The J. Jill Group Inc.

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The J. Jill Group Inc.

4 Batterymarch Park
Quincy, Massachusetts 02169
U.S.A.
Telephone: (617) 376-4300
Toll Free: (800) 498-9960
Fax: (617) 769-0177
Web site: http://www.jjill.com

Wholly Owned Subsidiary of The Talbots, Inc.
Incorporated: 1987 as DM Management Company
Employees: 3,700
Sales: $350 million (2006)
NAIC: 448120 Women's Clothing Stores; 454110 Electronic Shopping and Mail-Order Houses

The J. Jill Group Inc., purchased by The Talbots, Inc., in 2006, is an upscale specialty marketer of women's apparel, accessories, and gifts under the J. Jill brand. It uses multiple distribution channels to market its wares, including its catalogs, retail stores, and web site. J. Jill's apparel is almost entirely private label under its own name, with emphasis on natural fibers and unique details. Its target customers are active, affluent women aged 35 to 55.

SELLING BY CATALOG ONLY

J. Jill's history can be traced to the postwar era, when Karl Lipsky founded a catalog company initially called Jennifer House (named for his wife), which offered a selection of decorative items. The Barrington, New York-based business eventually grew to also include a separate catalog featuring classic, tailored women's clothing and called J. Jill (the second name in honor of Lipsky's daughter). Small catalogers during this time were proliferating, serving in particular the needs of the country's rural communities. Over the next 20 years, however, their geographic reach expanded to include cities and suburbs, bolstered by the emergence of the toll-free telephone number, computer-generated mailing lists, and bank credit cards.

In June 1988, the year that the U.S. Postal Service implemented massive postage rate increases for third-class mailing, which would adversely impact many catalogers, Lipsky sold his company to the newly developed DM Management Company of Hingham, Massachusetts. DM (the DM standing for direct marketing) was founded by The Talbot's veteran George Burman, with venture capital funds in order to purchase undervalued and poorly performing catalogs. DM Management got Jennifer House and J. Jill in the deal. The company faced fiscal challenges in its early years under DM Management. In 1990 (the year ended June 30), for example, it lost $9.63 million on sales of $23.88 million. Over the next two years, however, DM Management's sales continued to climb and its losses decreased. In fiscal 1993, the company earned $1.55 million on net sales of $47.51 million.

By mid-1993 there were three DM Management apparel catalogs: J. Jill Ltd., The Very Thing!, and Nicole Summers. The first was described by the company as featuring "comfortable and easy-to-wear clothing," the second as "refined apparel for women with discerning tastes," and the third as for "women whose style is distinct but eclectic." Typically, they were mingled and mailed together, with a unique offer of free overnight shipping and handling with a minimum order of $50 and the slogan, "Call us today, wear it tomorrow." DM Management went public in 1993, offering stock at $9 a share. In fiscal 1994 the company enjoyed its best year to date, earning $3.27 million in net income on net sales of $63.34 million.

DM Management added N.S. Memorandum, a specialty Nicole Summers career dress spinoff, in 1993, and Gateway, a specialty resort and vacation wear book of fashions from The Very Thing!, in November 1994. A month later it acquired the trademark, customer list, and certain other assets of Carroll Reed, Inc., a specialty retailer and cataloger of classic women's apparel, for $6.21 million. DM Management described the Carroll Reed catalog as featuring "enduring styles with impeccable tailoring and superior value." By mid-1995 the company had added a third specialty catalog, Our Favorites, which featured the most popular items from each of the principal catalogs. Circulation of all DM catalogs came to 44.2 million in fiscal 1995, with Nicole Summers leading The Very Thing! and J. Jill, Ltd. (Carroll Reed was not included in this tabulation.)

DM Management was leasing corporate headquarters and production facilities in Hingham, Massachusetts. It owned a distribution center in Meredith, New Hampshire, and had three outlet stores—two in New Hampshire and one in Bedford, Massachusetts. DM was offering both brand-name and private-label dresses, suits, sportswear, swimwear, loungewear, coats, jackets, shoes, and accessories, purchasing merchandise from about 450 different vendors.

