JJill Inc (JILL) 2017 Q3 法說會逐字稿

Good morning. My name is Kim, and I will be your conference operator today. At this time, I would like to welcome everyone to the J.Jill Third Quarter 2017 Conference Call.

On today's call are Paula Bennett, President and CEO of J.Jill, Inc.; and Dave Biese, Chief Financial Officer. (Operator Instructions)

Before we begin, I need to remind you that certain comments made during this call may constitute forward-looking statements and are made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in the press release and J.Jill's SEC filings. The forward-looking statements made today are as of the date of this call, and we do not undertake any obligation to update our forward-looking statements.

Finally, we may refer to certain adjusted or non-GAAP financial measures on this call. A reconciliation schedule following the GAAP various (sic) [versus] non-GAAP financial measures is available in our press release issued today. If you do not have a copy of today's press release, you may obtain one by visiting the Investor Relations page of our website at jjill.com.

I will now turn the call over to Paula.

Thank you. And thank you, everyone, for joining us. I will begin today's call with an overview of our third quarter results and will provide insight into the shortfalls in the quarter and the steps we are taking to regain momentum and deliver consistent performance going forward. I will also provide a look into our current business trends before turning the call over to Dave, who will walk you through our third quarter financial results in more detail and also provide our fourth quarter and annual outlook.

For the quarter, total comparable sales declined by 0.6%, and adjusted earnings per share was $0.13. While we finished stronger than the revised guidance we provided in early October, we are disappointed with the sharp deceleration we experienced versus the consistency we've driven in prior quarters and years.

There were a few factors that, when combined, impacted our results, but the bottom line is we did not deliver the way we have in the past. We take this very seriously and have taken action to help minimize any volatility going forward. In addition, we have seen improved positive trends in October and into the fourth quarter, which I will share more on later.

With that said, let me review the quarter. As noted in our release in early October, we had product and marketing issues that were all connected. First, there were product and merchandising issues primarily related to our new September floor set. Second, we saw a deceleration of our e-commerce sale business that was driven by a separate merchandising issue. And third, both were exacerbated by a shift in our marketing calendar around the Labor Day weekend. Given these issues, both our retail and direct channels experienced significant softness in September reflected in a shortfall in conversion.

As a reminder, when we talk about our sale business, we're referring to anything that has a hard markdown. This business is more heavily weighted towards our direct channel.

Now let me give you a little more detail on our product and merchandising issues. First, as it relates to our product offering for September, we saw particular softness in our novelty woven tops, which featured bold prints that did not resonate with our customer and were also priced on the high-end of our range for the category. In addition, in terms of merchandising, we had winners in our key marketing features, but we did not invest nearly enough in these items relative to the demand we saw for them. She trusts us to guide her with our key stories, and we were not able to meet demand effectively. Next, we also experienced a deceleration in our sale business, which was a significant part of our e-commerce channel's weakness in the quarter. We were up against a very robust sale business last year when we had clear, well-assorted programs that worked and drove large volume. This year, we were over-assorted in our sale product making it difficult for our customers to shop as we had the breadth but not the depth of the assortment. And finally, a shift in the marketing calendar beginning around Labor Day further impacted our product challenges. We had made the decision to extend our August floor set by an additional week, setting the September floor set one week later and closer to the Labor Day weekend. While this was a planned shift in order to take advantage of opportunities we saw from last year's learnings, it did not play out that way. And coupling these issues with other external factors, such as hurricanes and unseasonably warm weather, we performed below our expectations.

Moving to our October performance. We had a stronger-than-expected finish to the quarter, driven by improved conversion in both channels. We had a favorable response to our October delivery. The offering was much more in line with our consistent track record, with focus on seasonally appropriate wear-now sweaters and knit tops, all supported with a needed level of inventory. We also took action to improve the sell-through of our September product delivery. The improvement in our business in October was most notable in our retail channel driven by healthy traffic increases in stores. Our direct business also rebounded, but was not as strong as our retail business and lagged relative to prior-period trends. We are paying particular attention to our e-commerce business to address the assortment challenges I just discussed. We are coupling this work with a review of our marketing and promotional programs in the channel to address the deceleration.

In addition to this work, we are also further refining our new e-commerce platform and holding off on the completion of the rollout until after holiday. In the rollout to our initial test group, the new site showed lower conversion rates and lower average order value than expected. While this had a minimal impact on our overall third quarter results, we made the decision to continue using our legacy site for most of our e-commerce traffic. We look forward to the completion of the rollout after the holiday season and remain very excited about how this site will allow us to improve the overall customer experience.

