10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 4, 2018

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________________ to _____________________

Commission File Number: 001-38026

J.Jill, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	45-1459825
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4 Batterymarch Park, Quincy, MA 02169	02169
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (617) 376-4300

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒  No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of September 18, 2018, the registrant had 43,747,757 shares of common stock, $0.01 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets (Unaudited)	2
	Consolidated Statements of Operations and Comprehensive Income (Unaudited)	3
	Consolidated Statement of Shareholders’ Equity (Unaudited)	4
	Consolidated Statements of Cash Flows (Unaudited)	5
	Notes to Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Mine Safety Disclosures	21
Item 5.	Other Information	21
Item 6.	Exhibits	21
Exhibit Index		22
Signatures		23

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

J.Jill, Inc.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share data)

	August 4, 2018		February 3, 2018
Assets
Current assets:
Cash	$	62,035	$	25,978
Accounts receivable		5,107		4,733
Inventories, net		61,591		80,591
Prepaid expenses and other current assets		22,466		21,166
Total current assets		151,199		132,468
Property and equipment, net		113,063		118,420
Intangible assets, net		142,569		148,961
Goodwill		197,026		197,026
Other assets		558		682
Total assets	$	604,415	$	597,557
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	43,128	$	53,962
Accrued expenses and other current liabilities		45,717		48,759
Current portion of long-term debt		2,799		2,799
Total current liabilities		91,644		105,520
Long-term debt, net of discount and current portion		238,165		238,881
Deferred income taxes		43,107		46,263
Other liabilities		28,885		27,577
Total liabilities		401,801		418,241
Commitments and contingencies (see Note 9)
Shareholders’ Equity
Common stock, par value $0.01 per share; 250,000,000 shares authorized; 43,744,033 and 43,752,790 shares issued and outstanding at August 4, 2018 and February 3, 2018, respectively		437		437
Additional paid-in capital		119,236		117,393
Accumulated earnings		82,941		61,486
Total shareholders’ equity		202,614		179,316
Total liabilities and shareholders’ equity	$	604,415	$	597,557

The accompanying notes are an integral part of these consolidated financial statements.

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J.Jill, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (UNAUDITED)

(in thousands, except share and per share data)

	For the Thirteen Weeks Ended				For the Twenty-Six Weeks Ended
	August 4, 2018		July 29, 2017		August 4, 2018		July 29, 2017
Net sales	$	179,713	$	181,372	$	361,254	$	347,498
Costs of goods sold		63,058		58,724		124,258		109,242
Gross profit		116,655		122,648		236,996		238,256
Selling, general and administrative expenses		97,365		97,011		197,659		194,044
Operating income		19,290		25,637		39,337		44,212
Interest expense, net		4,853		5,084		9,670		10,029
Income before provision for income taxes		14,437		20,553		29,667		34,183
Provision for income taxes		3,952		8,557		7,924		14,160
Net income and total comprehensive income	$	10,485	$	11,996	$	21,743	$	20,023
Net income per common share attributable to common shareholders:
Basic	$	0.24	$	0.29	$	0.51	$	0.48
Diluted	$	0.23	$	0.28	$	0.49	$	0.46
Weighted average number of common shares outstanding:
Basic		42,855,366		41,549,825		42,535,849		42,033,984
Diluted		44,716,193		43,554,275		44,061,804		43,559,781

The accompanying notes are an integral part of these consolidated financial statements.

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J.Jill, Inc.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (UNAUDITED)

(in thousands, except common share data)

							Additional					Total
	Common Stock						Paid-in		Accumulated			Shareholders’
	Shares			Amount			Capital		Earnings			Equity
Balance, February 3, 2018		43,752,790		$	437		$	117,393	$	61,486		$	179,316
Adoption of ASU 2014-09(1)		—			—			—		(288	)		(288	)
Vesting of restricted stock units		9,602			1			—		—			1
Forfeiture of restricted stock awards		(18,359	)		(1	)		—		—			(1	)
Equity-based compensation		—			—			1,843		—			1,843
Net income		—			—			—		21,743			21,743
Balance, August 4, 2018		43,744,033		$	437		$	119,236	$	82,941		$	202,614

⁽¹⁾ See Note 2 for additional detail regarding the adoption of new accounting standards.

The accompanying notes are an integral part of these consolidated financial statements.

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J.Jill, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

	For the Twenty-Six Weeks Ended
	August 4, 2018			July 29, 2017
Net income	$	21,743		$	20,023
Operating activities:
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		18,245			17,131
Loss on disposal of fixed assets		28			340
Noncash amortization of deferred financing and debt discount costs		794			1,615
Equity-based compensation		1,843			261
Deferred rent liability		(64	)		664
Deferred income taxes		(3,054	)		(1,121	)
Changes in operating assets and liabilities:
Accounts receivable		(374	)		(1,219	)
Inventories		19,000			3,851
Prepaid expenses and other current assets		(2,371	)		5,993
Accounts payable		(11,943	)		(221	)
Accrued expenses		(2,322	)		(5,909	)
Other noncurrent assets and liabilities		1,590			3,872
Net cash provided by operating activities		43,115			45,280
Investing activities:
Purchases of property and equipment		(5,659	)		(10,915	)
Net cash used in investing activities		(5,659	)		(10,915	)
Financing activities:
Repayments on long-term debt		(1,399	)		(21,399	)
Receivable from related party		—			2,227
Net cash used in financing activities		(1,399	)		(19,172	)
Net change in cash		36,057			15,193
Cash:
Beginning of Period		25,978			13,468
End of Period	$	62,035		$	28,661

The accompanying notes are an integral part of these consolidated financial statements.

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J.Jill, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Description of Business

J.Jill, Inc.,“J.Jill” or the “Company”, is a premier omnichannel retailer and nationally recognized women’s apparel brand committed to delighting customers with great wear-now product. The brand represents an easy, relaxed, inspired style that reflects the confidence and comfort of a woman with a rich, full life. J.Jill provides guiding service through more than 270 stores nationwide and a robust e-commerce platform. J.Jill is headquartered outside Boston.

2. Summary of Significant Accounting Policies

Basis of Presentation

Our interim consolidated financial statements are unaudited. All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted, in accordance with the rules of the Securities and Exchange Commission (the “SEC”). In the opinion of management, these interim consolidated financial statements contain all normal and recurring adjustments necessary to state fairly the financial position and results of operations of the Company. The consolidated balance sheet as of February 3, 2018 is derived from the audited consolidated balance sheet as of that date. The unaudited results of operations for the thirteen and twenty-six weeks ended August 4, 2018 are not necessarily indicative of future results or results to be expected for the full year ending February 2, 2019. You should read these statements in conjunction with our audited consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended February 3, 2018.

Significant changes to our accounting policies as a result of adopting Accounting Standards Update (“ASU”) 2014-09 – Revenue from Contracts with Customers (Topic 606) are discussed below in “Significant Accounting Policies Update” and Note 3.

Recently Adopted Accounting Policies

In May 2014, the FASB issued ASU 2014-09 – Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in FASB ASC Topic 605 – Revenue Recognition. The new guidance established principles for reporting revenue and cash flows arising from an entity’s contracts with customers. The Company adopted ASU 2014-09 and related amendments, collectively known as Accounting Standards Codification 606 (“Topic 606”) as of February 4, 2018 on a modified retrospective basis. See “Significant Accounting Policies Update” and Note 3 for a discussion of our updated policies related to revenue recognition and disclosures related to the impact of this standard.

In October 2016 the FASB issued ASU 2016-16 – Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This update is intended to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Under the new guidance, an entity would recognize the current and deferred income tax consequences of an intra-entity asset transfer when the transfer occurs. Intra-entity inventory transfers would still be an exception. The provisions of ASU 2016-16 were adopted as of February 4, 2018 under the modified retrospective method with no cumulative-effect adjustment to retained earnings.

In August 2016, the FASB issued ASU 2016-15 – Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments,which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard was retrospectively adopted as of February 4, 2018 and did not have an impact on the consolidated statement of cash flows.

Recently Issued Accounting Pronouncements

In July 2018, the FASB issued ASU 2018-09 – Codification Improvements, which facilitates amendments to a variety of topics to clarify, correct errors in, or make minor improvements to the accounting standards codification. The effective date of the standard is dependent on the facts and circumstances of each amendment. Some amendments do not require transition guidance and will be effective upon the issuance of this standard. A majority of the amendments in ASU 2018-09 will be effective in annual periods beginning after December 15, 2018. We will be required to adopt this standard in the first quarter of fiscal 2019.This standard is not expected to have a material impact on our consolidated financial statements and related disclosures.

In June 2018, The FASB issued ASU 2018-07 – Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of Topic 718 to include share-based payment transactions

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for acquiring goods and services from nonemployees. The provisions of ASU 2018-07 are effective for fiscal years beginning after December 15, 2018. The Company plans to adopt these standards beginning in the first quarter of fiscal 2019 using a modified retrospective approach. The Company is evaluating the impact that adopting ASU 2018-07 will have on its consolidated financial statements, but does not expect that impact to be material.

In February 2016, the FASB issued ASU 2016-02 – Leases. The amendments in this update include a new FASB ASC Topic 842, which supersedes Topic 840. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted for all entities as of the beginning of interim or annual reporting periods. In July 2018, the FASB issued ASU 2018-10 – Codification Improvements to Topic 842, Leases. The amendments are intended to address narrow aspects of the guidance issued in the amendments in ASU 2016-02. In July 2018, the FASB issued ASU 2018-11 – Leases (Topic 842): Targeted Improvements, which provides an additional (and optional) transition method by allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. These provisions are effective for reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact that adopting ASU 2016-02 and related amendments will have on its consolidated financial statements and expects to raise significant “Right of Use” assets and significant, offsetting lease liabilities. These amounts have not yet been quantified. The Company plans to adopt these standards beginning in the first quarter of fiscal 2019 using the modified retrospective approach with a cumulative adjustment to retained earnings.

Significant Accounting Policies Update

Adoption of ASC Topic 606: Revenue from Contracts with Customers

On February 4, 2018, the Company adopted Topic 606 using the modified retrospective method applied to contracts which were not completed as of February 4, 2018. As part of the adoption of Topic 606, Topic 340-20 – Capitalized Advertising Costs was superseded and therefore, the Company transitioned to ASC 720-35 – Advertising Costs for reporting on costs of advertising. Results for reporting periods beginning after February 4, 2018 are presented under Topic 606 and Topic 720, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605 and Topic 340.

The Company recorded a cumulative reduction to opening retained earnings of $0.3 million. The impact on opening retained earnings was a $0.8 million decrease from the acceleration of prepaid catalog expenses offset by a $0.5 million increase from the recognition of direct revenues previously deferred under Topic 605.

Effective February 4, 2018, the Company changed its consolidated balance sheet presentation for expected sales returns and recorded a $5.0 million return asset and a corresponding increase to the return liability to present our sales reserve gross in accordance with Topic 606. In addition, as of the date of adoption of Topic 606, the Company will present reimbursements of costs of marketing programs related to the private label credit card gross in the consolidated statement of operations with no impact to opening retained earnings.

Revenue Recognition

Revenue is primarily derived from the sale of apparel and accessory merchandise through our retail channel and direct channel, which includes website and catalog phone orders. Revenue also includes shipping and handling fees collected from customers. Topic 606 requires entities to recognize revenue when control of the promised goods or services are transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.  Revenue from our retail channel is recognized at the time of sale and revenue from our direct channel is recognized upon shipment of merchandise to the customer.

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. The estimated sales reserve is recorded as a return asset (and corresponding adjustment to cost of goods sold) for the cost of inventory and a return liability for the amount to settle the return with a customer (and a corresponding adjustment to revenue). The return asset and return liability are recorded in prepaid expenses and other assets, and accrued expenses and other current liabilities, respectively, in the consolidated balance sheet. The Company collects and remits sales and use taxes in all states in which retail and direct sales occur and taxes are applicable. 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. Proceeds from the sale of gift cards are recorded as a contract liability until the customer redeems the gift card or when the likelihood of redemption is remote. Based on historical experience, the Company estimates the value of outstanding gift

7

cards that will ultimately not be redeemed (“gift card breakage”) and will not be escheated under statutory unclaimed property laws. This gift card breakage is recognized as revenue over the time period established by the Company’s historical gift card redemption pattern.

The Company recognizes revenues from shipments to customers before the shipping and handling activities occur and will accrue those related costs. Shipping and handling costs are recorded in selling, general and administrative expenses. There is no change to the Company’s comparative reporting of shipping and handling costs as a result of adopting of Topic 606.