FOCUS ON J. JILL: 1996–98

DM Management had disappointing net income of $773,000 on net sales of $72.69 million in fiscal 1995. With the stock slumping (it fell below $2 a share late in the calendar year) Gordon R. Cooke was appointed to replace Samuel L. Shanaman as president and chief executive of the company. Cooke, former president of Time Warner Interactive Merchandising, had previously helped start an around-the-clock home-shopping show and presided over Bloomingdale's mail-order operations. Interviewed in 1998 for Forbes by Peter Kafka, Cooke recalled, "Every skirt we sold was down to the ankles. All our models had little plastic flowers on their dresses, and it drove me crazy. I said, 'Who are we targeting, the 80- to 100-year-old woman?'" Under his direction, DM Management began appealing to how its mature customers wanted to see themselves rather than as they were, using catalog photos and illustrations to evoke youth and fashion.

To save printing and paper costs, DM Management combined the Nicole Summers and The Very Thing! catalogs in March 1996. The overwhelming majority of the company's customers—chiefly career women between the ages of 45 and 65—were not only receiving both books but often getting several copies of the same catalog. Two months later, the company dropped Carroll Reed because of disappointing sales and the difficulty of integrating its customer list with DM's other catalogs. The company made a small profit in fiscal 1996, excluding a $9.6 million charge for the costs of discontinuing this book.

The transformation of DM Management left the company with two core books: Nicole Summers and J. Jill, which was targeting a customer about a decade younger and more oriented toward casual clothing than the more corporate, career-minded Nicole Summers buyer. J. Jill began offering more exclusive, private-label merchandise under the J. Jill label, a broader range of sizes, and "total look" ensembles that combined apparel, accessories, shoes, and gifts on a single page. Nearly two-thirds of J. Jill catalogs began to go to new customers.

For the 1996 holiday season, DM increased the proportion of new merchandise offerings to 60 percent, compared with only 15 percent in prior years, when the company was essentially promoting goods the customer had already been offered earlier in the year. DM also added product categories to its holiday catalogs, including accessories, gifts, and home furnishings. Nicole Summers offered Elizabeth Arden cosmetics for the first time and introduced crystal from Baccarat and Waterford. Changing to a calendar-year (except for the week after Christmas) annual accounting, DM posted net income of $3.37 million for 1996—excluding the Carroll Reed charge but including a $1.6 million income tax benefit—on net sales of $84.64 million.

COMPANY PERSPECTIVES

J. Jill remains committed to the promise at the core of its brand—the celebration of the over-35 woman and the recognition of her confidence and unique sense of style.

DM's marketing changes were inspired by Cooke's use of database management to learn more not only about the company's own customers but also the buying patterns of other mail-order buyers. The company purchased two million names in 1997 and mailed half of all copies of J. Jill catalogs to prospective, rather than previous, customers. Rather than rely on scattershot techniques or only on its own internal resources, DM was (in 1998) acquiring lists of prospects in part from Abacus, a database cooperative that was pooling information from more than 1,000 catalogers to identify the most active mail-order buyers.

Business was so good in 1997 that to fulfill its orders DM Management had to rent 150,000 square feet of space in Meredith to supplement the activities at its own 93,120-square-foot warehouse, plus additional rented quarters in nearby Laconia. The company, in January 1998, began construction of a 400,000-square-foot operations facility in Tilton, New Hampshire. Sales soared to $135.53 million in 1997, and net income rose to $3.9 million. DM raised $17.45 million that year by issuing an additional 1.41 million shares of stock to the public at $13.50 a share. The company enjoyed an even better year in 1998, earning $8.4 million on sales of $218.73 million.