We are pleased with our positive quarter-to-date results. We've had 3 deliveries since September, and our October, November and December assortments have resonated with our customers. Our offering includes more knits and sweaters for the season, which have historically been strong categories for us. We're also pleased with our efforts to promote and move through our September product challenges, including the woven tops. At this time, we are comfortable with our overall investment in inventory, confident that we will have moved through these product issues by year-end, and we'll enter 2018 with the intended quality and level of inventory.

So now, how can we safeguard against major product and merchandising issues in the future? First, we have refocused intensely on our product framework and have tailored our upcoming assortments, including novelty woven tops, and where appropriate, edited our purchases to ensure we have clear, relevant product story, that they're appropriately priced and have the proper depth of investment. Our 12 product deliveries each year allow us to continually drive activity and engagement with our customers, offering ongoing newness that drives transactions, but also helps us move quickly past any prior product issue.

In September, we went live with a new merchandise financial planning system, which will help to ensure we have the correct breadth and depth of inventory across both channels. We expect improved functionality from the system will benefit our assortment beginning in mid-2018. The new system will include more detailed category planning and better inventory management capabilities among other improvements.

And with what we learnt from the September calendar shift, we, of course, corrected our marketing cadence where needed. We are further adjusting the related marketing investment, leveraging our data capabilities to improve our overall effectiveness. In summary, I've always said that we are a learning organization. We learned some very tough lessons last quarter and are taking full advantage of those learnings to highlight and execute on our opportunities to improve. The challenges we face are addressable, and our team is focused and committed more strongly than ever to drive our business while providing a seamless customer experience across our channels.

With that, I will turn the call over to Dave.

Thank you, Paula, and good morning. I'll begin with a review of our third quarter and then discuss our outlook for the fourth quarter and for the full year of 2017.

Turning first to our income statement. Our total net sales for the third quarter were $162 million, an increase of 1.6% versus last year. Total company comparable sales declined 0.6%, driven primarily by the challenging September performance that Paula noted. We finished the quarter with positive trends in October, driven largely by our retail stores. Gross profit was $108.5 million versus $108.1 million last year. And gross margin was 67% compared to last year's 67.8%.

The rate reduction reflects the actions taken to move through slow selling product in the quarter. Our SG&A expenses were $95.2 million versus $92.6 million last year. Included in this year's expense was $700,000 of nonrecurring costs primarily associated with our transition to operating as a public company after our IPO in the first quarter. In the third quarter of 2016, we had $2.3 million of nonrecurring costs related to the IPO. Excluding the nonrecurring expenses from both this year's and last year's figures, SG&A as a percentage of total net sales was 58.4% versus 56.7% for the third quarter of 2016.

Our GAAP operating income was $13.3 million, or 8.2% of sales. Excluding the nonrecurring expenses from both periods, operating income was $13.9 million, or 8.6% of sales, versus $17.7 million, or 11.1% of sales, last year.

Adjusted EBITDA for the quarter was $23 million as compared to $26.6 million last year. As a percentage of sales, adjusted EBITDA was 14.2% versus 16.7% last year. A reconciliation of adjusted EBITDA to net income is included in our press release.

Interest expense for the quarter decreased to $4.5 million from last year's $4.8 million, reflecting the voluntary $20 million prepayment of our term loan in June. Income tax expense was $2.8 million, approximately equal to last year, and the effective tax rate was 31.6% compared to 26.5% in the third quarter of 2016.

Finally, GAAP net income for the period was $6 million, or $0.14 per diluted share, versus $7.8 million, or $0.18 per diluted share, last year. Adjusted diluted earnings per share, excluding nonrecurring expenses, was $0.13 for the quarter compared to last year's $0.18. Adjusted earnings also reflect a 40% effective tax rate assumption, which is higher than the reported tax rate for the quarter and helps explain why adjusted earnings per share is lower than the GAAP earnings per share.

For our year-to-date performance highlights, please refer to this morning's press release.

Turning now to our balance sheet. We ended the quarter with $25.8 million in cash and $38.4 million in availability under our revolving credit facility. Our inventory at the end of the quarter was $85.4 million compared to $79 million at the end of the third quarter in 2016.

