---

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

(Mark One)

|ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED MARCH 30, 2002
|- | ----------------------------------------------------------------------------------------------------------------------------

OR

|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

Commission file number 0-22480

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The J. Jill Group, Inc.(Exact Name of Registrant as Specified in its Charter)

Delaware(State or Other Jurisdiction of
Incorporation or Organization)

04-2973769(I.R.S. Employer
Identification No.)4 Batterymarch Park, Quincy, MA(Address of Principal Executive Offices)

02169(Zip Code)


Registrant's telephone number, including area code:(617) 376-4300

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes ý    No o

Shares
outstanding of the Registrant's common stock (par value $0.01) at May 3, 2002: 12,699,862

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THE J. JILL GROUP, INC.        INDEX TO QUARTERLY REPORT ON FORM 10-Q        FOR THE QUARTER ENDED MARCH 30, 2002

|                             |         |                                                                                                    |                                                                                       | Page
|---------------------------- | ------- | -------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ----
|PART IFINANCIAL INFORMATION |         |                                                                                                   
|                             | Item 1. |                                                                                                    | Condensed Consolidated Financial Statements                                           |     
|                             |         | Consolidated Balance Sheets at March 30, 2002, March 31, 2001 and December 29, 2001                |                                                                                       | 3   
|                             |         | Consolidated Statements of Operations for the three months ended March 30, 2002 and March 31, 2001 |                                                                                       | 4   
|                             |         | Consolidated Statements of Cash Flows for the three months ended March 30, 2002 and March 31, 2001 |                                                                                       | 5   
|                             |         | Notes to Condensed Consolidated Financial Statements                                               |                                                                                       | 6   
|                             | Item 2. |                                                                                                    | Management's Discussion and Analysis of Financial Condition and Results of Operations |     
|                             | Item 3. |                                                                                                    | Quantitative and Qualitative Disclosures about Market Risk                            |     
|PART IIOTHER INFORMATION    |         |                                                                                                   
|                             | Item 6. |                                                                                                    | Exhibits and Reports on Form 8-K                                                      |     
|Signatures                   |         | 19                                                                                                

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THE J. JILL GROUP, INC.        CONSOLIDATED BALANCE SHEETS        (in thousands)        (unaudited)

|                                     |                                                                                                                                                                                                           | March 30,
2002             |                                            | March 31,
2001 |         | December 29,
2001
|------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | -------------- | ------- | -----------------
|ASSETS                               |                                                                                                                                                                                                           |                            |                                            |                |         |                  
|Current assets:                      |                                                                                                                                                                                                           |                            |                                            |                |         |                  
|                                     | Cash and cash equivalents                                                                                                                                                                                 |                            | $                                          | 32,879         |         | $                
|                                     | Cash held in escrow                                                                                                                                                                                       |                            |                                            | 668            |         |                  
|                                     | Accounts receivable, net                                                                                                                                                                                  |                            |                                            | 8,546          |         |                  
|                                     | Inventory                                                                                                                                                                                                 |                            |                                            | 30,972         |         |                  
|                                     | Prepaid catalog expenses                                                                                                                                                                                  |                            |                                            | 4,297          |         |                  
|                                     | Deferred income taxes                                                                                                                                                                                     |                            |                                            | 7,356          |         |                  
|                                     | Other current assets                                                                                                                                                                                      |                            |                                            | 4,158          |         |                  
|                                     |                                                                                                                                                                                                           |                            |                                            |                |         |                  
|                                     |                                                                                                                                                                                                           | Total current assets       |                                            |                | 88,876  |                  
|Property and equipment, net          |                                                                                                                                                                                                           |                            | 90,039                                     |                |         | 68,603           
|Deferred income taxes                |                                                                                                                                                                                                           |                            |                                           |                |         | 1,431            
|Other non-current assets             |                                                                                                                                                                                                           |                            | 2,058                                      |                |         | 1,789            
|                                     |                                                                                                                                                                                                           |                            |                                            |                |         |                  
|                                     |                                                                                                                                                                                                           |                            | Total assets                               |                | $       | 180,973          
|                                     |                                                                                                                                                                                                           |                            |                                            |                |         |                  
|LIABILITIES AND STOCKHOLDERS' EQUITY |                                                                                                                                                                                                           |                            |                                            |                |         |                  
|Current liabilities:                 |                                                                                                                                                                                                           |                            |                                            |                |         |                  
|                                     | Accounts payable                                                                                                                                                                                          |                            | $                                          | 10,433         |         | $                
|                                     | Accrued expenses                                                                                                                                                                                          |                            |                                            | 12,297         |         |                  
|                                     | Accrued customer returns                                                                                                                                                                                  |                            |                                            | 5,806          |         |                  
|                                     | Current portion of long-term debt                                                                                                                                                                         |                            |                                            | 1,698          |         |                  
|                                     |                                                                                                                                                                                                           |                            |                                            |                |         |                  
|                                     |                                                                                                                                                                                                           | Total current liabilities  |                                            |                | 30,234  |                  
|Long-term debt, less current portion |                                                                                                                                                                                                           |                            | 15,151                                     |                |         | 16,851           
|Deferred credits from landlords      |                                                                                                                                                                                                           |                            | 15,290                                     |                |         | 5,445            
|Deferred income taxes                |                                                                                                                                                                                                           |                            | 271                                        |                |         |                 
|Commitments                          |                                                                                                                                                                                                           |                            |                                            |                |         |                  
|Stockholders' equity:                |                                                                                                                                                                                                           |                            |                                            |                |         |                  
|                                     | Special preferred stock (par value $0.01) 1,000,000 shares authorized                                                                                                                                     |                            |                                            |               |         |                  
|                                     | Common stock (par value $0.01) 30,000,000 shares authorized, 12,398,568, 11,866,662 and 12,070,466 shares issued and outstanding as of March 30, 2002, March 31, 2001 and December 29, 2001,
respectively |                            |                                            | 124            |         |                  
|                                     | Additional paid-in capital                                                                                                                                                                                |                            |                                            | 98,440         |         |                  
|                                     | Retained earnings                                                                                                                                                                                         |                            |                                            | 21,463         |         |                  
|                                     |                                                                                                                                                                                                           |                            |                                            |                |         |                  
|                                     |                                                                                                                                                                                                           | Total stockholders' equity |                                            |                | 120,027 |                  
|                                     |                                                                                                                                                                                                           |                            |                                            |                |         |                  
|                                     |                                                                                                                                                                                                           |                            | Total liabilities and stockholders' equity |                | $       | 180,973          
|                                     |                                                                                                                                                                                                           |                            |                                            |                |         |                  