Credit Card Agreement

The Company has an arrangement with a third party to provide a private label credit card to its customers through August 2023, and will automatically renew thereafter for successive two year terms. The Company does not bear the credit risk associated with the private label credit card at any point prior to the termination of the agreement, at which point the Company is obligated to purchase the receivables. If the arrangement is terminated prior to September 7, 2021 and other criteria are met, the Company is obligated to pay a purchase price premium. The potential impact of the purchase obligation cannot be reasonably estimated, and therefore, has not been recorded.

The Company receives royalty payments through its private label credit card agreement. The royalty payments are recognized as revenue when they are received. Royalty payments recognized in the thirteen and twenty-six weeks ended August 4, 2018 were $1.4 million and $2.8 million, respectively, and in the thirteen and twenty-six weeks ended July 29, 2017 were $1.1 million and $2.3 million, respectively.

The Company also receives reimbursements for costs of marketing programs related to the private label credit card, which are recorded as revenue as earned and the costs incurred are recorded as operating expenses in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income (loss). Reimbursements for costs of marketing programs of $0.4 million and $1.5 million were recognized in the thirteen and twenty-six weeks ended August 4, 2018, respectively.

The credit card agreement provides a signing bonus to the Company, which is recognized into revenue over the life of the agreement.

Advertising Costs

The Company incurs costs to produce, print, and distribute its catalogs. Catalog costs are considered direct response advertising, which are capitalized as incurred, and expensed when the catalog is mailed to the customer (the first time the advertising occurs). Advertising expenses were $8.6 million and $18.7 million in the thirteen and twenty-six weeks ended August 4, 2018, respectively, and $8.8 million and $18.0 million in the thirteen and twenty-six weeks ended July 29, 2017, respectively. The costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income (loss).

Other advertising costs are recorded as incurred. Other advertising costs recorded were $5.4 million and $11.2 million in the thirteen and twenty-six weeks ended August 4, 2018, respectively, and $5.6 million and $10.5 million in the thirteen and twenty-six weeks ended July 29, 2017, respectively. The costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income (loss).

3. Revenues

Disaggregation of Revenue

The Company sells its products directly to consumers and the Company earns royalties under its credit card agreement. The following table presents revenues disaggregated by revenue source (in thousands):

	For the Thirteen Weeks Ended				For the Twenty-Six Weeks Ended
	August 4, 2018		July 29, 2017(1)		August 4, 2018		July 29, 2017(1)
Retail	$	106,210	$	103,189	$	214,241	$	198,536
Direct	$	73,503	$	78,183		147,013		148,962
Net revenues	$	179,713	$	181,372	$	361,254	$	347,498

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⁽¹⁾ As previously noted, prior period amounts have not been adjusted under the modified retrospective method.

Contract Liabilities

The Company recognizes a contract liability when it has received consideration from the customer and has a future obligation to the customer. Total contract liabilities consisted of the following (in thousands):

	August 4, 2018		February 3, 2018
Contract liabilities:
Signing bonus	$	718	$	788
Unredeemed gift cards		4,917		6,466
Total contract liabilities(1)	$	5,635	$	7,254

⁽¹⁾ Included in accrued expenses and other current liabilities on the Company's consolidated balance sheet. The short term portion of the signing bonus is included in accrued expenses on the Company’s consolidated balance sheet.

For the thirteen and twenty-six weeks ended August 4, 2018, the Company recognized approximately $2.8 million and $6.1 million of revenue related to gift card redemptions and breakage. For the thirteen and twenty-six weeks ended July 29, 2017, the Company recognized approximately $2.8 million and $6.0 million of revenue related to gift card redemptions and breakage. Revenue recognized consists of gift cards that were part of the unredeemed gift card balance at the beginning of the period as well as gift cards that were issued during the period.

Performance Obligations

The Company has a remaining performance obligation of $0.7 million for a signing bonus related to the private label credit card agreement. The Company will recognize revenue over the remaining life of the contract as follows (in thousands):

	Fiscal Year 2018		Fiscal Year 2019		Thereafter
Signing bonus	$	71	$	141	$	506

This disclosure does not include revenue related to performance obligations from unredeemed gift cards, as substantially all gift cards are redeemed in the first year of issuance.

Practical Expedients and Policy Elections

The Company excludes from its transaction price all amounts collected from customers for sales taxes that are remitted to taxing authorities.

Shipping and handling activities that occur after control of related goods transfers to the customer are accounted for as fulfillment activities rather than assessing these activities as performance obligations.

The Company does not disclose remaining performance obligations that have an expected duration of one year or less.

4. Debt

The components of the Company’s outstanding Term Loan were as follows (in thousands):

	August 4, 2018			February 3, 2018
Term Loan	$	246,777		$	248,176
Discount on debt and debt issuance costs		(5,813	)		(6,496	)
Less: Current portion		(2,799	)		(2,799	)
Net long-term debt	$	238,165		$	238,881

The Company was in compliance with all financial covenants as of August 4, 2018.

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5. Income Taxes

The Company recorded income tax expense of $4.0 million and $7.9 million during the thirteen and twenty-six weeks ended August 4, 2018, respectively, and $8.6 million and $14.2 million during the thirteen and twenty-six weeks ended July 29, 2017, respectively. The effective tax rates were 27.4% and 26.7% in the thirteen and twenty-six weeks ended August 4, 2018, respectively, and 41.6% and 41.4% in the thirteen and twenty-six weeks ended July 29, 2017, respectively.

The effective tax rate for the thirteen and twenty-six weeks ended August 4, 2018 exceeds the federal statutory rate of 21.0% primarily due to stock compensation, state income taxes and §162(m) officer compensation limitation. The effective tax rate for the thirteen and twenty-six weeks ended July 29, 2017 exceeds the federal statutory rate of 35.0% primarily due to state income taxes and non-deductible IPO related expenses.

On December 22, 2017, the U.S. Tax Cuts and Jobs Act (TCJA) legislation was signed.  The new U.S. tax legislation is subject to a number of provisions, including a reduction of the U.S. federal corporate income tax rate from 35.0% to 21.0% (effective January 1, 2018) and a change in certain business deductions, including allowing for immediate expensing of certain qualified capital expenditures.

Staff Accounting Bulletin No. 118 (“SAB 118”), issued by the Securities and Exchange Commission in December 2017, provides the Company with up to one year to finalize accounting for the impacts of TCJA. When the initial accounting for TCJA impacts is incomplete, the Company may include provisional amounts when reasonable estimates may be determined. As of February 3, 2018, the Company made a reasonable estimate of its deferred income tax benefit related to the corporate rate change of $24.0 million and estimates to expense qualifying capital expenditures.

In the thirteen and twenty-six weeks ended August 4, 2018, the Company has not recognized any measurement period adjustments. The Company has not completed its process to determine the final impact of TCJA. The final impact may differ from this estimate, possibly materially, due to, among other things, changes in interpretations and assumptions that the Company has made and the issuance of additional regulatory and other guidance. Further, any required adjustment would be reflected as a discrete expense or benefit in the quarter that it is identified, as allowed by SAB 118. Although no material changes are anticipated, the Company expects to complete the analysis within the measurement period in accordance with SAB 118.

6. Earnings Per Share

The following table summarizes the computation of basic and diluted net income per share attributable to common shareholders (in thousands, except share and per share data):

	For the Thirteen Weeks Ended				For the Twenty-Six Weeks Ended
	August 4, 2018		July 29, 2017		August 4, 2018		July 29, 2017
Numerator
Net income attributable to common shareholders:	$	10,485	$	11,996	$	21,743	$	20,023
Denominator
Weighted average number of common shares outstanding, basic:		42,855,366		41,549,825		42,535,849		42,033,984
Dilutive effect of restricted shares:		1,860,827		2,004,450		1,525,955		1,525,797
Weighted average number of common shares outstanding, diluted:		44,716,193		43,554,275		44,061,804		43,559,781
Net income per common share attributable to common shareholders, basic:	$	0.24	$	0.29	$	0.51	$	0.48
Net income per common share attributable to common shareholders, diluted:	$	0.23	$	0.28	$	0.49	$	0.46

The weighted average common shares for the diluted earnings per share calculation exclude the impact of outstanding equity awards if the assumed proceeds per share of the award is in excess of the related fiscal period’s average price of the Company’s common stock. Such awards are excluded because they would have an antidilutive effect. There were 336,105 and 729,463 for the thirteen and twenty-six weeks ended August 4, 2018, respectively, and 283,230 and 280,038 for the thirteen and twenty-six weeks ended July 29, 2017, respectively, such awards excluded.

7. Equity-Based Compensation

Compensation expense was $1.0 million and $1.8 million for the thirteen and twenty-six weeks ended August 4, 2018, respectively, and $0.2 million and $0.3 million for the thirteen and twenty-six weeks ended July 29, 2017, respectively.

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8. Related Party Transactions

For the thirteen and twenty-six weeks ended August 4, 2018, the Company incurred an immaterial amount of related party transactions. For the thirteen and twenty-six weeks ended July 29, 2017 the Company incurred an immaterial amount of out-of-pocket expenses in relation to the advisory services agreement with a related party. These expenses are included in operating expenses in the accompanying consolidated statements of operations and comprehensive income.

9. Commitments and Contingencies

Operating Lease Agreements

The Company recorded a deferred lease liability of $10.6 million and $9.5 million as of August 4, 2018 and February 3, 2018, respectively. In certain instances, the Company also receives tenant improvement incentives for its store leases, which it accrues and amortizes ratably over the life of the lease. The Company maintained a tenant improvement incentive liability of $18.0 million and $17.3 million as of August 4, 2018 and February 3, 2018, respectively.  

Total rental and common area maintenance expense was $15.1 million and $30.6 million for the thirteen and twenty-six weeks ended August 4, 2018, respectively, exclusive of contingent rental expense recorded of $0.4 million and $0.6 million for the same respective periods. Total rental and common area maintenance expense was $14.9 million and $29.3 million for the thirteen and twenty-six weeks ended July 29, 2017, respectively, exclusive of contingent rental expense recorded of $0.4 million and $0.8 million for the same respective periods.

Legal Proceedings

Shareholder Class Action Lawsuits

On October 13, 2017, a securities lawsuit was filed in the United States District Court for the District of Massachusetts against the Company, several members of our Board of Directors and our Chief Financial Officer, among others. The complaint was brought under the Securities Act of 1933 and sought certification of a class of plaintiffs comprised of all shareholders that acquired stock issued by the Company in its initial public offering in March 2017. The plaintiffs sought compensation for losses they incurred since purchasing the stock.  Following the filing of this lawsuit, two additional, similar actions were brought in the same court. The three matters were eventually consolidated, and a lead plaintiff was appointed by the court. On March 9, 2018, an amended complaint captioned The Pension Trust v. J.Jill, Inc., et al. was filed. The Company filed a motion to dismiss on May 14, 2018, which was opposed by the plaintiffs on July 17, 2018. The Company believes the claims in the case are without merit and intends to defend the matter vigorously. No material amount has been accrued.

We are not presently party to any other legal proceedings the resolution of which we believe would have a material adverse effect on our business, financial condition, operating results or cash flows. We establish reserves for specific legal matters when we determine that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The followingdiscussionand analysisshouldbe read in conjunctionwith our consolidatedfinancial statementsand relatednotestheretoincludedelsewherein thisQuarterly Reporton Form 10-Q. The followingdiscussioncontainsforward-looking statementsthatreflectour plans,estimatesand assumptions.Our actualresultscoulddiffermateriallyfrom thosediscussedin theforward-lookingstatements.Factorsthatcouldcausesuch differencesare discussedin the sectionsof thisQuarterly Report on Form 10-Q titled“Risk Factors” and “Special Note Regarding Forward-Looking Statements”.

Weoperateon a 52- or 53-weekfiscalyearthatends on theSaturdaythatisclosestto January31. Each fiscalyeargenerallyiscomprisedof four13-weekfiscalquarters,althoughin theyearswith 53 weeks, thefourth quarterrepresentsa 14-weekperiod. The fiscal year ending February 2, 2019 (“Fiscal Year 2018”) and fiscal year ended February 3, 2018 (“Fiscal Year 2017”) are comprisedof 52 weeks and 53 weeks, respectively.

Overview

J.Jill is a premier omnichannel retailer and nationally recognized women’s apparel brand committed to delighting customers with great wear-now product. The brand represents an easy, relaxed, inspired style that reflects the confidence and comfort of a woman with a rich, full life. J.Jill provides guiding service through more than 270 stores nationwide and a robust e-commerce platform. J.Jill is headquartered outside Boston.

