Today, I look at a female clothing firm, J. Jill. I decided to cover this firm because I really do not know about women fashion and wanted to see what I can learn.

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Pros

1 Strong customer.

Our typical customer is 40-65 years old, is college educated and has an annual household income that exceeds $150,000. She leads a busy, yet balanced life, as she works outside the home, is involved in her community and has a family with children. She engages across both our direct and retail channels and is highly loyal, as evidenced by the fact that approximately 70% of our gross sales in pro forma fiscal year 2015 came from customers that have been shopping with J.Jill for at least five years.

This is a great demographic with sustainable and large purchasing power.

2. Sales, Net income, and Adjusted EBITA are growing.

3. Consistent cash flow from operations. This is a good sign, they are making money.

3. Decent underwriters.

4. High Tax rate. If Trump cuts taxes, the savings will go straight to the bottom line.

 

Cons

  1. Very completive industry.
  2. Not so comparable financial statement due to change in organization.
  3. Not implemented chip technology yet. I am surprised that this is a risk factor. But seeing even the small stores can take chip credit cards, this does not seem to be a good sign.
  4. Missing ownership information. Not sure what is going on but the ownership information is missing.
  5. Lot of debt and lease due. Without the profit growth, this firm can be easily distressed.

In conclusion, I would pass the IPO because the firm is in a competitive industry and can be easily distressed. Plus, I have no idea how much moat the firm has.

 

Interesting Finds

  1. Generous return policy of 90 days!
  2. Gift card breakage was 0.5 million in 2015 and increasing over time.
  3. Catalogs costs are capitalized and amortized over 6 months! This is interesting because people do not keep catalogs anymore. Most of the catalogs go straight to the recycling bin.

 

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