Paying the price for J. Jill

Jul 01, 2009 9:30 PM  By

When Talbots Bought J. Jill Three Years Ago, it was no secret that industry watchers felt the women’s apparel merchant had way overpaid.

Financial experts pointed out that with J. Jill’s $517 million price tag, Talbots paid about 19.3 times earnings before EBITDA (earnings before interest, taxes, depreciation and amortization). That was a serious multiple for a business that wasn’t doing so great.

You might recall that apparel brand Liz Claiborne was trying to acquire J. Jill then as well — it had offered $366 million for J. Jill about three months before the Talbots deal. (And many thought that Claiborne’s was an offer J. Jill couldn’t refuse.)

It wasn’t just that Talbots didn’t want Liz Claiborne to get J. Jill — though clearly that was a factor. Private equity buyers — namely Golden Gate Capital — had started snapping up women’s apparel merchants, and some felt that Talbots feared becoming a small player backed into a corner.

So it’s ironic that Golden Gate winds up with J. Jill in the end. And for the bargain price of $75 million. (See “Golden Gate gets J. Jill”.)

What’s more, Talbots was apparently lucky to get $75 million for J. Jill. At least one analyst has said J. Jill is valued on its books at less than $20 million. Yikes.

We all know about J. Jill’s problems — its overeager retail expansion, the recession and so on. But it is always about the merchandise, and J. Jill lost its way on that front a few years ago.

The products it’s been offering don’t resonate with core customers and, judging by the financials, they don’t appeal to a new audience either. I know I stopped buying from J. Jill two or three years ago; many other people I know did as well.

What happened? The selection had become too dowdy and too expensive for what it was; plus, the quality seems to have suffered.

Let’s hope that under Golden Gate J. Jill can get its merchandising mojo back. I could use some new clothes.

P.S. For more on company sales, mergers and acquisitions and who owns what, see our coverage of the Multichannel Merchant 100. As you might imagine, the deck has been reshuffled quite a bit this year, thanks to the economy.