FactorsAffectingOur OperatingResults

Variousfactorsareexpectedto continueto affectour resultsof operationsgoing forward,includingthe following:

OverallEconomic Trends. Consumerpurchasesof clothingand othermerchandisegenerallydeclineduring recessionaryperiodsand otherperiodswhen disposableincomeisadverselyaffected,and consequentlyour resultsof operationsmaybe affectedby generaleconomicconditions.For example,reducedconsumer confidenceand loweravailabilityand highercostof consumercreditmayreducedemandforour merchandise and maylimitour abilityto increaseor sustainprices.The growth rateof themarketcouldbe affectedby macroeconomicconditionsin theUnitedStates.

Consumer Preferencesand Fashion Trends. Our abilityto maintainour appealto existingcustomersand attractnew customersdependson our abilityto anticipatefashiontrends.During periodsin which we have successfullyanticipatedfashiontrends, we have generallyhad morefavorableresults.

Competition. The retailindustryishighlycompetitiveand retailerscompetebasedon a varietyof factors, includingdesign,quality,priceand customerservice.Levelsof competitionand theabilityof our competitorsto moreaccuratelypredictfashiontrendsand otherwiseattractcustomersthroughcompetitivepricingor other factorsmayimpactour resultsof operations.

Our Strategic Initiatives. Our business will continue to have an impact on our results of operations, including our newly re-platformed e-commerce site. Although initiatives of this nature are designed to create growth in our business and continuing improvement in our operating results, the timing of expenditures related to these initiatives, as well as the achievement of returns on our investments, may affect our results of operation in future periods.

Pricingand Changes in Our MerchandiseMix. Our productofferingchangesfromperiodto period,as do thepricesatwhich goods aresoldand themarginswe areableto earnfromthesalesof thosegoods. The levels atwhich we areableto priceour merchandiseareinfluencedby a varietyof factors,includingthequalityof our products,costof production,pricesatwhich our competitorsaresellingsimilarproductsand thewillingnessof our customersto pay forproducts.

Potential Changes in Tax Laws and/or Regulations.  Changes in tax laws in any of the multiple jurisdictions in which we operate, or adverse outcomes from tax audits that we may be subject to in any of the jurisdictions in which we operate, could adversely affect our business, financial condition and operating results.  Additionally, any potential changes with respect to tax and trade policies, tariffs and government regulations affecting trade between the U.S. and other countries could adversely affect our business, as we source the majority of our merchandise from manufacturers located outside of the U.S.

How We Assessthe Performanceof Our Business

In assessingtheperformanceof our business,we considera varietyof financialand operatingmetrics, includingGAAPand non-GAAPmeasures,includingthefollowing:

Net salesconsistsprimarilyof revenues,netof merchandisereturnsand discounts,generatedfromthesale of appareland accessorymerchandisethroughour retailchanneland directchannel.Net salesalsoinclude shippingand handlingfeescollectedfrom

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customers and royalty revenues and marketing reimbursements related to our private label credit card agreement.Revenue fromour retailchannelisrecognizedatthetime of saleand revenuefromour directchannelisrecognizedupon shipmentof merchandiseto thecustomer.

Net salesareimpactedby thesizeof our activecustomerbase,productassortmentand availability, marketingand promotionalactivitiesand thespendinghabitsof our customers.Net salesarealsoimpactedby the migrationof single-channelcustomersto omnichannelcustomerswho, on average, spend nearlythreetimes morethansingle-channelcustomers.

Totalcompanycomparablesalesincludesnetsalesfromour full-pricestoresthathave been open formore than52 weeks and fromour directchannel.This measurehighlightstheperformanceof existingstoresopen duringtheperiod,whileexcludingtheimpactof new storeopeningsand closures.When a storein thetotal companycomparablestorebaseistemporarilyclosedforremodelingor otherreasons,itisincludedin total companycomparablesalesonly usingthefullweeks itwas open. Certainof our competitorsand otherretailers maycalculatetotalcompanycomparablesalesdifferentlythanwe do. As a result,thereportingof our total companycomparablesalesmaynot be comparableto salesdatamadeavailableby othercompanies.

Number of storesreflectsallstoresopen attheend of a reportingperiod.In connectionwith openingnew stores,we incurpre-openingcosts.Pre-openingcostsincludeexpensesincurredpriorto openinga new storeand primarilyconsistof payroll,travel,training,marketing,initialopeningsuppliesand costsof transportinginitial inventoryand fixturesto storelocations,as wellas occupancycostsincurredfromthetimeof possessionof a storesiteto theopeningof thatstore.These pre-openingcostsareincludedin selling,generaland administrative expensesand aregenerallyincurredand expensedwithin30 days of openinga new store.

Gross profitisequalto our netsaleslesscostsof goods sold.Gross profitas a percentageof our netsalesis referredto as grossmargin.Costs of goods soldincludesthedirectcostsof soldmerchandise,inventory shrinkage,and adjustmentsand reservesforexcess,aged and obsoleteinventory.We reviewour inventorylevels on an ongoing basisto identifyslow-movingmerchandiseand use productmarkdownsto efficientlysellthese products.Changes in theassortmentof our productsmayalsoimpactour grossprofit.The timingand levelof markdownsaredrivenby customeracceptanceof our merchandise.Certainof our competitorsand otherretailers mayreportcostsof goods solddifferentlythanwe do. As a result,thereportingof our grossprofitand gross marginmaynot be comparableto othercompanies.

The primarydriversof thecostsof goods soldareraw materials,which fluctuatebasedon certainfactors beyond our control,includinglaborconditions,transportationor freightcosts,energyprices,currency fluctuationsand commodityprices.We placeorderswith merchandisesuppliersin UnitedStatesdollarsand, as a result,arenot exposedto significantforeigncurrencyexchangerisk.

Selling,generaland administrativeexpensesincludealloperatingcostsnot includedin costsof goods sold. These expensesincludeallpayrolland relatedexpenses,occupancycostsand otheroperatingexpensesrelatedto our storesand to our operationsatour headquarters,includingutilities,depreciationand amortization.These expensesalsoincludemarketingexpense,includingcatalogproductionand mailingcosts,warehousing, distributionand shippingcosts,customerserviceoperations,consultingand softwareservices,professional servicesand otheradministrativecosts.

Our historical revenue growth has been accompanied by increased selling, general and administrative expenses. The most significant increases were in occupancy costs associated with retail store expansion, and in marketing and payroll investments. While we expect these expenses to increase as we continue to open new stores, increase brand awareness and grow our business, we believe these expenses will decrease as a percentage of net sales over time.

Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA, which represents net income (loss) plus net interest expense, provision (benefit) for income taxes, depreciation and amortization, equity-based compensation expense, write-off of property and equipment, and other non-recurring expenses and one-time items. We present Adjusted EBITDA on a consolidated basis because management uses it as a supplemental measure in assessing our operating performance, and we believe that it is helpful to investors, securities analysts and other interested parties as a measure of our comparative operating performance from period to period. We also use Adjusted EBITDA as one of the primary methods for planning and forecasting overall expected performance of our business and for evaluating on a quarterly and annual basis actual results against such expectations. Further, we recognize Adjusted EBITDA as a commonly used measure in determining business value and as such, use it internally to report results.

Whilewe believethatAdjustedEBITDAisusefulin evaluatingour business,AdjustedEBITDAisa non-GAAPfinancialmeasurethathas limitationsas an analyticaltool.AdjustedEBITDAshouldnot be considered an alternativeto, or substitutefor,netincome(loss),which iscalculatedin accordancewith GAAP.In addition, othercompanies,includingcompaniesin our industry,maycalculateAdjustedEBITDAdifferentlyor not atall, which reducestheusefulnessof AdjustedEBITDAas a toolforcomparison.We recommendthatyou reviewthe reconciliationand calculationof AdjustedEBITDAand AdjustedEBITDAmarginto netincome(loss),themost directlycomparableGAAPfinancialmeasure,below and not relysolelyon AdjustedEBITDAor any single financialmeasureto evaluateour business.

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Reconciliationof Net Incometo AdjustedEBITDAand Calculationof AdjustedEBITDAMargin

The followingtableprovidesa reconciliationof netincometo AdjustedEBITDAand thecalculation of AdjustedEBITDAmarginfortheperiodspresented.

	For the Thirteen Weeks Ended						For the Twenty-Six Weeks Ended
(in thousands)	August 4, 2018			July 29, 2017			August 4, 2018			July 29, 2017
Statements of Operations Data:
Net income	$	10,485		$	11,996		$	21,743		$	20,023
Interest expense, net		4,853			5,084			9,670			10,029
Provision for income taxes		3,952			8,557			7,924			14,160
Depreciation and amortization		8,892			8,341			18,249			17,140
Equity-based compensation expense(a)		1,083			237			1,843			261
Write-off of property and equipment (b)		16			338			28			340
Other non-recurring expenses(c)		—			721			1,346			4,306
Adjusted EBITDA	$	29,281		$	35,274		$	60,803		$	66,259
Net sales	$	179,713		$	181,372		$	361,254		$	347,498
Adjusted EBITDA margin		16.3	%		19.4	%		16.8	%		19.1	%

(a) Representsexpensesassociatedwith equityincentiveinstrumentsgrantedto our management and board of directors. Incentive instrumentsareaccountedforas equity-classifiedawardswith therelatedcompensationexpenserecognizedbasedon fairvalueatthedateof thegrants.

(b) Representsnet gain or losson thedisposalof fixedassets.

(c) Represents items management believes are not indicative of ongoing operating performance. For the period ended July 29, 2017, these expenses are primarily composed of legal and professional fees associated with the initial public offering completed March 14, 2017 and subsequent transition to a public company. For the twenty-six weeks ended August 4, 2018, these expenses include costs related to a CEO transition.

Resultsof Operations

Thirteen weeks ended August 4, 2018 Compared to Thirteen weeks ended July 29, 2017

The followingtablesummarizesour consolidatedresultsof operationsfortheperiodsindicated:

	For the Thirteen Weeks Ended										Change from the Thirteen Weeks Ended July 29, 2017 to the Thirteen Weeks
(in thousands)	August 4, 2018					July 29, 2017					Ended August 4, 2018
	Dollars		% of Net Sales			Dollars		% of Net Sales			$ Change			% Change
Net sales	$	179,713		100.0	%	$	181,372		100.0	%	$	(1,659	)		(0.9	)%
Costs of goods sold		63,058		35.1	%		58,724		32.4	%		4,334			7.4	%
Gross profit		116,655		64.9	%		122,648		67.6	%		(5,993	)		(4.9	)%
Selling, general and administrative expenses		97,365		54.2	%		97,011		53.5	%		354			0.4	%
Operating income		19,290		10.7	%		25,637		14.1	%		(6,347	)		(24.8	)%
Interest expense, net		4,853		2.7	%		5,084		2.8	%		(231	)		(4.5	)%
Income before provision for income taxes		14,437		8.0	%		20,553		11.3	%		(6,116	)		(29.8	)%
Provision for income taxes		3,952		2.2	%		8,557		4.7	%		(4,605	)		(53.8	)%
Net income	$	10,485		5.8	%	$	11,996		6.6	%	$	(1,511	)		(12.6	)%

Net Sales

Net sales forthe thirteen weeks ended August 4, 2018 decreased $1.7 million, or 0.9%, to $179.7 from $181.4 million for the thirteen weeks ended July 29, 2017.At theend of thosesameperiods,we operated 273 and 274 retail stores,respectively. The decrease in total net sales versus the prior year was driven by replacing a high volume week in May with a lower volume week in August due to a calendar shift created by the fifty-third week in Fiscal Year 2017, partially offset by a 2.2% increase in total company comparable sales.

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Our retailchannel contributed59.1%of our netsalesin the thirteen weeks ended August 4, 2018 and 56.9% in the thirteen weeks ended July 29, 2017.Our directchannel contributed 40.9% of our netsalesin the thirteen weeks ended August 4, 2018 and 43.1% in the thirteen weeks ended July 29, 2017.

Gross Profitand Costs of Goods Sold

Gross profitforthe thirteen weeks ended August 4, 2018 decreased $6.0 million, or 4.9%, to $116.7 from $122.6 million for the thirteen weeks ended July 29, 2017.The gross margin for the thirteen weeks ended August 4, 2018 was 64.9% compared to 67.6% for the thirteen weeks ended July 29, 2017, largely driven by added promotions, markdowns, and liquidation actions to clear certain goods.

