J.Jill's 2025 Q2 Earnings Call: Contradictions Emerge on Tariff Impact, Consumer Behavior, and Mitigation 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: $0.81 adjusted diluted EPS, down from $1.05 in Q2 2024
• Gross Margin: 68.4%, down ~210 bps YOY (incl. ~50 bps tariff pressure)

Guidance:

• Q3 adjusted EBITDA expected at $18M–$22M.
• Q3 sales about flat to down low single digits; comps down low- to mid-single digits.
• Q3 gross margin down YOY more than Q2, largely from tariffs.
• Tariffs to impact roughly $5M per quarter net; average rates ~20% (India 50%).
• 2025 capex unchanged at $20M–$25M.
• Expect 1–5 net new stores in 2025; two openings late Q3.
• H2 unit receipts bought down mid-single digits; using strategic pricing and tighter promotions to offset tariffs.
• Ship-from-store live fleetwide to support sales and margins.

Business Commentary:

* Sales and Profitability Stability: - J.Jill, Inc. reported total sales down less than 1% and adjusted EBITDA of $25.6 million in Q2 2025. - The stability was driven by improved traffic, both online and in stores, and increased promotional activity.

• Inventory Management and Gross Margin:
• Gross margin was 68.4%, down about 210 basis points versus Q2 2024, driven by higher mix of markdown sales and higher full price promotional rates.

• This was a result of the company's effective markdown and promotional actions to align inventory with sales trends.

• Tariff Impact and Mitigation Strategies:

• Tariffs had an approximate 50 basis points impact on gross margin, with rates for sourcing countries averaging around 20%.

• The company is working multiple levers, including vendor negotiated offsets and adjustments in order quantities, to mitigate the impact.

• Capital Expenditures and Store Expansion:

• Capital expenditures for the quarter were about $3 million, primarily focused on stores and ship-from-store capabilities.
• The company plans to open 2 new stores toward the end of Q3, maintaining its goal to open 50 stores by the end of 2029.

Sentiment Analysis:

• Sales trends improved into June/July, delivering total sales down <1% and adjusted EBITDA of $25.6M. Gross margin fell to 68.4%, down ~210 bps YOY. Q3 outlook: comps down low- to mid-single digits and gross margin down YOY more than Q2 due to tariffs. Management highlighted cash generation and operational discipline, launching ship-from-store and maintaining capex/store plans while working pricing and promotions to mitigate ~$5M quarterly tariff impact.

Q&A:

• Question from Jungwon Kim (TD Cowen): What drove improvement in June/July, and how should we think about the annualized tariff impact?
  Response: Improvement was led by clearance/promo activity boosting traffic and conversion; tariffs expected to hit ~$5M per quarter (~$20M annualized) with mitigation via vendor offsets, on-order adjustments, and pricing.

• Question from Jungwon Kim (TD Cowen): Will second-half promotional levels be in line or elevated versus last year?
  Response: Plan is for tighter promotions with strategic pricing to offset tariffs; guidance range reflects uncertainty around customer receptivity, with H2 receipts bought down mid-single digits.

• Question from Corey Tarlowe (Jefferies): After 100 days, where are the biggest opportunities and what's working?
  Response: Focus is on growing the customer file via evolved product, enhanced customer journey, and faster ways of working; testing TV and shifting marketing mix now, with assortment work building into 2026.

• Question from Corey Tarlowe (Jefferies): Back-half margin puts/takes and sustaining high-teens EBITDA margin?
  Response: Tariffs are the main headwind; aim to offset dollars via selective pricing and less promo, with inventories bought down; continue investing in assortment/marketing to drive profitable growth.

• Question from Janine Hoffman Stichter (BTIG): How is your consumer trending now?
  Response: Consumer is slowly returning with sequential improvement; optimism into Q3 as tariff-related noise settles.

• Question from Janine Hoffman Stichter (BTIG): Will back-half promotions be up or down year over year?
  Response: Depends on acceptance of price increases; could be tighter if receptive or higher if resistance emerges—both scenarios embedded in guidance.

• Question from Marni Shapiro (The Retail Tracker): Plans to upgrade/modernize Inspired Rewards and leverage POS upgrades?
  Response: A non-tender rewards program is being developed for launch in the back half; POS and OMS implementations are complete; JCC remains highly penetrated.

• Question from Marni Shapiro (The Retail Tracker): Views on social/digital content and real-life events after TV test?
  Response: Small local TV test was impactful; marketing mix will shift toward broader awareness with more digital and direct engagement, with tests in H2.

• Question from Marni Shapiro (The Retail Tracker): Have you already changed merchandising presentations?
  Response: Yes—cleaner in-store/online presentations, stronger color stories, and refreshed windows without changing product; early signs are positive.