8 million, primarily driven by the receipt of the income tax refund, partially offset by payments for merchandise inventory and rents for retail stores that were deferred into Fiscal Year 2021 from Fiscal Year 2020.
Key elements of cash provided by operating activities were (i) net income of $36.2 million, (ii) adjustments to reconcile net income to net cash provided by operating activities of $43.1 million, primarily driven by $22.9 million of depreciation and amortization and the loss on debt refinancing of $12.7 million, and (iii) the use of cash from net operating assets and liabilities of $16.0 million, primarily driven by accrued expenses and other current liabilities and operating lease assets and liabilities.
The ABL Amendment (i) extended the maturity date of the ABL Facility from May 8, 2023 to May 8, 2024, provided that if by November 4, 2023, the Priming Facility maturity date has not been appropriately extended to a date that is at least November 4, 2024, then the ABL Facility maturity date will automatically be deemed to be November 4, 2023, and (ii) changed the benchmark interest rate applicable to the loans under the ABL Facility from LIBOR to SOFR.
This amendment extended the maturity date of the ABL Credit Agreement from May 8, 2024 to May 10, 2028 (or 180 days prior to the maturity date of the Company’s Term Loan Credit Agreement if the maturity date of such Term Loan Facility has not been extended to a date that is at least 180 days after the maturity date of the ABL Credit Agreement).
The Company had outstanding letters of credit in the amount of $7.0 million and had a maximum additional borrowing capacity of $30.0 million as of January 28, 2023. The Company was in compliance with all debt covenants as of January 28, 2023. The maturity date of the Priming Credit Agreement is May 8, 2024.
The Company had outstanding letters of credit in the amount of $5.8 million and had a maximum additional borrowing capacity of $34.2 million as of February 3, 2024. Future Cash Requirements We enter into contractual obligations in the ordinary course of business that may require future cash payments.
As of January 28, 2023, we had $87.1 million in cash and cash equivalents and $30.0 million of total availability under our $40.0 million ABL Facility. Also, in Fiscal Year 2021, we received $17.5 million of a total expected federal income tax refund of approximately $26.7 million related to Fiscal Year 2020.
As of February 3, 2024, we had $62.2 million in cash and cash equivalents and $34.2 million of total availability under our $40.0 million ABL Facility.
Removed
Property and Equipment , in the notes to the financial statements included elsewhere in this Annual Report, for additional information on these impairment losses. Fair value adjustments . Fair value adjustments consist of the mark-to-market of warrants and derivative liabilities related to the debt restructuring consummated on September 30, 2020.
Added
References in this Annual Report to “Fiscal Year 2023” refer to the fiscal year ended February 3, 2024, references to the “Fiscal Year 2022” refer to the fiscal year ended January 28, 2023 and references to “Fiscal Year 2021” refer to the fiscal year ended January 29, 2022.
Removed
Our first and second quarter of Fiscal Year 2020 financial results were significantly impacted by COVID-19 as our stores were temporarily closed beginning in mid-March 2020 through most of the second quarter of Fiscal Year 2020 in efforts to stop the spread of the virus.
Added
We recommend that you review the reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure, and the calculation of the resultant Adjusted EBITDA margin below and not rely solely on Adjusted EBITDA or any single financial measure to evaluate our business. 33 Reconciliation of Net Income (Loss) to Adjusted EBITDA and Calculation of Adjusted EBITDA Margin Fiscal Year Ended February 3, 2024 which is comprised of 53-weeks compared to Fiscal Year Ended January 28, 2023 and January 29, 2022 which are comprised of 52-weeks.
Removed
Our Retail channel was responsible for 53.2% of our net sales in Fiscal Year 2022 and 50.2% in Fiscal Year 2021. We operated 243 and 253 retail stores at the end of these same periods, respectively.
Added
Although the Company lost revenues, we continued to incur certain expenses, such as payroll and rent; therefore, ratios and other items may not be comparable to our Fiscal Year 2023 and Fiscal Year 2022 financial results. 53rd week .
Removed
Selling, General and Administrative Expenses Selling, general and administrative expenses for Fiscal Year 2022 increased $6.2 million, or 1.8%, to $341.9 million from $335.7 million for Fiscal Year 2021.
Added
The Company’s fiscal year ends on the Saturday, in January or February, nearest the last day of January, resulting in an additional week of results every five or six years. Fiscal Year 2023 contained 53-weeks of operations whereas 34 the Fiscal Years 2022 and 2021 contained 52-weeks of operations.
Removed
The increase in marketing costs was primarily due to a $2.2 million increase in print media and catalog costs, and $2.0 million increase in paid search and digital media expenses.
Added
The 53rd week added approximately $7.9 million to net sales and $2.2 million to Adjusted EBITDA for Fiscal Year 2023. Results of Operations Fiscal Year Ended February 3, 2024 which is comprised of 53-weeks compared to Fiscal Year Ended January 28, 2023 which is comprised of 52-weeks.
Removed
Income Taxes to the consolidated financial statements for additional income tax information. The Company paid $9.3 million in cash for income taxes during Fiscal Year 2021 and received a tax refund of approximately $17.5 million relating to prior years.
Added
Impairment of long-lived assets Impairment of long-lived assets for Fiscal Year 2023 decreased by $1.2 million, or 86.6% to $0.2 million from $1.4 million for Fiscal Year 2022.
Removed
Liquidity and Capital Resources General Our primary sources of liquidity and capital resources are cash and cash equivalents generated from operating activities and availability under our ABL Facility.
Added
Our Fiscal Year 2023 results include $0.2 million of impairment charges for long-lived assets (leasehold improvements and furniture, fixtures and equipment), and our Fiscal Year 2022 results include $1.4 million of impairment charges for long-lived assets (operating lease right-of-use asset, leasehold improvements and furniture, fixtures and equipment). 35 Loss on debt refinancing For Fiscal Year 2023, the Company recognized a loss on debt refinancing of $12.7 million related to entering into a Term Loan Credit Agreement and the repayment of the Priming Credit Agreement and the Subordinated Credit Agreement, as discussed in the Liquidity and Capital Resources section below.
Removed
In Fiscal Year 2022, the Company received the remaining expected refund of $9.2 million, bringing the total refund proceeds to $26.7 million.
Added
On April 5, 2023, the Company and Jill Acquisition LLC (the “Borrower”) entered into a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) by and among the lenders party thereto and Jefferies Finance LLC, as administrative and collateral agent.
Removed
The tax refund amount benefited from the provisions under the CARES Act enacted in March 2020 most significantly from the provision that allows for net operating losses in Fiscal Year 2020 to be carried back to earlier tax years with higher tax rates than the current year.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−0 removed1 unchanged
Biggest changeAs of January 28, 2023, there were outstanding balances of $201.3 million, and $20.5 million under the Priming Facility and Subordinated Term Loan Facility, respectively. There were no outstanding borrowings under the ABL Facility. We currently do not engage in any interest rate hedging activity.
Biggest changeAs of February 3, 2024, there was an outstanding balance of $168.4 million under the Term Loan Facility. There were no outstanding borrowings under the ABL Facility. We currently do not engage in any interest rate hedging activity.
Based on the schedule of outstanding borrowings as of January 28, 2023, a 10% change in our current interest rate would have affected net income by $1.6 million during Fiscal Year 2022.
Based on the schedule of outstanding borrowings as of February 3, 2024, a 10% change in our current interest rate would have affected net income by $10.5 million during Fiscal Year 2023.

Other JILL 10-K year-over-year comparisons