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QUINCY, MA-Calling the third quarter “disappointing” and “challenging,” Gordon Cooke, president, chairman and CEO of J. Jill Group, said the multi-channel specialty retailer of women’s apparel has laid the foundation for increased brick-and-mortar expansion and improved catalog and Internet sales productivity. Net sales for third quarter increased to $94.9 million, a 15.3% increase over the same quarter a year ago. However, the company posted a net loss of $2.6 million for the quarter, bettering a $2.9-million loss in third-quarter 2003.

While catalog sales showed improved productivity through decreases in page-count and an improved rate of return, Cooke said, catalog sales were “skewed toward promotional price product.” In all, the operating losses were attributed to unusually low levels of clearance inventory in the retail segment, lower than expected sales of fall full-price merchandise in the company’s direct segment, and increased spending in support of retail advertising and in-store visual presentation.

“We have always considered fiscal 2004 to be a transitional year during which we are making significant investments to improve our merchandising and product development infrastructure,” he said. During this transition, J Jill has hired a new product development and design team and implemented and strengthened store systems, according to Cooke.

The company has increased its proportion of novelty merchandise, accessories and jewelry and added sleepwear. The reformatting and improved visual presentation at its 155 stores will be complete by Thanksgiving. Holiday merchandise is 98% in stock, according to Olga Conley, EVP and CFO. Changes in catalog formats and drop-sequences are resulting in improved sales and store traffic, she said. A gift card has been introduced in time for the holidays and customers can now pay their J. Jill credit cards in stores, further enhancing store traffic, Cooke says.

During third quarter, retail stores accounted for $51.4 million in sales. Catalog sales were approximately $24 million, and the Internet generated about $18 million in sales. Conley projected overall fourth-quarter sales of between $123 million and $127 million.

Meanwhile, J. Jill plans to add 40 new stores in 2005. Two dozen leases have been negotiated, according to Cooke and 20 additional locations are currently under review. While continuing with its current 3,300-sf format, it is testing a 2,500-sf footprint “for fill-in markets, lower performing malls, and very expensive locations,” he says. A new, 5,000-sf combo missy/petite format is in development and will roll out selectively in Spring 2005. Product designers have developed improved fit techniques for the combo stores, Cooke reports. Of the new stores already under contract, six call for the 2,500-sf format. A majority of the planned store openings are in new areas.

J. Jill has evolved from a multi-brand, catalog-only merchant to a single-brand, multi-channel, private label retailer, focusing on career, casual and dressy apparel, accessories and footwear targeted to active, affluent women between the ages of 35 and 55. Plans call for making J. Jill a premier national brand with the potential for between 300 and 500 stores nationwide. It currently has 155 stores in 36 states coast to coast.

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