Dive Brief:

• Apparel retailer J. Jill has brought on advisers including the law firm Kirkland & Ellis as it tries to manage its balance sheet, according to reports in Debtwire and The Wall Street Journal.
• J. Jill has also brought on investment bank Centerview Partners, according to the Journal. A group of J. Jill's lenders, meanwhile, have brought in law firm Stroock & Stroock & Lavan as legal counsel as well as investment bank Guggenheim Partners, according to the Journal.
• J. Jill's stores have been temporarily closed since March 18 in response to the COVID-19 pandemic. At the time, the company drew down $33 million on its credit facility, leaving it with $50 million in cash. It has also furloughed the majority of its store workers to preserve liquidity.

Dive Insight:

J. Jill entered 2020 with baggage: debt, sales declines and financial losses. The women's apparel seller was in need of a turnaround and had little margin for error. Instead of a year working on winning back customers, it ran into a pandemic that has laid waste to discretionary retail. 

J. Crew on Monday became the first nationwide retailer to enter bankruptcy since the onset of the pandemic. Observers expect many more to follow as store closures eat into cash and liquidity reserves and what the market looks like even after stores reopen remains impossible to predict with any precision. Retailers already in distress could easily be forced into court by the current crisis.

J. Jill acknowledged as much in late April. The company, as other publicly traded retailers have, added language about COVID-19 to its risk disclosures. "We cannot foresee whether the outbreak of COVID-19 will be effectively contained, nor can we predict the severity and duration of its impact," the company said. "As such, impacts of COVID-19 to our business are highly uncertain and we will continue to assess the financial impacts."

The retailer added, "COVID-19 also aggravates many of the other risks to our business, including our ability to service our debt and lease obligations and our ability to continue to comply with the maintenance covenants of our indebtedness."

The pandemic hit J. Jill on the heels of a tough year. Comparable sales fell 3.6% in fiscal 2019, and the company posted a $128.6 million loss, compared to income of $30.5 million in the previous year. J. Jill's fourth quarter beat its own expectations, but still brought sales declines and a $38.6 million net loss. 

Interim CEO Jim Scully —​ who filled in for Linda Heasley after she stepped down in December — called the year "challenging." But Scully also pointed out some inventory management improvements​ on an analyst call early in March, during which disruption from the coronavirus was mentioned only twice as a vague macroeconomic risk.

At the time, Scully invoked optimism about the brand and its future. "We serve as a remarkable, growing and yet underserved demographic," he said, according to a Seeking Alpha transcript. "We have a right-sized store fleet, great penetration of online and a loyal customer who values both channels as ways to interact with the brand."

In downgrading J. Jill late last year, S&P Global analysts cited management missteps including "less effective marketing strategies and repeated merchandise mistakes with less on-trend colors and styles​," which have hurt the brand's relevance. 

The company, with its stock trading under $1, has been threatened with delisting of its stock from the New York Stock Exchange. The hire of Kirkland & Ellis raises the specter of a possible bankruptcy, given the law firm's prolific work with prominent retailers in Chapter 11, including Toys R Us, Pier 1 and Barneys New York, among others.

Again, J. Jill isn't alone in its travails. According to recent data from CreditRiskMonitor, 27 retailers with publicly traded stock or debt have at least a 4% chance of filing for bankruptcy within the next year. J. Jill is among them, with an estimated 10% to 50% chance of filing for bankruptcy.