Selling,Generaland AdministrativeExpenses

Selling,generaland administrativeexpensesforthe thirteen weeks ended August 4, 2018 increased $0.4 million, or 0.4%, to $97.4 from $97.0 million for the thirteen weeks ended July 29, 2017. The increase was due to additional expenses of $0.8 million related to depreciation and amortization and costs associated with investments in technology. These increases were partially offset by lower sales related expenses, including retail payroll, occupancy and direct fulfillment, as well as a decrease in net employee compensation, which was primarily driven by incentive expense.

As a percentageof netsales,selling,generaland administrativeexpenses were 54.2% for the thirteen weeks ended August 4, 2018 compared to 53.5% forthe thirteen weeks ended July 29, 2017.  

InterestExpense, Net

Interest expense, net, consists of interest expense on the Term Loan and is partially offset by interest earned on cash. Interestexpenseforthe thirteen weeks ended August 4, 2018 decreased $0.2 million, or 4.5%, to $4.9 from $5.1 million for the thirteen weeks ended July 29, 2017. The decrease was driven by the lower balance of the Term Loan and the acceleration of $0.6 million of deferred financing costs in the second quarter of 2017 due to a voluntary principal prepayment on the Term Loan of $20.0 million made in June 2017, partially offset by the impact of higher interest rates.

ProvisionforIncome Taxes

The provisionforincometaxes was $4.0 million for the thirteen weeks ended August 4, 2018compared to $8.6 million for the thirteen weeks ended July 29, 2017.Our effectivetaxratesforthesameperiods were 27.4% and 41.6%,respectively. The decrease in the effective tax rate was primarily due to new U.S. tax legislation.  The U.S. Tax Cuts and Jobs Act (the “TCJA”), enacted in December 2017, is subject to a number of provisions, including a reduction of the U.S. federal corporate income tax rate from 35.0% to 21.0% (effective January 1, 2018) and a change in certain business deductions, including allowing for immediate expensing of certain qualified capital expenditures.

Twenty-six weeks ended August 4, 2018 Compared to Twenty-six weeks ended July 29, 2017

The followingtablesummarizesour consolidatedresultsof operationsfortheperiodsindicated:

	For the Twenty-Six Weeks Ended										Change from the Twenty-Six Weeks Ended July 29, 2017 to the Twenty-Six Weeks
(in thousands)	August 4, 2018					July 29, 2017					Ended August 4, 2018
	Dollars		% of Net Sales			Dollars		% of Net Sales			$ Change			% Change
Net sales	$	361,254		100.0	%	$	347,498		100.0	%	$	13,756			4.0	%
Costs of goods sold		124,258		34.4	%		109,242		31.4	%		15,016			13.7	%
Gross profit		236,996		65.6	%		238,256		68.6	%		(1,260	)		(0.5	)%
Selling, general and administrative expenses		197,659		54.7	%		194,044		55.8	%		3,615			1.9	%
Operating income		39,337		10.9	%		44,212		12.7	%		(4,875	)		(11.0	)%
Interest expense, net		9,670		2.7	%		10,029		2.9	%		(359	)		(3.6	)%
Income before provision for income taxes		29,667		8.2	%		34,183		9.8	%		(4,516	)		(13.2	)%
Provision for income taxes		7,924		2.2	%		14,160		4.1	%		(6,236	)		(44.0	)%
Net income	$	21,743		6.0	%	$	20,023		5.8	%	$	1,720			8.6	%

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Net Sales

Net sales for the twenty-six weeks ended August 4, 2018 increased $13.8 million, or 4.0%, to $361.3 from $347.5 million for the twenty-six weeks ended July 29, 2017.At theend of thosesameperiods,we operated 273 and 274 retail stores,respectively. The increase in net sales was due to a 2.2% increase in total company comparable sales, driven by an increase in our active customer base.

Our retailchannel contributed 59.3% of our netsalesin the twenty-six weeks ended August 4, 2018 and 57.1% in the twenty-six weeks ended July 29, 2017.Our directchannel contributed 40.7% of our netsalesin the twenty-six weeks ended August 4, 2018 and 42.9% in the twenty-six weeks ended July 29, 2017.

Gross Profitand Costs of Goods Sold

Gross profitfor the twenty-six weeks ended August 4, 2018 decreased $1.3 million, or 0.5%, to $237.0 from $238.3 million for the twenty-six weeks ended July 29, 2017.The gross margin for the twenty-six weeks ended August 4, 2018 was 65.6% compared to 68.6% for the twenty-six weeks ended July 29, 2017, largely driven by added promotions, markdowns, and liquidation actions to clear certain goods.

Selling,Generaland AdministrativeExpenses

Selling,generaland administrativeexpensesfor the twenty-six weeks ended August 4, 2018 increased $3.6 million, or 1.9%, to $197.7 from $194.0 million for the twenty-six weeks ended July 29, 2017. The increase is related to higher sales related expenses of $1.6 million, including retail payroll, occupancy and direct fulfillment, as well as increased marketing costs of $2.8 million.  In addition, there was a $1.5 million increase related to depreciation and amortization and costs associated with investments in technology.  These increases were partially offset by a decrease in net employee compensation which is primarily driven by incentive expense.

As a percentageof netsales,selling,generaland administrativeexpenses were 54.7% for the twenty-six weeks ended August 4, 2018 compared to 55.8% for the twenty-six weeks ended July 29, 2017.  

InterestExpense, Net

Interest expense, net, consists of interest expense on the Term Loan and is partially offset by interest earned on cash. Interestexpensefor the twenty-six weeks ended August 4, 2018 decreased $0.4 million, or 3.6%, to $9.7 from $10.0 million for the twenty-six weeks ended July 29, 2017. The decrease was driven by the lower balance of the Term Loan and the acceleration of $0.6 million of deferred financing costs in the second quarter of 2017 due to a voluntary principal prepayment on the Term Loan of $20.0 million made in June 2017, partially offset by the impact of higher interest rates.

ProvisionforIncome Taxes

The provisionforincometaxes was $7.9 million for the twenty-six weeks ended August 4, 2018compared to $14.2 million for the twenty-six weeks ended July 29, 2017.Our effectivetaxratesforthesameperiods were 26.7% and 41.4%,respectively. The decrease in the effective tax rate was primarily due to new U.S. tax legislation under the TCJA.

Liquidityand CapitalResources

General

Our primary sources of liquidity and capital resources are cash generated from operating activities and availability under our ABL credit agreement, dated as of May 8, 2015, by and among 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 on May 27, 2016 by Amendment No. 1 thereto (the “ABL Facility”). Our primary requirements for liquidity and capital are working capital and general corporate needs, including 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 and the costs of operating as a public company. We believe that our current sources of liquidity and capital will be sufficient to finance our continued operations for at least the next 12 months. There can be no assurance, however, that our business will generate sufficient cash flows from operations or that future borrowings will be available under our ABL Facility or otherwise to enable us to service our indebtedness, or to make capital expenditures in the future. Our future operating performance and our ability to service or extend our indebtedness will be subject to future economic conditions and to financial, business, and other factors, many of which are beyond our control.

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Capital expenditures were $5.7 million for the twenty-six weeks ended August 4, 2018 compared to $10.9 million for the twenty-six weeks ended July 29, 2017.  The decrease in capital expenditures in Fiscal Year 2018 was due primarily to a decrease in spending on technology projects and stores investments.

Cash Flow Analysis

The followingtableshows our cashflowsinformationfortheperiodspresented:

	For the Twenty-Six Weeks Ended
(in thousands)	August 4, 2018			July 29, 2017
Net cash provided by operating activities	$	43,115		$	45,280
Net cash used in investing activities		(5,659	)		(10,915	)
Net cash used in financing activities		(1,399	)		(19,172	)

Net Cash providedby OperatingActivities

Net cash provided by operatingactivitiesduring the twenty-six weeks ended August 4, 2018 was $43.1 million.Key elementsof cash providedby operatingactivitieswere (i)netincomeof $21.7 million,(ii)adjustmentsto reconcilenetincometo netcashprovidedby operatingactivitiesof $17.8 million,primarilydrivenby depreciationand amortization, deferred income taxes and equity based compensation, and (iii) a decrease in netoperatingassetsand liabilitiesof $3.6 million,primarilydrivenby lower inventory levels, offset by cash uses in accounts payable, prepaid expenses and accrued expenses.

Net cash provided byoperatingactivitiesduring the twenty-six weeks ended July 29, 2017 was $45.3 million.Key elements of cashprovidedby operatingactivitieswere (i)netincomeof $20.0 million, and (ii)adjustmentsto reconcilenet incometo netcashprovidedby operatingactivitiesof $18.9 million,primarilydrivenby depreciation and amortization and non-cash amortization of deferred financing and debt discount costs, and (iii) a decrease in netoperatingassetsand liabilitiesof $6.4 million,primarily driven by cash provided by prepaid expenses and other current assets, inventories and other noncurrent assets and liabilities, offset with cash uses in accounts receivable and accrued expenses.

Net Cash used in InvestingActivities

Net cash used in investingactivitiesduring the twenty-six weeks ended August 4, 2018 was $5.7 million,representingpurchasesof propertyand equipmentrelatedinvestments in storesand information systems.

Net cash used in investingactivitiesduring the twenty-six weeks ended July 29, 2017 was $10.9 million,representingpurchasesof propertyand equipmentrelatedinvestments in storesand information systems.

Net Cash usedin FinancingActivities

Net cash used infinancingactivitiesduring the twenty-six weeks ended August 4, 2018 was $1.4 million,which was the scheduled repayment of our Term Loan.

Net cash used in financing activities during the twenty-six weeks ended July 29, 2017 was $19.2 million, which was primarily due to a voluntary principal prepayment on the Term Loan of $20.0 million made in June 2017.

Dividends

Since our initial public offering, we have not declared or paid any cash dividends. The payment of cash dividends in the future, if any, will be at the discretion of our board of directors and will depend upon such factors as earnings levels, capital requirements, restrictions imposed by applicable law, our overall financial condition, restrictions in our debt agreements, including our Term Loan and ABL Facility, and any other factors deemed relevant by our board of directors. 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 Term Loan, our ABL Facility and under future indebtedness that we or they may incur.

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CreditFacilities

At August 4, 2018 and February 3, 2018 therewere no loanamountsoutstandingundertheABLFacility. At thosesamedates,we had outstandinglettersof creditin theamountsof $1.6 million andourmaximumadditionalborrowingcapacity was $38.4 million.

ContractualObligations

The Company’s contractual obligations consist primarily of long-term debt obligations, interest payments, operating leases and purchase orders for merchandise inventory. These contractual obligations impact the Company’s short-term and long-term liquidity and capital resource needs. During the twenty-six weeks ended August 4, 2018, there were no material changes in the contractual obligations as of February 3, 2018.

Contingencies

Shareholder Class Action Lawsuits

On October 13, 2017, a securities lawsuit was filed in the United States District Court for the District of Massachusetts against the Company, several members of our Board of Directors and our Chief Financial Officer, among others. The complaint was brought under the Securities Act of 1933 and sought certification of a class of plaintiffs comprised of all shareholders that acquired stock issued by the Company in its initial public offering in March 2017. The plaintiffs sought compensation for losses they incurred since purchasing the stock.  Following the filing of this lawsuit, two additional, similar actions were brought in the same court. The three matters were eventually consolidated, and a lead plaintiff was appointed by the court. On March 9, 2018, an amended complaint captioned The Pension Trust v. J.Jill, Inc., et al. was filed. The Company filed a motion to dismiss on May 14, 2018, which was opposed by the plaintiffs on July 17, 2018. The Company believes the claims in the case are without merit and intends to defend the matter vigorously. No material amount has been accrued.

Off-Balance Sheet Arrangements

We arenot a partyto any off-balancesheetarrangements.

CriticalAccounting Policiesand SignificantEstimates

The mostsignificantaccountingestimatesinvolvea high degreeof judgmentor complexity.Management believestheestimatesand judgmentsmostcriticalto thepreparationof our consolidatedfinancialstatementsand to theunderstandingof our reportedfinancialresultsincludethosemadein connectionwith revenuerecognition, includingaccountingforgiftcardbreakageand estimatedmerchandisereturns;estimatingthevalueof inventory;impairmentassessmentsforgoodwilland otherindefinite-livedintangibleassets,and long-livedassets;and estimatingequity-basedcompensationexpense.Management evaluatesitspoliciesand assumptionson an ongoing basis.