The
accompanying notes are an integral part of the consolidated financial statements.

3

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THE J. JILL GROUP, INC.        CONSOLIDATED STATEMENTS OF OPERATIONS        (in thousands, except per share data)        (unaudited)

|                                             |                                  | Three Months Ended
|-------------------------------------------- | -------------------------------- | ------------------
|
|Net sales                                    |                                  | $                 
|Cost of products and merchandising           |                                  |                   
|                                             |                                  |                   
|                                             | Gross margin                     |                   
|Selling, general and administrative expenses |                                  |                   
|                                             |                                  |                   
|                                             | Income before interest and taxes |                   
|Interest, net                                |                                  |                   
|                                             |                                  |                   
|                                             | Income before taxes              |                   
|Income tax provision                         |                                  |                   
|                                             |                                  |                   
|                                             | Net income                       |                   
|                                             |                                  |                   
|Earnings per share:                          |                                  |                   
|                                             | Basic                            |                   
|                                             | Diluted                          |                   
|Weighted average shares outstanding:         |                                  |                   
|                                             | Basic                            |                   
|                                             | Diluted                          |                   

The
accompanying notes are an integral part of the consolidated financial statements.

4

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THE J. JILL GROUP, INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS        (in thousands)        (unaudited)

|                                             |                                                                                   | Three Months Ended                              |       
|-------------------------------------------- | --------------------------------------------------------------------------------- | ----------------------------------------------- | ------
|
|Cash flows provided by operating activities: |                                                                                   |                                                 |       
|                                             | Net income                                                                        |                                                 | $     
|                                             | Adjustments to reconcile net income to net cash provided by operating activities: |                                                 |       
|                                             |                                                                                   | Depreciation and amortization                   |       
|                                             |                                                                                   | Deferred income taxes                           |       
|                                             | Changes in assets and liabilities:                                                |                                                 |       
|                                             |                                                                                   | Decrease in accounts receivable                 |       
|                                             |                                                                                   | (Increase) decrease in inventory                |       
|                                             |                                                                                   | (Increase) decrease in prepaid catalog expenses |       
|                                             |                                                                                   | Increase in other assets                        |       
|                                             |                                                                                   | Decrease in accounts payable                    |       
|                                             |                                                                                   | Decrease in accrued expenses                    |       
|                                             |                                                                                   | Increase (decrease) in accrued customer returns |       
|                                             |                                                                                   | Increase in deferred credits from landlords     |       
|                                             |                                                                                   |                                                 |       
|Net cash provided by operating activities    |                                                                                   |                                                 | 6,773 
|Cash flows used in investing activities:     |                                                                                   |                                                 |       
|                                             | Increase in cash held in escrow                                                   |                                                 |       
|                                             | Additions to property and equipment                                               |                                                 |       
|                                             |                                                                                   |                                                 |       
|Net cash used in investing activities        |                                                                                   |                                                 | (6,382
|Cash flows provided by financing activities: |                                                                                   |                                                 |       
|                                             | Borrowings under debt agreements                                                  |                                                 |       
|                                             | Payments of debt borrowings                                                       |                                                 |       
|                                             | Proceeds from stock transactions                                                  |                                                 |       
|                                             |                                                                                   |                                                 |       
|Net cash provided by financing activities    |                                                                                   |                                                 | 2,336 
|Net increase in cash and cash equivalents    |                                                                                   |                                                 | 2,727 
|Cash and cash equivalents at:                |                                                                                   |                                                 |       
|                                             | Beginning of period                                                               |                                                 |       
|                                             |                                                                                   |                                                 |       
|                                             | End of period                                                                     |                                                 | $     
|                                             |                                                                                   |                                                 |       
|Supplemental information:                    |                                                                                   |                                                 |       
|Non-cash investing activities:               |                                                                                   |                                                 |       
|                                             | Construction in progress accrued, not paid                                        |                                                 | $     

The
accompanying notes are an integral part of the consolidated financial statements.

