J. Jill's 2026 Q2 Earnings Call: Contradictions Emerge on Tariff Impact, Customer Sentiment, and Inventory Strategies

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 3, 2025

Financials Results

• Revenue: $154M, down 0.8% YOY
• EPS: Adjusted diluted EPS $0.81, compared to $1.05 in Q2 2024
• Gross Margin: 68.4%, down ~210 bps YOY; ~50 bps pressure from tariffs

Guidance:

• Q3 adjusted EBITDA expected at $18–$22M.
• Q3 sales about flat to down low single digits; comps down low to mid-single digits.
• Q3 gross margin down more than Q2 YOY, primarily due to tariff pressure.
• Tariffs expected to impact ~$(5)M per quarter net of vendor offsets if current policies persist (avg rates ~20%; India 50%).
• FY25 capital expenditures expected at $20–$25M.
• Expect 1–5 net new stores in FY25; two openings planned late Q3.

Business Commentary:

• Sales and Inventory Management:
• J.Jill reported total sales of $154 million for Q2, down 0.8% compared to Q2 2024.
• The company successfully cleared excess inventory units during the quarter, ending with inventories approximately flat to last year.

• The company attributed the sales performance to improved traffic, both online and in stores, and increased promotional activity, which helped align inventory with sales trends.

• Profitability and Cash Flow:

• J.Jill's adjusted EBITDA was $25.6 million for Q2, down from $30.2 million in Q2 2024.
• The company generated $17 million of free cash flow in the quarter, ending with $46 million in cash on the balance sheet.

• Margin pressure was due to a higher mix of markdown sales and increased promotional rates to move inventory, as well as tariff-related costs.

• Tariff Impact and Strategic Mitigation:

• The company expects approximately $5 million of incremental impact from tariffs in the third quarter, assuming current tariff policies remain in place.

• J.Jill is working levers to mitigate the impact, including negotiating savings offsets with vendors, adjusting on-order quantities, and strategically reviewing promotion and pricing strategies.

• Store Performance and Expansion:

• Store sales were up 0.4% compared to Q2 2024 due to three net new stores opened during the quarter.
• J.Jill is committed to opening up to 50 stores by the end of 2029, focusing on productivity and increasing brand awareness.

• The company closed two stores during the quarter, bringing the total store count to 247.

• Customer Engagement and Product Strategy:

• The company is focusing on evolving its product assortment to attract new customers while continuing to deliver relevant and versatile items for existing customers.
• Enhancements to the customer journey include expanding marketing reach, testing new advertising channels, and reshooting imagery for digital media and catalogs.
• J.Jill is leveraging technology to improve operations, such as implementing an Order Management System and enhancing its rewards program to expand its customer base.

Sentiment Analysis:

• Sales trends improved into June/July with Q2 sales down <1%, but gross margin fell 210 bps YOY on promotions and tariffs. Q3 outlook calls for flat-to-down sales, comps down low-to-mid single digits, and gross margin down more than Q2, driven by tariffs. Management highlights strong free cash flow, ship-from-store rollout, and customer growth initiatives, but macro uncertainty and elevated tariffs temper near-term expectations.

Q&A:

• Question from Jonna Kim (TD Cowen): What drove the improvement in June/July, and how should we think about the annualized tariff impact next year as you mitigate this year's effects?
  Response: Improvement came from clearance/promotional actions that lifted traffic and conversion; tariffs are ~$(5)M per quarter net of offsets (~$20M annualized), with mitigation via vendor savings, on-order adjustments, and pricing.

• Question from Jonna Kim (TD Cowen): Will back-half promotional levels be in line or elevated versus last year?
  Response: Receipts are bought down mid-single digits; plan is strategic price increases and tighter promotions to offset tariffs, with guidance reflecting uncertain customer receptivity.

• Question from Corey Tarlowe (Jefferies): After 100 days, where do you see opportunities for change and acceleration, and what’s working?
  Response: Priorities are growing the customer file via broader product appeal, enhanced marketing/customer journey (TV test, refreshed imagery), and faster ways of working; ship-from-store launched and near-term presentation refinements are underway.

• Question from Corey Tarlowe (Jefferies): What are the margin puts/takes in the back half and the path to sustaining high-teens EBITDA margins?
  Response: Tariffs are the main headwind; offsets include selective pricing, disciplined promotions, and leaner inventories while investing in assortment and marketing to drive profitable growth and sustain margins long term.

• Question from Janine Stichter (BTIG): How is your consumer feeling today outside of promotion-driven noise?
  Response: Consumer is gradually returning with sequential improvements; optimism into Q3 as tariff-related noise settles.

• Question from Marni Shapiro (The Retail Tracker): With POS/OMS upgrades, will you modernize Inspired Rewards to broaden your base?
  Response: Yes—launching a non-tender rewards program in the back half to complement the highly penetrated private-label card.

• Question from Marni Shapiro (The Retail Tracker): How are you evolving the marketing mix (TV, social, events) to drive traffic?
  Response: A small local TV test performed strongly; mix will shift toward broader awareness with more digital/direct engagement, with tests in 2H to reach new customers.

• Question from Marni Shapiro (The Retail Tracker): Have you already changed in-store/online presentation even without changing product?
  Response: Yes—cleaner color stories, updated windows, and simplified shopping in-store and online; early response is positive.