Our significantaccountingpoliciesrelatedto these accountsin thepreparationof our consolidatedfinancialstatementsaredescribed under the heading “Management Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Estimates” in our Annual Reporton Form10-K for the fiscal year ended February 3, 2018. As of the date of this filing, there were no significant changes to any of the critical accounting policies and estimates previously described in our Annual Report on Form 10-K, except for the effects of the adoption of ASC 606 – Revenue from Contracts with Customers. Refer to Note 2 to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q, under header, “Significant Accounting Policies Update” for the effects and disclosures of adoption.

Recent Accounting Pronouncements

Refer to Note 2 to our unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q, for recently adopted accounting standards, including the dates of adoption and estimated effects on our results of operations, financial position or cash flows.

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are generally identified by the use of forward-looking terminology,

18

including the terms “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements.

These forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. All written and oral forward-looking statements made in connection with this Quarterly Report on Form 10-Q that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by the Risk Factors set forth in our Annual Report on Form 10-K for the year ended February 3, 2018 and other cautionary statements included therein and herein.

These forward-looking statements reflect our views with respect to future events as of the date of this Quarterly Report on Form 10-Q and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q and, except as required by law, we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. We qualify all of our forward-looking statements by these cautionary statements.

19

Item 3. Quantitative and Qualitative Disclosures About Market Risk

InterestRate Risk

We aresubjectto interestrateriskin connectionwith borrowingsundertheTermLoan and ABLFacility, which bearinterestatvariableratesequalto LIBORplusa marginas definedin therespectiveagreements describedabove. As of August 4, 2018, therewas no outstandingbalanceundertheABLFacility,and $1.6 millionlettersof creditoutstanding.The undrawn borrowingavailabilityundertheABLFacilitywas $38.4 millionand theamountoutstandingundertheTermLoan had decreasedto $246.8 millionas a resultof the scheduled repayments. We currentlydo not engagein any interestratehedgingactivity.Based on theinterestrateon theABLFacilityat August 4, 2018, and thescheduleof outstandingborrowingsunderour TermLoan, a 10% changein our currentinterestrate would affectnetincomeby $1.3 millionduringFiscal Year2018.

Impactof Inflation

Our resultsof operationsand financialconditionarepresentedbasedon historicalcost.Whileitisdifficult to accuratelymeasuretheimpactof inflationdue to theimprecisenatureof theestimatesrequired,we believethe effectsof inflation,ifany, on our resultsof operationsand financialconditionhave been immaterial.We cannot assureyou our businesswillnot be affectedin thefutureby inflation.

Item 4. Controls and Procedures

Evaluation of DisclosureControlsand Procedures

We maintaindisclosurecontrolsand proceduresthataredesignedto providereasonableassurancethat informationrequiredto be disclosedin thereportswe fileor submitundertheSecuritiesExchange Act of 1934, as amended,isrecorded,processed,summarizedand reportedwithinthetimeperiodsspecifiedin theSEC’s rulesand forms,and thatsuch informationisaccumulatedand communicatedto our management,includingour ChiefExecutiveOfficerand ChiefFinancialOfficer,to allowtimelydecisionsregardingrequireddisclosure.

Our management,underthesupervisionof our ChiefExecutiveOfficerand ChiefFinancialOfficer, evaluatedtheeffectivenessof our disclosurecontrolsand procedures(asdefinedin Rules 13a-15(e)and 15d-15(e)undertheSecuritiesExchange Act of 1934, as amended)as of theend of theperiodcoveredby this Quarterly Reporton Form-10-Q.Based on thatevaluation,our ChiefExecutiveOfficerand ChiefFinancialOfficer have concludedthatas of theend of theperiodcoveredby thisQuarterly Reporton Form-10-Q,our disclosure controlsand procedureswere effectiveto providesuch reasonableassurance.

Changes to Internal Control over Financial Reporting

There were no significant changes in our internal control over financial reporting, (as defined in Rules 13a-15(e) and 15d-15(e) under the Act) during thefiscal quarter ended August 4, 2018 identified in connection with the evaluation by our management, including our Chief Executive Officer and Chief Financial Officer, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitationson the Effectivenessof Controlsand Procedures

In designingand evaluatingour disclosurecontrolsand procedures,our managementrecognizesthatany controlsand procedures,no matterhow welldesignedand operated,can provideonly reasonable,not absolute, assuranceof achievingthedesiredcontrolobjectives.In addition,thedesignof disclosurecontrolsand proceduresmustreflectthefactthatthereareresourceconstraintsand our managementisrequiredto apply judgmentin evaluatingthebenefitsof possiblecontrolsand proceduresrelativeto theircosts.The designof any disclosurecontrolsand proceduresalsoisbasedin partupon certainassumptionsaboutthelikelihoodof future events,and therecan be no assurancethatany designwillsucceedin achievingitsstatedgoalsunderallpotential futureconditions.

20

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

Shareholder Class Action Lawsuits

On October 13, 2017, a securities lawsuit was filed in the United States District Court for the District of Massachusetts against the Company, several members of our Board of Directors and our Chief Financial Officer, among others. The complaint was brought under the Securities Act of 1933 and sought certification of a class of plaintiffs comprised of all shareholders that acquired stock issued by the Company in its initial public offering in March 2017. The plaintiffs sought compensation for losses they incurred since purchasing the stock.  Following the filing of this lawsuit, two additional, similar actions were brought in the same court. The three matters were eventually consolidated, and a lead plaintiff was appointed by the court. On March 9, 2018, an amended complaint captioned The Pension Trust v. J.Jill, Inc., et al. was filed. The Company filed a motion to dismiss on May 14, 2018, which was opposed by the plaintiffs on July 17, 2018. The Company believes the claims in the case are without merit and intends to defend the matter vigorously. No material amount has been accrued.

We are not presently party to any other legal proceedings the resolution of which we believe would have a material adverse effect on our business, financial condition, operating results or cash flows. We establish reserves for specific legal matters when we determine that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable.

Item 1A. Risk Factors

Factors that could cause our actual results to differ materially from those in this report are described under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended February 3, 2018. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K.  However, additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations and we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The exhibits listed on the Exhibit Index are filed or furnished as part of this Quarterly Report on Form 10-Q.

21

Exhibit Index

Exhibit Number	Description
31.1	Certification of Principal Executive Officer required by Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer required by Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* Furnished herewith.

22

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	J.Jill, Inc.
Date: September 18, 2018	By:	/s/ Linda Heasley
		Linda Heasley
		Chief Executive Officer and Director
Date: September 18, 2018	By:	/s/ David Biese
		David Biese
		Executive Vice President, Chief Financial and Operating Officer

23

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Linda Heasley, certify that:

1. I have reviewed this Quarterly Report of J.Jill, Inc. (the “Company”) on Form 10-Q for the period ended August 4, 2018;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Securities Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: September 18, 2018	By:	/s/ Linda Heasley
		Linda Heasley
		Chief Executive Officer and Director

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David Biese, certify that:

1. I have reviewed this Quarterly Report of J.Jill, Inc. (the “Company”) on Form 10-Q for the period ended August 4, 2018;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Securities Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: September 18, 2018	By:	/s/ David Biese
		David Biese
		Executive Vice President, Chief Financial and Operating Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of J.Jill, Inc. (the “Company”) on Form 10-Q for the period ended August 4, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: September 18, 2018	By:	/s/ Linda Heasley
		Linda Heasley
		Chief Executive Officer and Director

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of J.Jill, Inc. (the “Company”) on Form 10-Q for the period ended August 4, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: September 18, 2018	By:	/s/ David Biese
		David Biese
		Executive Vice President, Chief Financial and Operating Officer

XML

Document and Entity Information - shares	6 Months Ended
	Aug. 04, 2018	Sep. 18, 2018
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Aug. 04, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2
Trading Symbol	JILL
Entity Registrant Name	J.Jill, Inc.
Entity Central Index Key	0001687932
Current Fiscal Year End Date	--02-02
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		43,747,757

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Aug. 04, 2018	Feb. 03, 2018
Current assets:
Cash	$ 62,035	$ 25,978
Accounts receivable	5,107	4,733
Inventories, net	61,591	80,591
Prepaid expenses and other current assets	22,466	21,166
Total current assets	151,199	132,468
Property and equipment, net	113,063	118,420
Intangible assets, net	142,569	148,961
Goodwill	197,026	197,026
Other assets	558	682
Total assets	604,415	597,557
Current liabilities:
Accounts payable	43,128	53,962
Accrued expenses and other current liabilities	45,717	48,759
Current portion of long-term debt	2,799	2,799
Total current liabilities	91,644	105,520
Long-term debt, net of discount and current portion	238,165	238,881
Deferred income taxes	43,107	46,263
Other liabilities	28,885	27,577
Total liabilities	401,801	418,241
Commitments and contingencies (see Note 9)
Shareholders’ Equity
Common stock, par value $0.01 per share; 250,000,000 shares authorized; 43,744,033 and 43,752,790 shares issued and outstanding at August 4, 2018 and February 3, 2018, respectively	437	437
Additional paid-in capital	119,236	117,393
Accumulated earnings	82,941	61,486
Total shareholders’ equity	202,614	179,316
Total liabilities and shareholders’ equity	$ 604,415	$ 597,557

XML

Consolidated Balance Sheets (Parenthetical) - $ / shares	Aug. 04, 2018	Feb. 03, 2018
Statement Of Financial Position [Abstract]
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	250,000,000	250,000,000
Common stock, shares issued	43,744,033	43,752,790
Common stock, shares outstanding	43,744,033	43,752,790

XML

Consolidated Statements of Operations and Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Aug. 04, 2018	Jul. 29, 2017	Aug. 04, 2018	Jul. 29, 2017
Income Statement [Abstract]
Net sales	$ 179,713	$ 181,372	$ 361,254	$ 347,498
Costs of goods sold	63,058	58,724	124,258	109,242
Gross profit	116,655	122,648	236,996	238,256
Selling, general and administrative expenses	97,365	97,011	197,659	194,044
Operating income	19,290	25,637	39,337	44,212
Interest expense, net	4,853	5,084	9,670	10,029
Income before provision for income taxes	14,437	20,553	29,667	34,183
Provision for income taxes	3,952	8,557	7,924	14,160
Net income and total comprehensive income	$ 10,485	$ 11,996	$ 21,743	$ 20,023
Net income per common share attributable to common shareholders:
Basic	$ 0.24	$ 0.29	$ 0.51	$ 0.48
Diluted	$ 0.23	$ 0.28	$ 0.49	$ 0.46
Weighted average number of common shares outstanding:
Basic	42,855,366	41,549,825	42,535,849	42,033,984
Diluted	44,716,193	43,554,275	44,061,804	43,559,781

XML

Consolidated Statement of Shareholders' Equity - 6 months ended Aug. 04, 2018 - USD ($) $ in Thousands		Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Earnings [Member]
Beginning balance at Feb. 03, 2018		$ 179,316	$ 437	$ 117,393	$ 61,486
Beginning balance, shares at Feb. 03, 2018		43,752,790	43,752,790
Adoption of ASU 2014-09	[1]	$ (288)			(288)
Vesting of restricted stock units		1	$ 1
Vesting of restricted stock units, shares			9,602
Forfeiture of restricted stock awards		(1)	$ (1)
Forfeiture of restricted stock awards, shares			(18,359)
Equity-based compensation		1,843		1,843
Net income		21,743			21,743
Ending Balance at Aug. 04, 2018		$ 202,614	$ 437	$ 119,236	$ 82,941
Ending balance, shares at Aug. 04, 2018		43,744,033	43,744,033

[1] See Note 2 for additional detail regarding the adoption of new accounting standards.

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Aug. 04, 2018	Jul. 29, 2017
Statement Of Cash Flows [Abstract]
Net income	$ 21,743	$ 20,023
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	18,245	17,131
Loss on disposal of fixed assets	28	340
Noncash amortization of deferred financing and debt discount costs	794	1,615
Equity-based compensation	1,843	261
Deferred rent liability	(64)	664
Deferred income taxes	(3,054)	(1,121)
Changes in operating assets and liabilities:
Accounts receivable	(374)	(1,219)
Inventories	19,000	3,851
Prepaid expenses and other current assets	(2,371)	5,993
Accounts payable	(11,943)	(221)
Accrued expenses	(2,322)	(5,909)
Other noncurrent assets and liabilities	1,590	3,872
Net cash provided by operating activities	43,115	45,280
Investing activities:
Purchases of property and equipment	(5,659)	(10,915)
Net cash used in investing activities	(5,659)	(10,915)
Financing activities:
Repayments on long-term debt	(1,399)	(21,399)
Receivable from related party		2,227
Net cash used in financing activities	(1,399)	(19,172)
Net change in cash	36,057	15,193
Cash:
Beginning of Period	25,978	13,468
End of Period	$ 62,035	$ 28,661

XML

Description of Business

6 Months Ended

Aug. 04, 2018

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Description of Business

1. Description of Business

J.Jill, Inc.,“J.Jill” or the “Company”, is a premier omnichannel retailer and nationally recognized women’s apparel brand committed to delighting customers with great wear-now product. The brand represents an easy, relaxed, inspired style that reflects the confidence and comfort of a woman with a rich, full life. J.Jill provides guiding service through more than 270 stores nationwide and a robust e-commerce platform. J.Jill is headquartered outside Boston.