5

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THE J. JILL GROUP, INC.        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS        (unaudited)

The financial statements included herein have been prepared by The J. Jill Group, Inc. (together with its wholly owned consolidated subsidiaries, the
"Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission, and in the opinion of management contain all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. Accordingly, although the Company believes that
the disclosures are adequate to make the information presented not misleading, these financial statements should be read in conjunction with the consolidated financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 2001 ("fiscal 2001"). As a retailer, the Company is subject to seasonal
fluctuations in net sales. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

A.    Nature of business:

The Company is a specialty retailer of high quality women's apparel, accessories and footwear that markets its products through its catalogs, retail stores and
e-commerce website.

B.    Reclassifications:

Certain amounts in the prior year financial statements and related notes have been reclassified to conform to the current period presentation. In addition to
certain reclassifications in the accompanying financial statements, segment information for the three months ended March 31, 2001 has been presented to conform to current period presentation
and management's current internal reporting structure.

C.    Debt:

The Company's credit facilities at March 30, 2002 consisted of (i) a $50,000,000 revolving credit facility (the "Revolving Credit Facility");
(ii) a $12,000,000 real estate loan (the "Tilton Facility Loan"); and (iii) a $9,500,000 equipment loan (the "Equipment Loan").

The
Company entered into the Revolving Credit Facility on June 29, 2001 to replace its prior revolving credit facility. The Revolving Credit Facility was subsequently amended to,
among other things, change the maximum number of new retail store openings allowed under the agreement from 25 per year for fiscal 2001 and fiscal 2002 to 50 for the two-year period with
no annual maximum. The Company is currently negotiating to further increase this maximum for the two-year period. The Revolving Credit Facility is collateralized by substantially all the
personal property, both tangible and intangible, of the Company. The Revolving Credit Facility matures on June 1, 2003 and at March 30, 2002 bore interest at 4.75% per annum. The amount
available under the Revolving Credit Facility is reduced by outstanding borrowings and outstanding letters of credit. Outstanding borrowings may not exceed $20,000,000 and bear interest at an annual
rate equal to the prime lending rate announced by one of the participating banks or the LIBOR lending rate. There were no outstanding borrowings on the Revolving Credit Facility at March 30,
2002. At March 31, 2001 borrowings under the prior revolving credit facility totaled $4,940,000. Outstanding letters of credit totaled $17,156,000 at March 30, 2002 compared to
$15,940,000 under the prior revolving credit facility at March 31, 2001. Availability under the Revolving Credit Facility at March 30, 2002 was $32,844,000. Outstanding letters of credit
do not bear interest. The Company is required to pay a commitment fee of 1/4 of 1% per annum on the unused portion of the Revolving Credit Facility.

6

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THE J. JILL GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The
Tilton Facility Loan is collateralized by a mortgage lien on the Company's operations, fulfillment and distribution center in Tilton, New Hampshire (the "Tilton facility"). The
Tilton facility is owned by Birch Pond Realty Corporation, a wholly owned subsidiary of The J. Jill Group, Inc., and leased to The J. Jill Group, Inc. Payments of principal and interest
on the Tilton Facility Loan, a 10-year loan, are due monthly, based on a 20-year amortization, with a balloon payment of the remaining balance payable on April 1, 2009.
The interest rate on the Tilton Facility Loan is fixed at 7.30% per annum. The Equipment Loan is collateralized by substantially all of the Company's materials handling equipment. The Equipment Loan
requires monthly payments of principal and interest through its maturity on December 1, 2005, and has a weighted average interest rate of 7.62% per annum.

The
Company's credit facilities contain various lending conditions and covenants including restrictions on permitted liens. Certain credit facilities also require compliance with certain
debt service coverage and other financial ratios. The Company was in compliance with the financial covenants associated with its credit facilities as of and for the quarters ended March 30,
2002 and March 31, 2001. At March 30, 2002 the Company estimated the fair value of its outstanding borrowings to be $19,130,000.

A
summary of the Company's outstanding long-term debt follows (in thousands):

March 30,
2002

March 31,
2001

December 29,
2001Real estate loans

$
11,177

$
11,479

$
11,257Equipment loans


5,591


6,816


5,906Furniture loans





347


89Revolving credit borrowings





4,940


Capitalized lease obligations


81


132


93Total long-term debt


16,849


23,714


17,345Less current maturities


(1,698
)

(6,863
)

(1,755
)Long-term debt, less current portion

$
15,151

$
16,851

$
15,590


D.    Earnings per share:

A reconciliation of the numerators and denominators of the basic and diluted earnings per share computations follows (in thousands, except per share data):

Three Months EndedMarch 30,
2002

March 31,
2001Numerator:Net income

$
2,696

$
796Denominator (shares):Basic weighted average shares outstanding


12,240


11,265Assumed exercise of stock options


801


752Diluted weighted average shares outstanding


13,041


12,017Earnings per share:Basic

$
0.22

$
0.07Diluted

$
0.21

$
0.07


7

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THE J. JILL GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

During
the first quarter of fiscal 2002, options to purchase 261,000 shares of the Company's common stock were granted and options to purchase 303,069 shares of common stock were
exercised pursuant to the Company's stock option plans. Also during the first quarter of fiscal 2002, the Company received $2,488,000 in cash from the exercise of stock options and recorded a related
tax benefit of $1,562,000.