DM Management entered the home furnishings market by adding a 24-page section of sheets, towels, and other domestic goods to its October 1998 issue of J. Jill. This was followed in March 1999 by a freestanding 48-page home catalog titled Peopleplacesthings, sent to one million prospective customers and stressing "natural fibers, casual comfort, easy care and lots of spirit," according to Patricia Lee, president of merchandising. Peopleplacesthings items featured a muted color palette, with neutral, washed-out hues. The publication was shelved in mid-1999, when DM decided to concentrate instead on building retail and online ventures.

DM Management continued to lavish attention on the J. Jill catalog. In the April 1999 issue of Catalog Age, Lois Boyle wrote, "J. Jill hires many of the same beautiful models with streamlined bodies who appear in other books, but it photographs them with a keen difference. The poses and clothes styling reflect a lifestyle—not just clothes on a model. In a look you might call 'sloppy chic,' many J. Jill photos reflect clothes that are comfortably suited to a woman involved in everyday activities." In a later 1999 Catalog Age issue, a J. Jill 1998 holiday catalog cover of a "naked" mannequin adorned with Christmas lights was cited as among the ten best catalog covers of the year.

LAUNCHING RETAIL STORES AND E-COMMERCE IN 1999

DM Management was renamed The J. Jill Group, Inc., in June 1999. This action was accompanied by a corporate decision to expand its sales through retail and e-commerce operations as well as mail order. The company announced plans to open ten J. Jill stores in 2000 and up to 50 stores by the end of 2001. These outlets would, ideally, be located in upscale malls and close to chain stores such as Crate & Barrel, Banana Republic, Bloomingdale's, J. Crew, Lord & Taylor, Nordstrom, Restoration Hardware, Saks Fifth Avenue, and Talbot's. They would carry about half the stockkeeping units in the J. Jill catalog and would merchandise apparel, accessories, shoes, and gifts in a "lifestyle presentation." Many of the chairs, armoires, and lighting displaying the goods would also be for sale. "We believe retail will eventually represent three to four times our catalog business," Cooke told Shannon Oberndorf of Catalog Age.

The first two new J. Jill stores, opened in August 1999, were 5,000-square-foot units in Natick, Massachusetts and Providence, Rhode Island. An interactive web site, linked to the company's order-taking infrastructure and fulfillment operations, made its debut in August 1999. J. Jill Group moved its headquarters from Hingham to Quincy, Massachusetts, before year's end.

KEY DATES

1988:: DM Management purchases Jennifer House and J. Jill.
1993:: DM Management goes public.
1994:: Company buys Carroll Reed, its fourth regular catalog.
1996:: DM Management drops two of its four catalogs.
1998:: DM constructs a new warehouse in Tilton, New Hampshire.
1999:: Company changes its name to J. Jill, opens its first retail stores, introduces e-commerce web site, and drops its Nicole catalog.
2006:: The Talbots acquires J. Jill and reorganizes it as a brand of the holding company.

The Nicole Summers catalog was renamed Nicole in June 1999, with plans announced to feature loose, less-tailored clothing than in the past. The first issue appeared in August but apparently fared poorly. In September J. Jill Group announced that it would lose money during the third quarter of the year and would discontinue Nicole. The company posted another loss for the last three months of 1999 and registered a deficit of $6.84 million (including charges of about $6 million for discontinuing Nicole) on sales of $250.28 million. Company shares of stock, trading as high as $26.50 in May 1999, closed the year at only slightly more than $3. "J. Jill had a wonderful run," an analyst told Philana Patterson of the Wall Street Journal in October, adding "They hit a chord—and they created competition. Talbot's, Coldwater Creek and Lands' End began to … put more of that type of merchandise in the marketplace."

Of the J. Jill Group's 1999 net sales, J. Jill merchandise accounted for about 87 percent. Almost all of its offerings were private-label merchandise sold under the J. Jill name. Many of these offerings were being designed by the company itself and were not available in other catalogs or retail stores. Regular sizes ranged from four to 20, with a broad assortment of apparel also available in the same styles in petite, tall, and large sizes. Extended size offerings accounted for 47 percent of total J. Jill apparel offerings in 1999. About 32 percent of the company's merchandise came from foreign suppliers or buyers, mainly in Hong Kong, Singapore, and Israel. In all, the company purchased goods from about 630 vendors during the year.