XML

Summary of Significant Accounting Policies

6 Months Ended

Aug. 04, 2018

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

Our interim consolidated financial statements are unaudited. All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted, in accordance with the rules of the Securities and Exchange Commission (the “SEC”). In the opinion of management, these interim consolidated financial statements contain all normal and recurring adjustments necessary to state fairly the financial position and results of operations of the Company. The consolidated balance sheet as of February 3, 2018 is derived from the audited consolidated balance sheet as of that date. The unaudited results of operations for the thirteen and twenty-six weeks ended August 4, 2018 are not necessarily indicative of future results or results to be expected for the full year ending February 2, 2019. You should read these statements in conjunction with our audited consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended February 3, 2018.

Significant changes to our accounting policies as a result of adopting Accounting Standards Update (“ASU”) 2014-09 – Revenue from Contracts with Customers (Topic 606) are discussed below in “Significant Accounting Policies Update” and Note 3.

Recently Adopted Accounting Policies

In May 2014, the FASB issued ASU 2014-09 – Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in FASB ASC Topic 605 – Revenue Recognition. The new guidance established principles for reporting revenue and cash flows arising from an entity’s contracts with customers. The Company adopted ASU 2014-09 and related amendments, collectively known as Accounting Standards Codification 606 (“Topic 606”) as of February 4, 2018 on a modified retrospective basis. See “Significant Accounting Policies Update” and Note 3 for a discussion of our updated policies related to revenue recognition and disclosures related to the impact of this standard.

In October 2016 the FASB issued ASU 2016-16 – Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This update is intended to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Under the new guidance, an entity would recognize the current and deferred income tax consequences of an intra-entity asset transfer when the transfer occurs. Intra-entity inventory transfers would still be an exception. The provisions of ASU 2016-16 were adopted as of February 4, 2018 under the modified retrospective method with no cumulative-effect adjustment to retained earnings.

In August 2016, the FASB issued ASU 2016-15 – Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments,which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard was retrospectively adopted as of February 4, 2018 and did not have an impact on the consolidated statement of cash flows.

Recently Issued Accounting Pronouncements

In July 2018, the FASB issued ASU 2018-09 – Codification Improvements, which facilitates amendments to a variety of topics to clarify, correct errors in, or make minor improvements to the accounting standards codification. The effective date of the standard is dependent on the facts and circumstances of each amendment. Some amendments do not require transition guidance and will be effective upon the issuance of this standard. A majority of the amendments in ASU 2018-09 will be effective in annual periods beginning after December 15, 2018. We will be required to adopt this standard in the first quarter of fiscal 2019.This standard is not expected to have a material impact on our consolidated financial statements and related disclosures.

In June 2018, The FASB issued ASU 2018-07 – Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The provisions of ASU 2018-07 are effective for fiscal years beginning after December 15, 2018. The Company plans to adopt these standards beginning in the first quarter of fiscal 2019 using a modified retrospective approach. The Company is evaluating the impact that adopting ASU 2018-07 will have on its consolidated financial statements, but does not expect that impact to be material.

In February 2016, the FASB issued ASU 2016-02 – Leases. The amendments in this update include a new FASB ASC Topic 842, which supersedes Topic 840. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted for all entities as of the beginning of interim or annual reporting periods. In July 2018, the FASB issued ASU 2018-10 – Codification Improvements to Topic 842, Leases. The amendments are intended to address narrow aspects of the guidance issued in the amendments in ASU 2016-02. In July 2018, the FASB issued ASU 2018-11 – Leases (Topic 842): Targeted Improvements, which provides an additional (and optional) transition method by allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. These provisions are effective for reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact that adopting ASU 2016-02 and related amendments will have on its consolidated financial statements and expects to raise significant “Right of Use” assets and significant, offsetting lease liabilities. These amounts have not yet been quantified. The Company plans to adopt these standards beginning in the first quarter of fiscal 2019 using the modified retrospective approach with a cumulative adjustment to retained earnings.

Significant Accounting Policies Update

Adoption of ASC Topic 606: Revenue from Contracts with Customers

On February 4, 2018, the Company adopted Topic 606 using the modified retrospective method applied to contracts which were not completed as of February 4, 2018. As part of the adoption of Topic 606, Topic 340-20 – Capitalized Advertising Costs was superseded and therefore, the Company transitioned to ASC 720-35 – Advertising Costs for reporting on costs of advertising. Results for reporting periods beginning after February 4, 2018 are presented under Topic 606 and Topic 720, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605 and Topic 340.

The Company recorded a cumulative reduction to opening retained earnings of $0.3 million. The impact on opening retained earnings was a $0.8 million decrease from the acceleration of prepaid catalog expenses offset by a $0.5 million increase from the recognition of direct revenues previously deferred under Topic 605.

Effective February 4, 2018, the Company changed its consolidated balance sheet presentation for expected sales returns and recorded a $5.0 million return asset and a corresponding increase to the return liability to present our sales reserve gross in accordance with Topic 606. In addition, as of the date of adoption of Topic 606, the Company will present reimbursements of costs of marketing programs related to the private label credit card gross in the consolidated statement of operations with no impact to opening retained earnings.

Revenue Recognition

Revenue is primarily derived from the sale of apparel and accessory merchandise through our retail channel and direct channel, which includes website and catalog phone orders. Revenue also includes shipping and handling fees collected from customers. Topic 606 requires entities to recognize revenue when control of the promised goods or services are transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.  Revenue from our retail channel is recognized at the time of sale and revenue from our direct channel is recognized upon shipment of merchandise to the customer.

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. The estimated sales reserve is recorded as a return asset (and corresponding adjustment to cost of goods sold) for the cost of inventory and a return liability for the amount to settle the return with a customer (and a corresponding adjustment to revenue). The return asset and return liability are recorded in prepaid expenses and other assets, and accrued expenses and other current liabilities, respectively, in the consolidated balance sheet. The Company collects and remits sales and use taxes in all states in which retail and direct sales occur and taxes are applicable. 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. Proceeds from the sale of gift cards are recorded as a contract liability until the customer redeems the gift card or when the likelihood of redemption is remote. Based on historical experience, the Company estimates the value of outstanding gift cards that will ultimately not be redeemed (“gift card breakage”) and will not be escheated under statutory unclaimed property laws. This gift card breakage is recognized as revenue over the time period established by the Company’s historical gift card redemption pattern.

The Company recognizes revenues from shipments to customers before the shipping and handling activities occur and will accrue those related costs. Shipping and handling costs are recorded in selling, general and administrative expenses. There is no change to the Company’s comparative reporting of shipping and handling costs as a result of adopting of Topic 606.

Credit Card Agreement

The Company has an arrangement with a third party to provide a private label credit card to its customers through August 2023, and will automatically renew thereafter for successive two year terms. The Company does not bear the credit risk associated with the private label credit card at any point prior to the termination of the agreement, at which point the Company is obligated to purchase the receivables. If the arrangement is terminated prior to September 7, 2021 and other criteria are met, the Company is obligated to pay a purchase price premium. The potential impact of the purchase obligation cannot be reasonably estimated, and therefore, has not been recorded.

The Company receives royalty payments through its private label credit card agreement. The royalty payments are recognized as revenue when they are received. Royalty payments recognized in the thirteen and twenty-six weeks ended August 4, 2018 were $1.4 million and $2.8 million, respectively, and in the thirteen and twenty-six weeks ended July 29, 2017 were $1.1 million and $2.3 million, respectively.

The Company also receives reimbursements for costs of marketing programs related to the private label credit card, which are recorded as revenue as earned and the costs incurred are recorded as operating expenses in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income (loss). Reimbursements for costs of marketing programs of $0.4 million and $1.5 million were recognized in the thirteen and twenty-six weeks ended August 4, 2018, respectively.

The credit card agreement provides a signing bonus to the Company, which is recognized into revenue over the life of the agreement.

Advertising Costs

The Company incurs costs to produce, print, and distribute its catalogs. Catalog costs are considered direct response advertising, which are capitalized as incurred, and expensed when the catalog is mailed to the customer (the first time the advertising occurs). Advertising expenses were $8.6 million and $18.7 million in the thirteen and twenty-six weeks ended August 4, 2018, respectively, and $8.8 million and $18.0 million in the thirteen and twenty-six weeks ended July 29, 2017, respectively. The costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income (loss).

Other advertising costs are recorded as incurred. Other advertising costs recorded were $5.4 million and $11.2 million in the thirteen and twenty-six weeks ended August 4, 2018, respectively, and $5.6 million and $10.5 million in the thirteen and twenty-six weeks ended July 29, 2017, respectively. The costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income (loss).

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Revenues

6 Months Ended

Aug. 04, 2018

Revenue From Contract With Customer [Abstract]

Revenues

3. Revenues

Disaggregation of Revenue

The Company sells its products directly to consumers and the Company earns royalties under its credit card agreement. The following table presents revenues disaggregated by revenue source (in thousands):

	For the Thirteen Weeks Ended				For the Twenty-Six Weeks Ended
	August 4, 2018		July 29, 2017(1)		August 4, 2018		July 29, 2017(1)
Retail	$	106,210	$	103,189	$	214,241	$	198,536
Direct	$	73,503	$	78,183		147,013		148,962
Net revenues	$	179,713	$	181,372	$	361,254	$	347,498

⁽¹⁾ As previously noted, prior period amounts have not been adjusted under the modified retrospective method.

Contract Liabilities

The Company recognizes a contract liability when it has received consideration from the customer and has a future obligation to the customer. Total contract liabilities consisted of the following (in thousands):

	August 4, 2018		February 3, 2018
Contract liabilities:
Signing bonus	$	718	$	788
Unredeemed gift cards		4,917		6,466
Total contract liabilities(1)	$	5,635	$	7,254

⁽¹⁾ Included in accrued expenses and other current liabilities on the Company's consolidated balance sheet. The short term portion of the signing bonus is included in accrued expenses on the Company’s consolidated balance sheet.

For the thirteen and twenty-six weeks ended August 4, 2018, the Company recognized approximately $2.8 million and $6.1 million of revenue related to gift card redemptions and breakage. For the thirteen and twenty-six weeks ended July 29, 2017, the Company recognized approximately $2.8 million and $6.0 million of revenue related to gift card redemptions and breakage. Revenue recognized consists of gift cards that were part of the unredeemed gift card balance at the beginning of the period as well as gift cards that were issued during the period.

Performance Obligations

The Company has a remaining performance obligation of $0.7 million for a signing bonus related to the private label credit card agreement. The Company will recognize revenue over the remaining life of the contract as follows (in thousands):

	Fiscal Year 2018		Fiscal Year 2019		Thereafter
Signing bonus	$	71	$	141	$	506

This disclosure does not include revenue related to performance obligations from unredeemed gift cards, as substantially all gift cards are redeemed in the first year of issuance.

Practical Expedients and Policy Elections

The Company excludes from its transaction price all amounts collected from customers for sales taxes that are remitted to taxing authorities.

Shipping and handling activities that occur after control of related goods transfers to the customer are accounted for as fulfillment activities rather than assessing these activities as performance obligations.

The Company does not disclose remaining performance obligations that have an expected duration of one year or less.

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Debt

6 Months Ended

Aug. 04, 2018

Debt Disclosure [Abstract]

Debt

4. Debt

The components of the Company’s outstanding Term Loan were as follows (in thousands):

	August 4, 2018			February 3, 2018
Term Loan	$	246,777		$	248,176
Discount on debt and debt issuance costs		(5,813	)		(6,496	)
Less: Current portion		(2,799	)		(2,799	)
Net long-term debt	$	238,165		$	238,881

The Company was in compliance with all financial covenants as of August 4, 2018.