Between
March 30, 2002 and May 3, 2002 options to purchase 301,294 shares of common stock were exercised pursuant to the Company's stock option plans.

E.    Commitments:

The Company leases certain of its facilities under non-cancellable operating leases having initial or remaining terms of more than one year. Many of
the Company's leases contain scheduled increases in annual rent payments and the majority of the Company's real estate leases also require the Company to pay maintenance, insurance and real estate
taxes. Additionally, certain of the Company's leases include provisions for the payment of additional rent based on a percentage of sales over an established minimum.

During
the first quarter of fiscal 2002, the Company entered into leases for nine retail stores, each having terms of approximately 10 years. At March 30, 2002, the future
minimum lease payments for operating leases having a remaining term in excess of one year at such date, including the nine operating leases entered into during the quarter, were as follows (in
thousands):

For the remainder of fiscal 2002

$
10,929Fiscal 2003


15,173Fiscal 2004


15,432Fiscal 2005


15,523Fiscal 2006


15,713Thereafter


74,062Total

$
146,832


F.    Deferred credits from landlords:

Deferred credits from landlords includes step rent and allowances from landlords related to the Company's retail store leases. The benefit of these deferred
credits is recognized over the lease term.

G.    Segment information:

The Company currently has two reportable business segments, direct and retail. Each segment is separately managed and utilizes distinct distribution, marketing
and inventory management strategies. The direct segment markets merchandise through catalogs and an e-commerce website. The retail segment markets merchandise through retail stores.
Results from the Company's catalog outlet stores are included in the direct segment. Segment reporting is intended to give financial statement users a view of the Company "through the eyes of
management." The Company's internal management reporting is the basis for the information disclosed for its business segments.

8

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THE J. JILL GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

The
Company evaluates its segment profitability based on the direct contribution of each segment. Direct contribution represents each segment's net sales less direct costs related to the
segment's operations. Direct costs for both segments include merchandise acquisition and control costs and provisions for markdowns. Direct costs also include catalog costs, certain order processing
costs and e-commerce selling costs for the direct segment and retail store selling, occupancy and administrative costs for the retail segment. Direct contribution less unallocated
shared-service costs and general and administrative expenses is equal to income before interest and taxes. Unallocated shared-service costs include distribution and warehousing costs as well as
merchandising and product development costs. General and administrative expenses include corporate executive management costs, support service costs (e.g. shared information systems, finance and human
resources) and corporate headquarters occupancy costs. Segment assets are those that are directly used in or identified with segment operations, including inventory in stores, fixed assets primarily
related to store construction, accounts receivable and other operating assets. Unallocated assets include corporate cash and cash equivalents, the Company's corporate headquarters and distribution
facility, corporate information systems, deferred tax amounts, all inventory except inventory in stores and other corporate assets. The accounting policies of the Company's segments are the same as
those described in Note B to the Company's Annual Report on Form 10-K for fiscal 2001. In addition, inter-segment balances and transactions have been eliminated.

The
following tables provide financial information by segment and a reconciliation of segment direct contribution to income before interest and taxes (in thousands):

Three Months EndedMarch 30,
2002

March 31,
2001Net sales:Direct

$
51,178

$
52,982Retail


22,411


10,787Other (1)


(232
)

(437
)Total net sales

$
73,357

$
63,332Direct contribution reconciliation:Direct

$
16,414

$
12,071Retail


(855
)

(1,263
)Total direct contribution


15,559


10,808Unallocated shared-service costs


(6,099
)

(5,575
)General and administrative expenses


(4,707
)

(3,638
)Income before interest and taxes

$
4,753

$
1,595


Direct

Retail

Unallocated Assets

TotalIdentifiable assets:March 30, 2002

$
8,762

$
62,552

$
109,659

$
180,973March 31, 2001

$
6,263

$
31,975

$
121,419

$
159,657


9

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THE J. JILL GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

H.    Deferred compensation:

Effective January 1, 2002, the Company established an unfunded deferred compensation plan (the "Plan") to provide benefits for management and members of
the Board of Directors. The Plan provides for (i) elective deferrals of salary and incentive compensation on a pre-tax basis within limits specified by the Plan ("compensation
deferrals"), (ii) discretionary contributions by the Company ("discretionary contributions"), which may be made subject to vesting requirements, and (iii) certain other contributions by
the Company to be made in connection with the Company's annual discretionary match for its 401(k) Plan, if any ("other contributions"). Participants in the Plan are required to designate how they
would like their compensation deferrals, discretionary contributions and other contributions to be measured based on the various measurement options provided by the Plan. At March 30, 2002, a
deferred compensation liability to employees of $410,000 was included in accrued expenses in the accompanying consolidated balance sheet.

