On the heels of its March initial public offering, J.Jill offers an example of just how difficult it is to be an apparel retailer today, as forecasting where shoppers will spend their dollars is becoming increasingly uncertain.
The Quincy, Massachusetts-based company on Wednesday slashed its expectations for same-store sales in the fiscal third quarter, now calling for a decline of between 3 and 5 percent. Initially, J.Jill had forecast comparable sales to be up in the high single digits.
J. Jill shares were down more than 49 percent midmorning Thursday on the news.
"We have experienced a lower than expected sales trend across both our retail and direct channels, and are updating our guidance for the quarter," J.Jill President and CEO Paula Bennett said in a statement.
"We have been assessing the change in trend and have identified product and marketing calendar issues that are affecting traffic and conversion, and we are reacting quickly," Bennett added.
The company cited a lack of sales of woven tops — where it had made a significant inventory investment — and a failed attempt to keep August merchandise on the floors of stores for an additional week, which didn't turn out as planned.
In turn, J.Jill also lowered its expectations for fiscal third-quarter earnings, now calling for adjusted earnings per share of between 8 cents and 10 cents. That compares with a prior forecast of 18 cents to 20 cents.
While the news won't be received lightly by the Street in the short term, some analysts are saying there's still hope for J.Jill to turn sales around ahead of the all-important holiday shopping season.
"We see the miss as largely explainable, and believe the company is sufficiently nimble to address the missteps in short order," said Jefferies analyst Randal Konik.
As J.Jill refreshes and remodels existing stores, expands its size assortments and upgrades the customer shopping experience via technology, same-store sales should start to climb again, Konik said. The retailer's woes should be "quickly addressed," he said.
J.Jill has posted positive same-store sales for 20 of the last 22 quarters, hence why Wednesday's announcement came as a surprise to many. Bennett said she was "very disappointed" to have to make the adjustments.
Wells Fargo cut its price target on the retailer's stock to $10 from $12 per share, saying "the JILL story was predicated on sustainable, steady ... comp growth and margin expansion." The shares were trading Thursday at around $5 apiece.
Wells Fargo analyst Ike Boruchow wrote in a note to clients: "While the company continues to leverage their data-driven model and is well-positioned form a real estate perspective in our view (only in A-malls, conservative store base), it is clear that the highly competitive environment that they operate in (mall-based apparel) is pressuring their business model."
That same mall-based apparel competition has hurt many of J.Jill's peers, such as The Limited, Wet Seal, Vanity, BCBG Max Azria and Rue21, all of which have filed for bankruptcy protection this year.
But J.Jill has made strides to set itself apart — especially from low-price retailers — by targeting affluent women with an average household income of $150,000. The company also touts having a loyal customer base, with extensive data on its shoppers.
J.Jill is slated to issue a revised full fiscal 2017 outlook when the retailer reports fiscal third-quarter results on Dec. 5.
WATCH: J.Jill shares drop as company lowers financial outlook