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Income Taxes

6 Months Ended

Aug. 04, 2018

Income Tax Disclosure [Abstract]

Income Taxes

5. Income Taxes

The Company recorded income tax expense of $4.0 million and $7.9 million during the thirteen and twenty-six weeks ended August 4, 2018, respectively, and $8.6 million and $14.2 million during the thirteen and twenty-six weeks ended July 29, 2017, respectively. The effective tax rates were 27.4% and 26.7% in the thirteen and twenty-six weeks ended August 4, 2018, respectively, and 41.6% and 41.4% in the thirteen and twenty-six weeks ended July 29, 2017, respectively.

The effective tax rate for the thirteen and twenty-six weeks ended August 4, 2018 exceeds the federal statutory rate of 21.0% primarily due to stock compensation, state income taxes and §162(m) officer compensation limitation. The effective tax rate for the thirteen and twenty-six weeks ended July 29, 2017 exceeds the federal statutory rate of 35.0% primarily due to state income taxes and non-deductible IPO related expenses.

On December 22, 2017, the U.S. Tax Cuts and Jobs Act (TCJA) legislation was signed.  The new U.S. tax legislation is subject to a number of provisions, including a reduction of the U.S. federal corporate income tax rate from 35.0% to 21.0% (effective January 1, 2018) and a change in certain business deductions, including allowing for immediate expensing of certain qualified capital expenditures.

Staff Accounting Bulletin No. 118 (“SAB 118”), issued by the Securities and Exchange Commission in December 2017, provides the Company with up to one year to finalize accounting for the impacts of TCJA. When the initial accounting for TCJA impacts is incomplete, the Company may include provisional amounts when reasonable estimates may be determined. As of February 3, 2018, the Company made a reasonable estimate of its deferred income tax benefit related to the corporate rate change of $24.0 million and estimates to expense qualifying capital expenditures.

In the thirteen and twenty-six weeks ended August 4, 2018, the Company has not recognized any measurement period adjustments. The Company has not completed its process to determine the final impact of TCJA. The final impact may differ from this estimate, possibly materially, due to, among other things, changes in interpretations and assumptions that the Company has made and the issuance of additional regulatory and other guidance. Further, any required adjustment would be reflected as a discrete expense or benefit in the quarter that it is identified, as allowed by SAB 118. Although no material changes are anticipated, the Company expects to complete the analysis within the measurement period in accordance with SAB 118.

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Earnings Per Share

6 Months Ended

Aug. 04, 2018

Earnings Per Share [Abstract]

Earnings Per Share

6. Earnings Per Share

The following table summarizes the computation of basic and diluted net income per share attributable to common shareholders (in thousands, except share and per share data):

	For the Thirteen Weeks Ended				For the Twenty-Six Weeks Ended
	August 4, 2018		July 29, 2017		August 4, 2018		July 29, 2017
Numerator
Net income attributable to common shareholders:	$	10,485	$	11,996	$	21,743	$	20,023
Denominator
Weighted average number of common shares outstanding, basic:		42,855,366		41,549,825		42,535,849		42,033,984
Dilutive effect of restricted shares:		1,860,827		2,004,450		1,525,955		1,525,797
Weighted average number of common shares outstanding, diluted:		44,716,193		43,554,275		44,061,804		43,559,781
Net income per common share attributable to common shareholders, basic:	$	0.24	$	0.29	$	0.51	$	0.48
Net income per common share attributable to common shareholders, diluted:	$	0.23	$	0.28	$	0.49	$	0.46

The weighted average common shares for the diluted earnings per share calculation exclude the impact of outstanding equity awards if the assumed proceeds per share of the award is in excess of the related fiscal period’s average price of the Company’s common stock. Such awards are excluded because they would have an antidilutive effect. There were 336,105 and 729,463 for the thirteen and twenty-six weeks ended August 4, 2018, respectively, and 283,230 and 280,038 for the thirteen and twenty-six weeks ended July 29, 2017, respectively, such awards excluded.

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Equity-Based Compensation

6 Months Ended

Aug. 04, 2018

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Equity-Based Compensation

7. Equity-Based Compensation

Compensation expense was $1.0 million and $1.8 million for the thirteen and twenty-six weeks ended August 4, 2018, respectively, and $0.2 million and $0.3 million for the thirteen and twenty-six weeks ended July 29, 2017, respectively.

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Related Party Transactions

6 Months Ended

Aug. 04, 2018

Related Party Transactions [Abstract]

Related Party Transactions

8. Related Party Transactions

For the thirteen and twenty-six weeks ended August 4, 2018, the Company incurred an immaterial amount of related party transactions. For the thirteen and twenty-six weeks ended July 29, 2017 the Company incurred an immaterial amount of out-of-pocket expenses in relation to the advisory services agreement with a related party. These expenses are included in operating expenses in the accompanying consolidated statements of operations and comprehensive income.

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Commitments and Contingencies

6 Months Ended

Aug. 04, 2018

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

9. Commitments and Contingencies

Operating Lease Agreements

The Company recorded a deferred lease liability of $10.6 million and $9.5 million as of August 4, 2018 and February 3, 2018, respectively. In certain instances, the Company also receives tenant improvement incentives for its store leases, which it accrues and amortizes ratably over the life of the lease. The Company maintained a tenant improvement incentive liability of $18.0 million and $17.3 million as of August 4, 2018 and February 3, 2018, respectively.  

Total rental and common area maintenance expense was $15.1 million and $30.6 million for the thirteen and twenty-six weeks ended August 4, 2018, respectively, exclusive of contingent rental expense recorded of $0.4 million and $0.6 million for the same respective periods. Total rental and common area maintenance expense was $14.9 million and $29.3 million for the thirteen and twenty-six weeks ended July 29, 2017, respectively, exclusive of contingent rental expense recorded of $0.4 million and $0.8 million for the same respective periods.

Legal Proceedings

Shareholder Class Action Lawsuits

On October 13, 2017, a securities lawsuit was filed in the United States District Court for the District of Massachusetts against the Company, several members of our Board of Directors and our Chief Financial Officer, among others. The complaint was brought under the Securities Act of 1933 and sought certification of a class of plaintiffs comprised of all shareholders that acquired stock issued by the Company in its initial public offering in March 2017. The plaintiffs sought compensation for losses they incurred since purchasing the stock.  Following the filing of this lawsuit, two additional, similar actions were brought in the same court. The three matters were eventually consolidated, and a lead plaintiff was appointed by the court. On March 9, 2018, an amended complaint captioned The Pension Trust v. J.Jill, Inc., et al. was filed. The Company filed a motion to dismiss on May 14, 2018, which was opposed by the plaintiffs on July 17, 2018. The Company believes the claims in the case are without merit and intends to defend the matter vigorously. No material amount has been accrued.

We are not presently party to any other legal proceedings the resolution of which we believe would have a material adverse effect on our business, financial condition, operating results or cash flows. We establish reserves for specific legal matters when we determine that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Aug. 04, 2018

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

Our interim consolidated financial statements are unaudited. All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted, in accordance with the rules of the Securities and Exchange Commission (the “SEC”). In the opinion of management, these interim consolidated financial statements contain all normal and recurring adjustments necessary to state fairly the financial position and results of operations of the Company. The consolidated balance sheet as of February 3, 2018 is derived from the audited consolidated balance sheet as of that date. The unaudited results of operations for the thirteen and twenty-six weeks ended August 4, 2018 are not necessarily indicative of future results or results to be expected for the full year ending February 2, 2019. You should read these statements in conjunction with our audited consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended February 3, 2018.

Significant changes to our accounting policies as a result of adopting Accounting Standards Update (“ASU”) 2014-09 – Revenue from Contracts with Customers (Topic 606) are discussed below in “Significant Accounting Policies Update” and Note 3.

Recently Adopted Accounting Policies, Recently Issued Accounting Pronouncements and Significant Accounting Policies Update

Recently Adopted Accounting Policies

In May 2014, the FASB issued ASU 2014-09 – Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in FASB ASC Topic 605 – Revenue Recognition. The new guidance established principles for reporting revenue and cash flows arising from an entity’s contracts with customers. The Company adopted ASU 2014-09 and related amendments, collectively known as Accounting Standards Codification 606 (“Topic 606”) as of February 4, 2018 on a modified retrospective basis. See “Significant Accounting Policies Update” and Note 3 for a discussion of our updated policies related to revenue recognition and disclosures related to the impact of this standard.

In October 2016 the FASB issued ASU 2016-16 – Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This update is intended to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Under the new guidance, an entity would recognize the current and deferred income tax consequences of an intra-entity asset transfer when the transfer occurs. Intra-entity inventory transfers would still be an exception. The provisions of ASU 2016-16 were adopted as of February 4, 2018 under the modified retrospective method with no cumulative-effect adjustment to retained earnings.

In August 2016, the FASB issued ASU 2016-15 – Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments,which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The standard was retrospectively adopted as of February 4, 2018 and did not have an impact on the consolidated statement of cash flows.

Recently Issued Accounting Pronouncements

In July 2018, the FASB issued ASU 2018-09 – Codification Improvements, which facilitates amendments to a variety of topics to clarify, correct errors in, or make minor improvements to the accounting standards codification. The effective date of the standard is dependent on the facts and circumstances of each amendment. Some amendments do not require transition guidance and will be effective upon the issuance of this standard. A majority of the amendments in ASU 2018-09 will be effective in annual periods beginning after December 15, 2018. We will be required to adopt this standard in the first quarter of fiscal 2019.This standard is not expected to have a material impact on our consolidated financial statements and related disclosures.

In June 2018, The FASB issued ASU 2018-07 – Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The provisions of ASU 2018-07 are effective for fiscal years beginning after December 15, 2018. The Company plans to adopt these standards beginning in the first quarter of fiscal 2019 using a modified retrospective approach. The Company is evaluating the impact that adopting ASU 2018-07 will have on its consolidated financial statements, but does not expect that impact to be material.

In February 2016, the FASB issued ASU 2016-02 – Leases. The amendments in this update include a new FASB ASC Topic 842, which supersedes Topic 840. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted for all entities as of the beginning of interim or annual reporting periods. In July 2018, the FASB issued ASU 2018-10 – Codification Improvements to Topic 842, Leases. The amendments are intended to address narrow aspects of the guidance issued in the amendments in ASU 2016-02. In July 2018, the FASB issued ASU 2018-11 – Leases (Topic 842): Targeted Improvements, which provides an additional (and optional) transition method by allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. These provisions are effective for reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact that adopting ASU 2016-02 and related amendments will have on its consolidated financial statements and expects to raise significant “Right of Use” assets and significant, offsetting lease liabilities. These amounts have not yet been quantified. The Company plans to adopt these standards beginning in the first quarter of fiscal 2019 using the modified retrospective approach with a cumulative adjustment to retained earnings.

Significant Accounting Policies Update

Adoption of ASC Topic 606: Revenue from Contracts with Customers

On February 4, 2018, the Company adopted Topic 606 using the modified retrospective method applied to contracts which were not completed as of February 4, 2018. As part of the adoption of Topic 606, Topic 340-20 – Capitalized Advertising Costs was superseded and therefore, the Company transitioned to ASC 720-35 – Advertising Costs for reporting on costs of advertising. Results for reporting periods beginning after February 4, 2018 are presented under Topic 606 and Topic 720, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605 and Topic 340.

The Company recorded a cumulative reduction to opening retained earnings of $0.3 million. The impact on opening retained earnings was a $0.8 million decrease from the acceleration of prepaid catalog expenses offset by a $0.5 million increase from the recognition of direct revenues previously deferred under Topic 605.

Effective February 4, 2018, the Company changed its consolidated balance sheet presentation for expected sales returns and recorded a $5.0 million return asset and a corresponding increase to the return liability to present our sales reserve gross in accordance with Topic 606. In addition, as of the date of adoption of Topic 606, the Company will present reimbursements of costs of marketing programs related to the private label credit card gross in the consolidated statement of operations with no impact to opening retained earnings.

Revenue Recognition

Revenue Recognition

Revenue is primarily derived from the sale of apparel and accessory merchandise through our retail channel and direct channel, which includes website and catalog phone orders. Revenue also includes shipping and handling fees collected from customers. Topic 606 requires entities to recognize revenue when control of the promised goods or services are transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.  Revenue from our retail channel is recognized at the time of sale and revenue from our direct channel is recognized upon shipment of merchandise to the customer.