Separately,
the Company, in its discretion, transferred $817,000 to a trust. The trust assets are invested in corporate owned life insurance in a manner that is designed to approximate
the measurement designations of the Plan participants, for both vested and unvested balances. Changes in value of the trust assets are intended to mirror changes in value of the participants' deferred
compensation accounts. The trust assets are included in other non-current assets on the accompanying consolidated balance sheet at March 30, 2002.

I.    Recent accounting standards:

In August 2001, the Financial Accounting Standards Board issued Statement No. 144 ("SFAS 144"), "Accounting for the
Impairment or Disposal of Long-Lived Assets," which supersedes Statement No. 121 ("SFAS 121"), "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of," and the accounting and reporting provisions of Accounting Principles Board Opinion
No. 30 ("APB 30"), "Reporting the Results of OperationsReporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions." Because SFAS 121 did not address the accounting for a segment of a business accounted for as a discontinued operation
under APB 30, two accounting models existed for long-lived assets to be disposed of. SFAS 144 establishes a single accounting model, based on the framework established in
SFAS 121, for
long-lived assets to be disposed of. It also addresses certain significant implementation issues under SFAS 121. The Company adopted the provisions of SFAS 144 as of the
beginning of fiscal 2002. The Company has determined that SFAS 144 had no effect on the Company's consolidated financial statements.

10

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This Form 10-Q, including the following discussion, contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 that involve substantial risks and uncertainties. For this purpose, any statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the generality of the foregoing, the words "projected," "anticipated," "planned," "expected" and similar expressions are intended to identify
forward-looking statements. In particular, statements regarding future financial targets or trends are forward-looking statements. Forward-looking statements are not guarantees of the Company's future
financial performance, and undue reliance should not be placed on them. The Company's actual results, performance or achievements may differ significantly from the results discussed in or implied by
the forward-looking statements. Factors that might cause such a difference include, but are not limited to, the following: the continued success or possible future failure of the retail store
initiative; the ability of the Company to effectively manage its operations and growth in a multiple distribution channel environment; significant changes in customer acceptance of the Company's
product offerings; changes in competition in the apparel industry; changes in consumer spending, fashion trends and consumer preferences; changes in, or the failure to comply with, federal and state
tax and other government regulations; the customary risks of purchasing merchandise abroad, including longer lead times, higher initial purchase commitments and foreign currency fluctuations; possible
future increases in expenses and labor and employee benefit costs; the ability of the Company to attract and retain qualified personnel; business abilities and judgment of management; the existence or
absence of brand awareness; the existence or absence of publicity, advertising and promotional efforts; the success or failure of operating initiatives; the mix of the Company's sales between full
price and liquidation merchandise; general economic and business conditions and other factors. See also Item 1A, "Risk Factors," included in the Company's Annual Report on Form 10-K
for the fiscal year ended December 29, 2001 ("fiscal 2001"). The Company disclaims any intent or obligation to update any forward-looking statements.

Overview

The J. Jill Group, Inc. (together with its wholly owned consolidated subsidiaries, the "Company"), is a specialty retailer of high quality women's apparel,
accessories and footwear that markets its products through its catalogs, retail stores and e-commerce website. The Company currently has two reportable business segments, direct and
retail. Each segment is separately managed and utilizes distinct distribution, marketing and inventory management strategies. The direct segment markets merchandise through catalogs and an
e-commerce website. The retail segment markets merchandise through retail stores.

Net
sales for the three months ended March 30, 2002 ("first quarter fiscal 2002") increased by 15.8% to $73.4 million from $63.3 million during the three months
ended March 31, 2001 ("first quarter fiscal 2001"). Income before interest and taxes for first quarter fiscal 2002 was $4.8 million, or 6.5% of net sales, compared to
$1.6 million, or 2.5% of net sales, for first quarter fiscal 2001. Net income was $2.7 million, or $0.21 per diluted share, for first quarter fiscal 2002 compared to $0.8 million,
or $0.07 per diluted share, for first quarter fiscal 2001.

11

---

Results of Operations

The following table presents the Company's consolidated statements of operations expressed as a percentage of net sales:

Three Months EndedMarch 30,
2002

March 31,
2001Net sales

100.0
%
100.0
%Cost of products and merchandising

65.3

69.9Gross margin

34.7

30.1Selling, general and administrative expenses

28.2

27.6Income before interest and taxes

6.5

2.5Interest, net

0.3

0.3Income before taxes

6.2

2.2Income tax provision

2.5

0.9Net income

3.7
%
1.3
%


The
following table presents certain selected operating data:

Three Months EndedMarch 30,
2002

March 31,
2001DirectCirculation (1):Catalogs (in thousands)

16,000

15,300Square inches (in millions)

108,800

109,200Twelve-month buyers (2)

1,005,000

1,022,000Customer e-mail addresses

664,000

578,000Retail(3)Stores openBeginning of period

51

22End of period

55

24Store weeks in operation (4)