J. Jill Group's catalog circulation reached 94 million, and the number of its catalog customers, 1.21 million, in 1999. The J. Jill customer database contained about 2.6 million names at the end of the year, including about one million individuals who had made a purchase from the J. Jill catalog during the previous 12 months. Fulfillment of orders usually took three to five business days. Of J. Jill's five stores in operation at the end of the year, three were outlet stores run solely for the purpose of liquidating overstocks.

RETAIL GROWTH: 2000–02

In less than a year, the company had 17 stores and was operating in the black once more. Located in malls, the stores were designed to reinforce the natural, comfortable look of J. Jill merchandise. Interiors were serene and soothing, with neutral colors, wide aisles, and a sense of openness underlined by the low density of displayed merchandise. Shelves and flooring were made of wood, plants and comfortable chairs were placed strategically, and at the entry of each store stood a stone fountain with running water. Within each store, customers could also place orders online for out-of-stock items.

In addition to the stores, which were averaging over $500 per square foot, the J. Jill catalog and online sales also did well. According to analysts, the success of J. Jill and other specialty retailers targeting the same older audience was due to department stores abandoning that customer for much younger women.

Another plus for J. Jill was that it had invested in infrastructure for its warehouse and fulfillment process before opening its stores and initiating its retail web site. Beginning in 1998, it consolidated its four distribution centers into one new automated location. The company also updated its systems software and made it easier for customers to search for products. As a result, although sales for 2000 decreased slightly, the company reported a profit for the year, after a loss in 1999.

Early in 2001, J. Jill sold 1.2 million shares, using the nearly $30 million to fund new stores and for working capital. It launched its "Take 5" customer loyalty program for J. Jill credit card holders and within two months, card sales jumped to 40 percent of overall retail sales from 20 percent. By the end of 2001, it had 51 stores in 25 states. These accounted for 28 percent of sales, which totaled $287 million for the year, up 16.5 percent from 2000.

In 2002, J. Jill announced a three-for-two stock split in June and made some changes in the size and layout of its stores. New stores were smaller, at 4,000–4,500 square feet. And, with those stores that had a separate section for petite sizes generating significantly higher sales of those items than stores where petites were spread around the store, the company planned to roll out petite departments in most stores. At the end of the year there were 88 stores in 30 states, sales had increased by over 21 percent and income was up over 40 percent.

MERGING DIVISIONS: 2003–04

With 49 percent of the sales and almost all the growth coming from the stores, J. Jill made some major changes to reflect the growing importance of the retail units. Particularly, the company merged its retail and direct marketing divisions. This meant the company could use gift certificates, the Plus 5 loyalty program, and sales promotions across all its channels rather than having to treat the stores and the web/catalog units as separate companies. Thus it could transfer inventory from the web to a store without having to sell it from one channel to the other. However, the merger also meant that in the states where there were J. Jill stores, customers would have to pay sales tax on catalog and online purchases.

However, the new tax requirements were not the only things that had an impact on sales. Competition for apparel dollars had been growing, with both discounters and department stores adding private label lines of both casual and career styles. In addition, there were just more stores opening, and e-commerce was taking a much bigger slice of the market.

2005 AND BEYOND

Lackluster sales combined with the attraction of J. Jill's retail and direct marketing operation led to takeover talk in 2005. Interested companies included Urban Outfitters and Liz Claiborne. The winner, however, turned out to be The Talbots, which bought the company for $517 million early in 2006. Philip Kowalczyk was named president, and CEO Gordon Cooke retired. The two brands targeted the same age customer and appeared to complement each other, with Talbots offering more tailored merchandise and J. Jill more casual, unstructured styles. As of February 2007, there were 239 J. Jill stores, including eight outlet locations.

Robert Halasz

Updated, Ellen D. Wernick