I'll reiterate we are comfortable with our overall inventory investment and are confident that we will move through any product challenges by year-end. During the quarter, we opened 4 stores and closed 3, ending the quarter with 275 stores.

Turning to our outlook. Our fourth quarter outlook includes 14 weeks, and the full year outlook is for 53 weeks in fiscal 2017. The 53rd week is expected to contribute approximately $9 million in sales and $0.01 of earnings per share. When we quote comparable sales figures, however, it is for the 13 weeks and 52 weeks of business for the quarter and the year.

We've returned to positive total comparable sales to start the quarter. Historically, our fourth quarter sales as a percentage of the total year are generally in line with the other quarters, and November and December are our largest selling months in the quarter. Having the benefit of knowing November sales, we expect to deliver total comparable sales growth of 2% to 4% for the quarter, which I'll remind you is on a 13-week basis. Total net sales growth is expected to be 7% to 9% and includes 14 weeks of business.

We expect gross margin for the quarter to decrease moderately compared to the fourth quarter of 2016 as we move through any remaining product challenges before year-end. SG&A will deleverage as a percentage of sales in the fourth quarter, reflecting our marketing investment to engage our customer and deliver our sales goals and to continue to grow our customer file. SG&A also includes approximately $300,000 of ongoing public company costs that we did not incur a year ago. Interest for the quarter will decrease about $200,000 year-over-year given the June prepayment on our term loan. Including the benefit of the 14th week, GAAP diluted earnings per share are expected to be in the range of $0.05 to $0.07. Adjusted diluted earnings per share, which excludes approximately $500,000 of nonrecurring costs, are expected to be in the range of $0.06 to $0.08. Both the GAAP and adjusted diluted earnings per share include approximately $300,000 of ongoing public company costs not incurred in 2016.

Turning to our full year outlook. We expect total comparable sales growth, which exclude the 53rd week, to be 4% to 5%. We expect gross margin to decline moderately and our SG&A rate for the year to leverage moderately compared to 2016. GAAP diluted earnings per share for the full fiscal year 2017, including the impact of the 53rd week, are expected to be in the range of $0.64 to $0.66. Adjusted diluted earnings per share are expected to be in the range of $0.72 to $0.74 and exclude $5.5 million of nonrecurring costs. Both GAAP and adjusted diluted earnings per share include approximately $1.1 million of ongoing public company costs not incurred in 2016.

With regard to capital expenditures, we expect approximately $38 million for the year. We have completed the opening of 9 stores, and when complete, we'll close 7 to 8 stores for the year.

With that, we will provide a first quarter and full year 2018 outlook on our fourth quarter call. Now I'll turn the call back to the operator, and we will address any questions you may have.

(Operator Instructions) Your first question comes from the line of Paul Trussell from Deutsche Bank.

This is Gabby Carbone on for Paul. Just was wondering if you can dig in a little bit further around the trends you're seeing in the store channel versus the direct, especially in the month of October? And could you talk about the actions you're taking to get these channels working back in line with each other?

Well, I'll talk first to the trends. Some of the information we've shared is that when we moved from September to October, we saw the conversion in both channels improve in the month of October. Retail, which really delivered the performance outside our guidance, was really driven by the traffic that we saw in that month. It continued to have some strong conversion as well, but traffic was positive for us in October. As we move into the fourth quarter too, both channels are seeing relative strength versus the third quarter in both traffic and conversion, but, again, retail is being driven largely by improvements in traffic. And as far as getting them both back in line, if you will, as we thought about the fourth quarter, we looked at both of them kind of contributing equal in terms of our guidance. And particularly with [ROM] direct, there is any number of initiatives that we're employing in that channel to better analyze and really refocus the merchandising strategies there. We talked about the sale business in that channel contributing to a shortfall in the third quarter. So in terms of merchandising both the regular business and the sales business, we are -- we have a lot of effort in that regard. And I would also tell you that we are spending even more time analyzing both the marketing investment in that channel as well as the promotional cadence to really understand how it is we can return that channel to growing in the way we've seen it in the past. But that work is ongoing.

Great. Just a quick follow-up. The guidance for the fourth quarter. Could we -- for the gross margin line. Could we expect that to be down similar to what we just saw in the third quarter? Or should we see kind of a slight improvement there?