670

294Total CompanyJ. Jill private label credit card holders

336,000

215,000


12

---

The
following table summarizes net sales by segment (in thousands):

Three Months EndedMarch 30,
2002

March 31,
2001Direct

$
51,178

$
52,982Retail


22,411


10,787Other(1)


(232
)

(437
)Total net sales

$
73,357

$
63,332


Comparison of First Quarter Fiscal 2002 to First Quarter Fiscal 2001

Net sales increased by $10.0 million, or 15.8%, to $73.4 million during first quarter fiscal 2002 from $63.3 million during first quarter
fiscal 2001. First quarter fiscal 2002 retail segment net sales increased by 107.8% to $22.4 million from $10.8 million in first quarter fiscal 2001 largely as a result of increased
store count. At March 30, 2002 the Company had 55 retail stores open compared to 24 at March 31, 2001. Direct segment net sales decreased by 3.4% on 0.4% less square inches circulated.
This decrease is primarily as a result of lower promotional activity during first quarter fiscal 2002 as compared to first quarter fiscal 2001. E-commerce net sales represented 28.0% of
total direct segment net sales during first quarter fiscal 2002 compared to 23.4% during first quarter fiscal 2001.

Gross
margin represents net sales less cost of products and merchandising. Cost of products and merchandising consists primarily of merchandise development, control and acquisition
costs, provisions for markdowns, order processing and customer service costs, distribution facility costs and occupancy costs for the Company's stores. During first quarter fiscal 2002, the Company's
gross margin increased by $6.4 million, or 33.5%, to $25.4 million from $19.0 million during first quarter fiscal 2001. As a percentage of net sales, gross margin increased to
34.7% during first quarter fiscal 2002 from 30.1% during first quarter fiscal 2001. This increase in gross margin as a percentage of net sales was primarily attributable to increased full price sales
volumes, better inventory management and higher initial markups. These factors were partially offset by the deleveraging of higher retail occupancy and depreciation costs associated with the Company's
retail store rollout.

Selling,
general and administrative expenses consist of costs to produce, print and distribute catalogs, as well as e-commerce website, retail store selling and corporate
administrative costs. During first quarter fiscal 2002, selling, general and administrative expenses increased by $3.2 million, or 18.5%, to $20.7 million from $17.4 million
during first quarter fiscal 2001. Selling, general and administrative expenses as a percentage of net sales increased to 28.2% during first quarter fiscal 2002 from 27.6% during first quarter fiscal
2001. This increase in selling, general and administrative expenses as a percentage of net sales was largely as a result of higher employee benefit and compensation expenses.

First
quarter fiscal 2002 interest income and interest expense were unchanged from first quarter fiscal 2001 levels of $0.2 million and $0.4 million, respectively.

The
Company provides for income taxes at an effective tax rate that includes the full federal and state statutory tax rates. The Company's effective tax rate for first quarter fiscal
2002 was 40.6% compared to 42.0% for first quarter fiscal 2001. The decreased effective tax rate for first quarter fiscal 2002 reflects a decrease in the projected amount of non-deductible
expenses for fiscal 2002 as compared to fiscal 2001.

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Segment Direct Contribution

The Company currently has two reportable business segments, direct and retail. Segment reporting is intended to give financial statement users a view of the
Company "through the eyes of management." The Company's internal management reporting is the basis for the information disclosed for its business segments.

The
accounting policies of the Company's segments are the same as those described in Note B to the Company's Annual Report on Form 10-K for fiscal 2001. In
addition, inter-segment balances and transactions have been eliminated. The Company evaluates its segment profitability based on the direct contribution of each segment. Direct contribution represents
each segment's net sales less direct costs related to the segment's operations. Direct costs for both segments include merchandise acquisition and control costs and provisions for markdowns. Direct
costs also include catalog costs, certain order processing costs and e-commerce selling costs for the direct segment and retail store selling, occupancy and administrative costs for the
retail segment.

The
following table summarizes direct contribution (deficit) by segment (in thousands):

Three Months EndedMarch 30,
2002

March 31,
2001Direct

$
16,414

$
12,071Retail


(855
)

(1,263
)Total direct contribution

$
15,559

$
10,808


The
direct segment's first quarter fiscal 2002 direct contribution increased by $4.3 million, or 36.0%, compared to first quarter fiscal 2001. As a percentage of direct segment
net sales, the direct segment's direct contribution increased to 32.1% during first quarter fiscal 2002 from 22.8% during first quarter fiscal 2001. This increase in direct contribution as a
percentage of segment net sales was primarily attributable to higher gross margins associated with increased full price sales volumes, better inventory management and higher initial markups.

The
retail segment's first quarter fiscal 2002 direct deficit decreased by $0.4 million, or 32.3%, compared to first quarter fiscal 2001. This decrease in the retail segment's
direct deficit is also largely due to higher gross margins achieved during first quarter fiscal 2002.

