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.
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.
- Very completive industry.
- Not so comparable financial statement due to change in organization.
- 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.
- Missing ownership information. Not sure what is going on but the ownership information is missing.
- 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.
- Generous return policy of 90 days!
- Gift card breakage was 0.5 million in 2015 and increasing over time.
- 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.