I would say that we would expect it to be similar to the third quarter. So moderate, historically, for me has meant that it could be around a point, give or take, 20 basis points. And we would expect that the fourth quarter would look something like the third quarter, but, again, kind of in that range of 80 to 120 basis points decline.

Your next question comes from the line of Oliver Chen from Cowen & Company.

Our question was about the commentary on breadth and depth. Could you just articulate what needs to happen there? And what's going to happen going forward in regards to thinking about balancing the assortment that way? And the second sub point is about the product flow. And what are your thoughts on product flow in relation to what you experienced? Our modeling question had to do with the long-term view on operating margin. If there is a framework for thinking about operating margin over a multi-year period, that'd be helpful as well.

I'll start with the breadth and depth question. We are -- we found that we, as you know, had identified -- we had made an investment in novelty woven tops. It didn't resonate with our customer the way we expected. We had also had a secondary story in the month that was around a Camel & Black story that we used as our marketing focus and had not invested enough in it, because we made the decision to invest in it rather late in the process. She responded strongly. We disappointed her. She did not respond to the novelty woven tops. So with that, we had more novelty pieces that moved to markdown and were -- did not have the depth in the -- the proper depth in the assortment that we owned in markdown. But I think that the thing that we are focusing on, we have rolled out a new merchandise financial planning system in September that will affect -- have a positive impact mid-2018. And that really will enable us to plan our inventories in a way that we plan the assortment breadth, but we also can plan full price and sale and the flow-through more effectively than we have in the past. So we believe that our -- between the architecture work that we've done on our assortment and the investment approach that we're taking across both full price and sale that we'll be in -- we're confident in our approach go forward.

As far as operating margins and thinking about going forward, originally, when we guided the year, we were looking for an improvement in our operating margins, which really would have been the result of growing our direct business in the high teens. And in doing that, we'd have expected about 50 to 60 basis points growth in our operating margin. That was the original idea for the year. As far as how to think about that now, I would tell you that our long-term prospects for the business haven't changed. We feel very optimistic that the model's intact, and we can look to grow this business the way we originally intended. Having said that, for 2018, we will take the chance. We're heavy in planning right now, and we're going to take full advantage of the time we have between now and our year-end call to plan our business for 2018 and really understand where our guidance should be for 2018.

Your next question comes from the line of Kimberly Greenberger from Morgan Stanley.

I wanted to ask a couple of questions. First on inventory. It looks like it's up about 8% here. How much of this is carryover from third quarter versus fresh fourth quarter inventory? And what would you expect to be able to move through that? And the second is, I'm not sure I totally understand what's going on with the slowdown in e-commerce. I think you mentioned the new e-commerce platform saw lower conversion and a lower average order value. I'm not sure how to think about those 2 changes in your metrics and whether or not they're caused by the merchandising miscues that you discussed or in fact if they are related to the new platform. And what are you doing to address that?

Well, in terms of the e-commerce performance, the -- I'll just go quickly into the new e-commerce platform and that we have -- we've taken a very conservative approach to rolling that out with testing along the way. So that has not had a significant impact on the results that we've delivered in the e-commerce. It's really just -- we're just making efforts to ensure that we have -- that we've created great a customer experience as we roll over. So -- and I think I went through some of the more technical aspects of that. But we would take it back to the merchandising assortment and the fact that because the full-price assortment in September did not resonate with the customer and because of the fact that the sale product assortment -- as we mentioned in our October call, the sale product assortment was broad and not deep, we were impacted most dramatically in merchandising because of the impact of the sale product in e-commerce. So it -- the e-commerce platform change has a very small impact, but one that we're working through and doing it in a very deliberate way to ensure a great customer experience.

And, Kimberly, with regard to inventory, yes, we're up about 8% at the end of the third quarter year-over-year. I'll reiterate that we're very comfortable with where our inventory is at the moment in light of the third quarter. We've had relative success, if you will, moving through some of the product channels and feel, obviously, that's fully baked into the rate we've quoted. As we look forward, again, we look for something equal in terms of margin change year-over-year to continue to move through those goods, and we'd expect to exit the year in something comparable to the third quarter in terms of year-over-year growth. By year-end, we do not expect to have a significant portion of our inventory represented in the third quarter goods. Again, they're expected to be relatively fresh in terms of the mix of full price -- what we call full price and sale goods.

Yes, we look at the quantitative and qualitative aspects of our inventory for each season and, actually each month, and we're confident we'll be in good shape heading into the New Year.

