While catalog sales showed improved productivity throughdecreases in page-count and an improved rate of return, Cooke said,catalog sales were "skewed toward promotional price product." Inall, the operating losses were attributed to unusually low levelsof clearance inventory in the retail segment, lower than expectedsales of fall full-price merchandise in the company's directsegment, and increased spending in support of retail advertisingand in-store visual presentation.

"We have always considered fiscal 2004 to be a transitional yearduring which we are making significant investments to improve ourmerchandising and product development infrastructure," he said.During this transition, J Jill has hired a new product developmentand 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 andimproved visual presentation at its 155 stores will be complete byThanksgiving. Holiday merchandise is 98% in stock, according toOlga Conley, EVP and CFO. Changes in catalog formats anddrop-sequences are resulting in improved sales and store traffic,she said. A gift card has been introduced in time for the holidaysand customers can now pay their J. Jill credit cards in stores,further enhancing store traffic, Cooke says.