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. The estimated sales reserve is recorded as a return asset (and corresponding adjustment to cost of goods sold) for the cost of inventory and a return liability for the amount to settle the return with a customer (and a corresponding adjustment to revenue). The return asset and return liability are recorded in prepaid expenses and other assets, and accrued expenses and other current liabilities, respectively, in the consolidated balance sheet. The Company collects and remits sales and use taxes in all states in which retail and direct sales occur and taxes are applicable. 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. Proceeds from the sale of gift cards are recorded as a contract liability until the customer redeems the gift card or when the likelihood of redemption is remote. Based on historical experience, the Company estimates the value of outstanding gift cards that will ultimately not be redeemed (“gift card breakage”) and will not be escheated under statutory unclaimed property laws. This gift card breakage is recognized as revenue over the time period established by the Company’s historical gift card redemption pattern.

The Company recognizes revenues from shipments to customers before the shipping and handling activities occur and will accrue those related costs. Shipping and handling costs are recorded in selling, general and administrative expenses. There is no change to the Company’s comparative reporting of shipping and handling costs as a result of adopting of Topic 606.

Credit Card Agreement

Credit Card Agreement

The Company has an arrangement with a third party to provide a private label credit card to its customers through August 2023, and will automatically renew thereafter for successive two year terms. The Company does not bear the credit risk associated with the private label credit card at any point prior to the termination of the agreement, at which point the Company is obligated to purchase the receivables. If the arrangement is terminated prior to September 7, 2021 and other criteria are met, the Company is obligated to pay a purchase price premium. The potential impact of the purchase obligation cannot be reasonably estimated, and therefore, has not been recorded.

The Company receives royalty payments through its private label credit card agreement. The royalty payments are recognized as revenue when they are received. Royalty payments recognized in the thirteen and twenty-six weeks ended August 4, 2018 were $1.4 million and $2.8 million, respectively, and in the thirteen and twenty-six weeks ended July 29, 2017 were $1.1 million and $2.3 million, respectively.

The Company also receives reimbursements for costs of marketing programs related to the private label credit card, which are recorded as revenue as earned and the costs incurred are recorded as operating expenses in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income (loss). Reimbursements for costs of marketing programs of $0.4 million and $1.5 million were recognized in the thirteen and twenty-six weeks ended August 4, 2018, respectively.

The credit card agreement provides a signing bonus to the Company, which is recognized into revenue over the life of the agreement.

Advertising Costs

Advertising Costs

The Company incurs costs to produce, print, and distribute its catalogs. Catalog costs are considered direct response advertising, which are capitalized as incurred, and expensed when the catalog is mailed to the customer (the first time the advertising occurs). Advertising expenses were $8.6 million and $18.7 million in the thirteen and twenty-six weeks ended August 4, 2018, respectively, and $8.8 million and $18.0 million in the thirteen and twenty-six weeks ended July 29, 2017, respectively. The costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income (loss).

Other advertising costs are recorded as incurred. Other advertising costs recorded were $5.4 million and $11.2 million in the thirteen and twenty-six weeks ended August 4, 2018, respectively, and $5.6 million and $10.5 million in the thirteen and twenty-six weeks ended July 29, 2017, respectively. The costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income (loss).

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Revenues (Tables)

6 Months Ended

Aug. 04, 2018

Revenue From Contract With Customer [Abstract]

Schedule of Revenues Disaggregated by Revenue Source

The following table presents revenues disaggregated by revenue source (in thousands):

	For the Thirteen Weeks Ended				For the Twenty-Six Weeks Ended
	August 4, 2018		July 29, 2017(1)		August 4, 2018		July 29, 2017(1)
Retail	$	106,210	$	103,189	$	214,241	$	198,536
Direct	$	73,503	$	78,183		147,013		148,962
Net revenues	$	179,713	$	181,372	$	361,254	$	347,498

⁽¹⁾ As previously noted, prior period amounts have not been adjusted under the modified retrospective method.

Schedule of Contract Liabilities

Total contract liabilities consisted of the following (in thousands):

	August 4, 2018		February 3, 2018
Contract liabilities:
Signing bonus	$	718	$	788
Unredeemed gift cards		4,917		6,466
Total contract liabilities(1)	$	5,635	$	7,254

⁽¹⁾ Included in accrued expenses and other current liabilities on the Company's consolidated balance sheet. The short term portion of the signing bonus is included in accrued expenses on the Company’s consolidated balance sheet.

Schedule of Revenue Recognized Over Remaining Life of Contract

The Company will recognize revenue over the remaining life of the contract as follows (in thousands):

	Fiscal Year 2018		Fiscal Year 2019		Thereafter
Signing bonus	$	71	$	141	$	506

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Debt (Tables)

6 Months Ended

Aug. 04, 2018

Debt Disclosure [Abstract]

Components of Outstanding Term Loan

The components of the Company’s outstanding Term Loan were as follows (in thousands):

	August 4, 2018			February 3, 2018
Term Loan	$	246,777		$	248,176
Discount on debt and debt issuance costs		(5,813	)		(6,496	)
Less: Current portion		(2,799	)		(2,799	)
Net long-term debt	$	238,165		$	238,881

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Earnings Per Share (Tables)

6 Months Ended

Aug. 04, 2018

Earnings Per Share [Abstract]

Computation of Basic and Diluted Net Income Per Share Attributable to Common Shareholders

The following table summarizes the computation of basic and diluted net income per share attributable to common shareholders (in thousands, except share and per share data):

	For the Thirteen Weeks Ended				For the Twenty-Six Weeks Ended
	August 4, 2018		July 29, 2017		August 4, 2018		July 29, 2017
Numerator
Net income attributable to common shareholders:	$	10,485	$	11,996	$	21,743	$	20,023
Denominator
Weighted average number of common shares outstanding, basic:		42,855,366		41,549,825		42,535,849		42,033,984
Dilutive effect of restricted shares:		1,860,827		2,004,450		1,525,955		1,525,797
Weighted average number of common shares outstanding, diluted:		44,716,193		43,554,275		44,061,804		43,559,781
Net income per common share attributable to common shareholders, basic:	$	0.24	$	0.29	$	0.51	$	0.48
Net income per common share attributable to common shareholders, diluted:	$	0.23	$	0.28	$	0.49	$	0.46

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Description of Business - Additional Information (Detail)	Aug. 04, 2018 Store
Minimum [Member]
Organization Consolidation And Presentation Of Financial Statements [Line Items]
Number of Stores	270

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Summary of Significant Accounting Policies - Additional Information (Detail) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
	Feb. 04, 2018	Aug. 04, 2018	Jul. 29, 2017	Aug. 04, 2018	Jul. 29, 2017
Schedule Of Significant Accounting Policies [Line Items]
Expected sales returns	$ 5,000
Credit card arrangement extension, description				The Company has an arrangement with a third party to provide a private label credit card to its customers through August 2023, and will automatically renew thereafter for successive two year terms.
Royalty payments recognized as revenue		$ 179,713	$ 181,372	$ 361,254	$ 347,498
Operating Expenses [Member]
Schedule Of Significant Accounting Policies [Line Items]
Reimbursements for credit card marketing program		400		1,500
Selling, General and Administrative Expenses [Member]
Schedule Of Significant Accounting Policies [Line Items]
Advertising expenses		8,600	8,800	18,700	18,000
Other advertising expense		5,400	5,600	11,200	10,500
Royalty [Member]
Schedule Of Significant Accounting Policies [Line Items]
Royalty payments recognized as revenue		1,400	$ 1,100	2,800	$ 2,300
ASU 2014-09 [Member] | Retained Earnings [Member]
Schedule Of Significant Accounting Policies [Line Items]
Cumulative effect reduction to accumulated retained earnings		800		800
ASU 2014-09 [Member] | Retained Earnings [Member] | Difference between Revenue Guidance in Effect before and after Topic 606 [Member]
Schedule Of Significant Accounting Policies [Line Items]
Cumulative effect reduction to accumulated retained earnings		300		300
ASU 2014-09 [Member] | Retained Earnings [Member] | Calculated under Revenue Guidance in Effect before Topic 606 [Member]
Schedule Of Significant Accounting Policies [Line Items]
Cumulative effect reduction to accumulated retained earnings		$ 500		$ 500

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Revenues - Schedule of Revenues Disaggregated by Revenue Source (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Aug. 04, 2018	Jul. 29, 2017	Aug. 04, 2018	Jul. 29, 2017
Disaggregation Of Revenue [Line Items]
Net revenues	$ 179,713	$ 181,372	$ 361,254	$ 347,498
Retail [Member]
Disaggregation Of Revenue [Line Items]
Net revenues	106,210	103,189	214,241	198,536
Direct [Member]
Disaggregation Of Revenue [Line Items]
Net revenues	$ 73,503	$ 78,183	$ 147,013	$ 148,962

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Revenues - Schedule of Contract Liabilities (Detail) - USD ($) $ in Thousands	Aug. 04, 2018	Feb. 03, 2018
Contract liabilities:
Signing bonus	$ 718	$ 788
Unredeemed gift cards	4,917	6,466
Total contract liabilities	$ 5,635	$ 7,254

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Revenues - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Aug. 04, 2018	Jul. 29, 2017	Aug. 04, 2018	Jul. 29, 2017
Disaggregation Of Revenue [Line Items]
Revenue recognized related to gift card redemptions and breakage	$ 2.8	$ 2.8	$ 6.1	$ 6.0
Signing bonus	$ 0.7		$ 0.7

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Revenues - Schedule of Revenue Recognized Over Remaining Life of Contract (Detail) $ in Thousands	Aug. 04, 2018 USD ($)
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Signing bonus	$ 700
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2018-08-05
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Signing bonus	$ 71
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	6 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2019-02-03
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Signing bonus	$ 141
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2020-02-02
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Signing bonus	$ 506
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period

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Debt - Components of Outstanding Term Loan (Detail) - USD ($) $ in Thousands	Aug. 04, 2018	Feb. 03, 2018
Long Term Debt [Abstract]
Term Loan	$ 246,777	$ 248,176
Discount on debt and debt issuance costs	(5,813)	(6,496)
Less: Current portion	(2,799)	(2,799)
Net long-term debt	$ 238,165	$ 238,881

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Income Taxes - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended		11 Months Ended	12 Months Ended
	Aug. 04, 2018	Jul. 29, 2017	Aug. 04, 2018	Jul. 29, 2017	Dec. 31, 2017	Feb. 03, 2018
Income Tax Disclosure [Abstract]
Income tax expense	$ 3,952,000	$ 8,557,000	$ 7,924,000	$ 14,160,000
Effective income tax rate	27.40%	41.60%	26.70%	41.40%
U.S. Federal corporate income tax rate	21.00%	35.00%	21.00%	35.00%	35.00%
Deferred income tax benefit related to TCJA						$ 24,000,000
Measurement period adjustments related to TCJA	$ 0		$ 0

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Earnings Per Share - Computation of Basic and Diluted Net Income Per Share Attributable to Common Shareholders (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Aug. 04, 2018	Jul. 29, 2017	Aug. 04, 2018	Jul. 29, 2017
Numerator
Net income attributable to common shareholders:	$ 10,485	$ 11,996	$ 21,743	$ 20,023
Denominator
Weighted average number of common shares outstanding, basic:	42,855,366	41,549,825	42,535,849	42,033,984
Dilutive effect of restricted shares:	1,860,827	2,004,450	1,525,955	1,525,797
Weighted average number of common shares outstanding, diluted:	44,716,193	43,554,275	44,061,804	43,559,781
Net income per common share attributable to common shareholders, basic:	$ 0.24	$ 0.29	$ 0.51	$ 0.48
Net income per common share attributable to common shareholders, diluted:	$ 0.23	$ 0.28	$ 0.49	$ 0.46

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Earnings Per Share - Additional Information (Detail) - shares	3 Months Ended		6 Months Ended
	Aug. 04, 2018	Jul. 29, 2017	Aug. 04, 2018	Jul. 29, 2017
Earnings Per Share [Abstract]
Antidilutive equity awards excluded from the computation of diluted earnings per share	336,105	283,230	729,463	280,038

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Equity-Based Compensation - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Aug. 04, 2018	Jul. 29, 2017	Aug. 04, 2018	Jul. 29, 2017
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Equity based compensation expense	$ 1.0	$ 0.2	$ 1.8	$ 0.3

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Commitments and Contingencies - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Aug. 04, 2018	Jul. 29, 2017	Aug. 04, 2018	Jul. 29, 2017	Feb. 03, 2018
Commitments And Contingencies Disclosure [Abstract]
Deferred lease liability	$ 10.6		$ 10.6		$ 9.5
Tenant improvement incentive liability	18.0		18.0		$ 17.3
Rent and common area maintenance expense	15.1	$ 14.9	30.6	$ 29.3
Contingent rental expense	$ 0.4	$ 0.4	$ 0.6	$ 0.8