Seasonality and Quarterly Fluctuations

As the Company's retail business becomes a greater portion of its overall business, the Company expects that its business will become more seasonal. The Company's
retail store rollout plan is expected to materially impact year-over-year comparisons of the Company's net sales. Also, January is included in the first fiscal quarter for the
Company but is included in the fourth fiscal quarter for many other retailers. Because January is a month that traditionally involves significant promotional pricing, this difference needs to be taken
into account when making comparisons of the Company's financial performance for interim periods with that of other retailers.

Liquidity and Capital Resources

The Company's principal working capital needs arise from the need to support costs incurred in advance of revenue generation, primarily inventory acquisition and
catalog development, production and mailing costs incurred prior to the beginning of each selling season. The Company has two selling seasons that correspond to the fashion seasons. The spring season
begins in January and ends in July. The fall season begins in July and ends in January. The Company's capital investment needs arise from initiatives intended to support the growth of the Company,
including the retail store rollout and improvements to the

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Company's physical and operating infrastructure. During first quarter fiscal 2002, the Company funded its working capital and capital investment needs with cash generated from operations.

The
Company's cash and cash equivalents ("cash") increased by $2.7 million during first quarter fiscal 2002. Approximately $6.8 million in cash was generated from
operations and $2.8 million in cash was received from stock transactions, primarily from the exercise of stock options during the period. Approximately $6.2 million was invested in
property and equipment, primarily related to the Company's retail store rollout.    During first quarter fiscal 2002, net income before depreciation and amortization and collections on
accounts receivable were the primary sources of cash from operations. The primary use of cash from operations was payments made on accounts payable.

Cash
increased by $24.8 million during first quarter fiscal 2001 largely as a result of proceeds received from the Company's private placement of common stock during the quarter
as well as $2.3 million in cash from net borrowings. Approximately $6.1 million was invested in property and equipment, primarily related to the Company's retail store rollout. During
first quarter fiscal 2001, net income before depreciation and amortization and collections on accounts receivable were the primary sources of cash from operations. The primary use of cash from
operations was increases in inventory.

Inventory
levels at March 30, 2002 were 2.8% and 28.0% lower than at December 29, 2001 and March 31, 2001, respectively. The decrease in inventory levels at
March 30, 2002 compared to March 31, 2001 is attributable to lower levels of prior season merchandise combined with ordering spring season inventory more conservatively and timing
receipts closer to need. This tighter inventory management has resulted in lower overstocks and lower overall inventory levels.

Accounts
receivable balances at March 30, 2002 were 37.2% lower than at December 29, 2001 primarily as a result of collections associated with the Company's Holiday
deferred billing program and landlord allowance receivables. Accounts receivable balances at March 30, 2002 were 126.0% higher than at March 31, 2001 primarily as a result of increased
receivables associated with the Company's Spring deferred billing program and landlord allowances.

Deferred
credits from landlords relate to the Company's retail stores leases. The increase in deferred credits from landlords since March 31, 2001 is related to retail stores
opened since that date.

The
Company's credit facilities at March 30, 2002 consisted of (i) a $50.0 million revolving credit facility (the "Revolving Credit Facility"); (ii) a
$12.0 million real estate loan (the "Tilton Facility Loan"); and (iii) a $9.5 million equipment loan (the "Equipment Loan").

The
Company entered into the Revolving Credit Facility on June 29, 2001 to replace its prior revolving credit facility. The Revolving Credit Facility was subsequently amended to,
among other things, change the maximum number of new retail store openings allowed under the agreement from 25 per year for fiscal 2001 and fiscal 2002 to 50 for the two-year period with
no annual maximum. The Company is currently negotiating to further increase this maximum for the two-year period. The Revolving Credit Facility is collateralized by substantially all the
personal property, both tangible and intangible, of the Company and matures on June 1, 2003. The amount available under the Revolving Credit Facility is reduced by outstanding borrowings and
outstanding letters of credit. Outstanding borrowings may not exceed
$20.0 million and bear interest at an annual rate equal to the prime lending rate announced by one of the participating banks or the LIBOR lending rate. There were no outstanding borrowings on
the Revolving Credit Facility at March 30, 2002. At March 31, 2001 borrowings under the prior revolving credit facility totaled $4.9 million. Outstanding letters of credit totaled
$17.2 million at March 30, 2002 compared to $15.9 million under the prior revolving credit facility at March 31, 2001. Availability under the Revolving Credit Facility at
March 30, 2002 was $32.8 million. Outstanding letters of credit do not bear interest. The Company is required to pay a commitment fee of 1/4 of 1% per annum on the unused
portion of the Revolving Credit Facility.

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The
Tilton Facility Loan is collateralized by a mortgage lien on the Company's operations, fulfillment and distribution center in Tilton, New Hampshire (the "Tilton facility"). The
Tilton facility is owned by Birch Pond Realty Corporation, a wholly owned subsidiary of The J. Jill Group, Inc., and leased to The J. Jill Group, Inc. The Equipment Loan is
collateralized by substantially all of the Company's materials handling equipment.

The
Company's credit facilities contain various lending conditions and covenants including restrictions on permitted liens. Certain credit facilities also require compliance with certain
debt service coverage and other financial ratios. The Company was in compliance with the financial covenants associated with its credit facilities as of and for the quarters ended March 30,
2002 and March 31, 2001. The weighted average interest rate for amounts outstanding under the Company's credit facilities during first quarter fiscal 2002 was 7.39% per annum.