That's very helpful. Lastly, did you experience growth in your customer file during the quarter? Or were the issues that you experienced, did they prevent any growth in your customer file?

We did have growth in our customer file. We saw a deceleration in the quarter. But we still believe in our business model. We've been able to -- and our ability to acquire and retain and grow the value of our loyal customers. And we're continuing to invest in our customer acquisition strategies. So we had -- yes, we did have growth in the third quarter. It was a slight deceleration from the prior quarter. But again, we're very confident in our ability, with the right product assortment, to be able to acquire customers, retain them and develop them. And we really have confidence in our ability to continue to grow the file.

And we had a positive month of November.

Yes, we did, in -- yes, in October and November, yes.

Your next question comes from the line of Brian Tunick from RBC.

I guess, 2 questions. I guess, first on the store side. Can you maybe tell us if the positive comps in October and November were driven by both transactions and AURs? And also, on the store side, how should we be thinking about maybe store opening count for next year? And then the second question on the online side. Can you maybe help us think about how you used shipping offers or order minimums so far in the fourth quarter versus last year? Were there more days of free shipping or anything like that, that you can help us understand that line item?

Okay. So as I tick through those, in October and November, again, our stores really -- the -- what we saw there was largely driven by traffic. I would say, we also saw a nice improvement in conversion. We saw it in October versus September and then, again, had an improvement going into November. As far as, like, AURs and average order and the like, there wasn't really any notable on either side of the plus or minus. So for the most part, we'll call it engagement with the customer improved, and we really feel like that was reflective of the product improvement as we moved from September and on. As far as store openings is concerned, we don't have a different viewpoint in terms of the overall opportunity in new stores. I don't have a number to guide you for next year just yet, and I will wait to do that until our year-end call. But again, the overall opportunity in the way we've described it previously has not changed. With regard to ship offers, what I would say is, as we moved through October and into the fourth quarter, we were more promotional in order to clear goods. And often when we use free ship, it is in conjunction with a broader promotional offer and just real quickly to it, off it. It always involves a minimum with the exception of, say, a Cyber Monday. As we increased promotional days, we would have offered more free ship days year-over-year in that context.

Your next question comes from the line of Randy Konik from Jefferies.

This is Janine Stichter on for Randy. I had just a question on SG&A. It looks like it's kind of been running up in the mid-single digit range. Is there some guidance you can give us to think about how we should be modeling SG&A for next year? And then maybe some color on some of the new customer acquisition tools that you're investing in, how you expect those to drive sales and kind of what specifically you're doing.

So on the SG&A, some of the comments we gave you as we went through the script is really right now being driven largely by our marketing investment and the influence of that. I guess, what I would say to that is, we are still seeing and we're seeing a nice ramp-up in customer engagement. So we feel like our marketing investment, as a general rule, is still relevant and valid in driving the business. And we are tailoring the mix a bit more than we're revisiting the level of spend. As far as next year is concerned in terms of SG&A, I'm simply not prepared to give a whole lot of color yet on next year. And that is not to avoid the question. It is because we have -- we are in the middle of our planning now and, again, really are going to take full advantage of that time to really understand what our model looks like for next year, particularly by season, given the spread of our forward versus last year's. So there is a lot going on in that regard, and we're going to, again, wait and provide more color on our year-end call. With regard to customer acquisition, I would tell you that I don't see us taking a veering off of really how we think about that. We always hindsight that and tailor to what we're experiencing. We did see growth in the file in the third quarter, not at the level we're accustomed to. But I would tell you we saw a nice improvement in October and November. So we will adjust, as we always have, the level of investment in acquisition to kind of meet what we're experiencing what the metrics tell us. But right now, I think our opportunity to continue to acquire customers is still strong.

Right. And to play up what Dave said, I mean, we use our data very effectively to drive our growth projections as well as our profitability projections in terms of our customer file. So -- to acquire customers, but also to retain and grow the value of each customer. And that is intact, and we are focused on that more than ever.

(Operator Instructions) Your next question comes from the line of Ike Boruchow from Wells Fargo.

Two questions. One quick one for Dave. Could you maybe just give us a tax rate to use for Q4? And then, Paula, just bigger picture, I think, going back to Kimberly's question. I just wanted to make sure I understand, is the reason the conversion in average order value were trending lower on the new site because of the issues that you're seeing with the clearance section? Or is it something else that you're trying to figure out altogether and that's why you're kind of pushing this out to try to figure this out once holiday is behind you? I'm just trying to make sure I understand the dynamic there.