At
March 30, 2002, the Company had 55 retail stores open. The Company plans to open 35 to 40 retail stores in fiscal 2002. The cash requirements related to the Company's retail
store initiative are significant and are primarily comprised of leasehold improvements, net of landlord allowances, and initial inventory acquisition costs. The initial cash requirements for opening a
new retail store are currently estimated at an average of approximately $0.7 million per store. In addition, at March 30, 2002, the combined future minimum lease payments due under the
Company's retail store leases were approximately $131.4 million in aggregate and ranged up to $14.5 million per year.

The
Company expects that its cash on hand, cash available under its existing credit facilities and cash flows from operations will be sufficient to support the Company's capital and
operating needs through fiscal 2002. The Company expects to utilize a significant portion of its cash generated from operations in fiscal 2002 to fund its planned retail store rollout. The Company
believes that, if the current trend of business continues, it will generate enough cash from operations in fiscal 2002 to support all of its retail store rollout costs in fiscal 2002.

Future Financial Targets

With respect to fiscal 2002, and assuming the current economic environment does not deteriorate further, the Company is targeting net sales for the year to
increase by 15% to 20% over fiscal 2001 levels with diluted earnings per share ranging between $1.32 and $1.37, compared to $1.05 in fiscal 2001. For the second quarter of fiscal 2002, the Company is
targeting net sales to range between $81.0 and $83.0 million and diluted earnings per share to range between $0.26 and $0.28, compared to $0.21 for the second quarter of fiscal 2001.

The
Company expects its positive gross margin trend to continue into the second quarter of fiscal 2002. Gross margin as a percentage of net sales for the second quarter of fiscal 2002 is
targeted to increase by more than 300 basis points compared to the second quarter of fiscal 2001. Selling, general and administrative expenses as a percentage of net sales for the second quarter of
fiscal 2002 are targeted to remain at first quarter fiscal 2002 levels. Second quarter selling, general and administrative expenses as a percentage of net sales are targeted to be almost 300 basis
points higher than last year's second quarter levels. These are the Company's targets, not predictions of actual performance. Historically, the Company's performance has deviated, often materially,
from its targets. See the first paragraph of this Item 2 for factors that might cause such deviations.

Recent Accounting Standards

In August 2001, the Financial Accounting Standards Board issued Statement No. 144 ("SFAS 144"), "Accounting for the
Impairment or Disposal of Long-Lived Assets," which supersedes Statement No. 121 ("SFAS 121"), "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of," and the accounting and reporting provisions of Accounting Principles Board Opinion
No. 30 ("APB 30"), "Reporting the Results of OperationsReporting the Effects of Disposal of a Segment of a

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Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." Because SFAS 121 did not address the accounting for a segment of a business
accounted for as a discontinued operation under APB 30, two accounting models existed for long-lived assets to be disposed of. SFAS 144 establishes a single accounting model, based
on the framework established in SFAS 121, for long-lived assets to be disposed of. It also addresses certain significant implementation issues under SFAS 121. The Company
adopted the provisions of SFAS 144 as of the beginning of fiscal 2002. The Company has determined that SFAS 144 had no effect on the Company's consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company's objective in managing its long-term exposure to interest rate changes and foreign currency rate changes is to limit the material impact
of the changes on cash flows and earnings and to
lower its overall borrowing costs. To achieve its objectives, the Company periodically identifies these risks and manages them through its regular operating and financing activities, including
periodic refinancing of debt obligations to increase availability while minimizing financing costs and considering fixed and variable rate debt positions. The Company does not currently use derivative
financial instruments or enter into foreign currency denominated contracts. Management has calculated the effect of a 10% change in interest rates over a month and determined the effect to be
immaterial. Management does not foresee or expect any significant changes in the management of foreign currency or interest rate exposures or in the strategies it employs to manage such exposures in
the near future.

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PART IIOTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K



|    |  | Certificate of Incorporation and By-Laws                                                                                                                                                                                                                                 
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1 |  | Restated Certificate of Incorporation of the Company (included as Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 25, 1993, File No. 0-22480, and incorporated herein by reference)                                           
|3.2 |  | Certificate of Amendment of Restated Certificate of Incorporation of the Company, dated June 1, 1999 (included as Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 26, 1999, File
No. 0-22480, and incorporated herein by reference)
|3.3 |  | Certificate of Amendment of Restated Certificate of Incorporation of the Company, dated June 5, 2001 (included as Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, File
No. 0-22480, and incorporated herein by reference)
|3.4 |  | By-Laws of the Company, as amended (included as Exhibit 99.1 to the Company's Current Report on Form 8-K filed November 24, 1999, File No. 0-22480, and incorporated herein by reference)                                                                                



The Company did not file any reports on Form 8-K during the quarter ended March 30, 2002.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

|                    |  | THE J. JILL GROUP, INC.
|------------------- |  | -----------------------
|Dated: May 13, 2002 |  | By:                    
|Dated: May 13, 2002 |  | By:                    

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