Dave, do you want to take the first...

On the first one, our adjusted diluted number, we used 40% as kind of a run rate, tax rate over time. As far as what to use for the effective rate, I would think something like 39.6%, 39.7% would be fine.

So, Ike, in terms of the new e-commerce site, which we call our ECP, I mean, there are 2 areas that were impacting the site performance. One, and what we believe is the most significant one, is the page load times. And they're slower on the ECP than on our legacy site, and they are within the intended goals that we've set for the performance. So our total page load response times are averaging about 60% slower than our legacy site. And by extension and the average pages that a customer views when she goes to the site are about 15% lower than legacy. So I think it's important to note these are issues that are driven by technical issues. They're not driven at all by an inability to handle traffic on the new site -- on the new platform. And second, there are some differences in the way promotional discounts are being displayed on the new site, which are not as clear for the customer. So we believe that both of these areas are impacting the AOV and conversion rates on the new site. And we're working through -- rather than move more traffic onto the site, we're working through those. We're addressing those issues. They're both significant areas of focus by our IS team, and we have deployed, deployment of fixes planned in early January once the holiday season is behind us, that's meant to address both of those areas. And, as I said, they're both technical areas, and we feel confident we'll be able to address them and fix them so that as we roll over onto the new site completely, we'll be able to provide a great customer experience.

Got it. And Paula, when did you try -- when did you first start rolling over into the new site when you started to see these issues pop up?

Well, we started with a 10% level initially. And then as we rolled a bit more through the site, we got to a point where we realized we didn't want to take any more on. We needed to have enough on there to learn, but we wanted to make sure that we were not impacting the business or the customer experience.

And that was happening during Q3.

Yes, that's right.

Your next question comes from the line of Pam Quintiliano from SunTrust.

So I had 2 quick ones. First, regarding holiday, how should we think about what your typical cadence is from a promotional perspective for the holiday season? Is there anything that's unusual? Or should we see more of these 30%, 40% type of events? And then as far as the comp guidance, very clear that you're pleased with current trends. So does the guidance assume a continuation of current trends, an acceleration? And just what are you assuming about the competitive landscape? And how are you going to compete against that?

Well, the -- I'll just start with your second question first. I mean, the competitive environment. I mean, retail is always competitive, but we don't feel it's more or less competitive at this time than it has been in the past. And with the product and the offerings that we have, we believe that we're very well positioned to continue to capture market share. And what was the -- the second thing was...

The first part of that question was just regarding if the guidance assumes the continuation of current trends or an acceleration based on your visibility on the flows that are coming in.

We've -- well, I'll just say quickly, we've had an improved trend with the October delivery, with the November, with the December delivery. We've had very nice acceptance from our customers of that product and have been moving through the product very well. So...

Well, as far as the promotional cadence, I guess, what I would say is, I don't feel like you're going to see necessarily a dramatic shift for us year-over-year and the way we use the promotions that we do use and generally the cadence that relates to it. In our business, though, we do shift from -- into a pretty heavy sale business, if you will, I'll say, shortly before Christmas and kind of generally as we travel through January. So you're going to see that, and you can imagine that as we move into sale, we're pretty strong promotionally, but, again, there's nothing necessarily unusual about that. And again, everything we're doing has an eye towards optimizing margin at this point, taking advantage of the fact that our full price offer is doing well, but at the same time balancing the fact that we have to move some of the goods yet that are with us through the third quarter. And as far as a comp guidance is concerned at this point and really what does our guidance reflect, I wouldn't -- I mean, the third quarter was so unusual that I wouldn't say we drew a lot necessarily from what we saw in the third quarter. It's really looking at our inventory levels, looking at all things I just described, understanding the promotional cadence and really kind of reading how our customer behaved in November to really inform the balance of the quarter.

There are no further questions at this time. I will now turn the call back over to Paula for closing remarks.

Well, thank you all. Thank you for joining us today. Dave and I were very pleased to be able to be with you and to tell our story. But before we wrap up, I want to thank our J.Jill team for their dedication and commitment to our customer. And with the holiday season now underway, I'd really like to wish everyone a very happy holiday. We look forward to updating you on our progress in the new year. Thank you.

This concludes today's conference. You may now disconnect.