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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 SEPTEMBER 28, 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 November 1, 2002: 19,494,911

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THE J. JILL GROUP, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 28, 2002



|                                                 |         |                                                                                                                                |                                                                                       | Page
|------------------------------------------------ | ------- | ------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------- | ----
|PART IFINANCIAL INFORMATION                     |         |                                                                                                                               
|                                                 | Item 1. |                                                                                                                                | Condensed Consolidated Financial Statements                                           |     
|                                                 |         | Consolidated Balance Sheets at September 28, 2002, September 29, 2001 and December 29, 2001                                    |                                                                                       | 3   
|                                                 |         | Consolidated Statements of Operations for the three months and the nine months ended September 28, 2002 and September 29, 2001 |                                                                                       | 4   
|                                                 |         | Consolidated Statements of Cash Flows for the nine months ended September 28, 2002 and September 29, 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                            |     
|                                                 | Item 4. |                                                                                                                                | Controls and Procedures                                                               |     
|PART IIOTHER INFORMATION                        |         |                                                                                                                               
|                                                 | Item 5. |                                                                                                                                | Other Information                                                                     |     
|                                                 | Item 6. |                                                                                                                                | Exhibits and Reports on Form 8-K                                                      |     
|SIGNATURES                                       |         | 23                                                                                                                            
|CERTIFICATIONS PURSUANT TO RULE 13a-14 OR 15d-14 |         | 24                                                                                                                            

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THE J. JILL GROUP, INC.

CONSOLIDATED BALANCE SHEETS    (in thousands)    (unaudited)

|                                     |                                                                                                                                                                                                                | September 28,
2002                         |         | September 29,
2001 |         | December 29,
2001
|------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ------------------ | ------- | -----------------
|ASSETS                               |                                                                                                                                                                                                                |                                            |         |                    |         |                  
|Current assets:                      |                                                                                                                                                                                                                |                                            |         |                    |         |                  
|                                     | Cash and cash equivalents                                                                                                                                                                                      |                                            | $       | 27,137             |         | $                
|                                     | Cash held in escrow                                                                                                                                                                                            |                                            |         | 677                |         |                  
|                                     | Accounts receivable, net                                                                                                                                                                                       |                                            |         | 11,728             |         |                  
|                                     | Inventory                                                                                                                                                                                                      |                                            |         | 49,759             |         |                  
|                                     | Prepaid catalog expenses                                                                                                                                                                                       |                                            |         | 7,244              |         |                  
|                                     | Deferred income taxes                                                                                                                                                                                          |                                            |         | 6,308              |         |                  
|                                     | Other current assets                                                                                                                                                                                           |                                            |         | 4,812              |         |                  
|                                     |                                                                                                                                                                                                                |                                            |         |                    |         |                  
|                                     |                                                                                                                                                                                                                | Total current assets                       |         |                    | 107,665 |                  
|Property and equipment, net          |                                                                                                                                                                                                                |                                            | 106,155 |                    |         | 78,274           
|Deferred income taxes                |                                                                                                                                                                                                                |                                            |        |                    |         | 827              
|Other non-current assets             |                                                                                                                                                                                                                |                                            | 3,457   |                    |         | 1,592            
|                                     |                                                                                                                                                                                                                |                                            |         |                    |         |                  
|                                     |                                                                                                                                                                                                                | Total assets                               |         | $                  | 217,277 |                  
|                                     |                                                                                                                                                                                                                |                                            |         |                    |         |                  
|LIABILITIES AND STOCKHOLDERS' EQUITY |                                                                                                                                                                                                                |                                            |         |                    |         |                  
|Current liabilities:                 |                                                                                                                                                                                                                |                                            |         |                    |         |                  
|                                     | Accounts payable                                                                                                                                                                                               |                                            | $       | 17,737             |         | $                
|                                     | Accrued expenses                                                                                                                                                                                               |                                            |         | 16,400             |         |                  
|                                     | Accrued customer returns                                                                                                                                                                                       |                                            |         | 6,723              |         |                  
|                                     | Current portion of long-term debt                                                                                                                                                                              |                                            |         | 1,764              |         |                  
|                                     |                                                                                                                                                                                                                |                                            |         |                    |         |                  
|                                     |                                                                                                                                                                                                                | Total current liabilities                  |         |                    | 42,624  |                  
|Long-term debt, less current portion |                                                                                                                                                                                                                |                                            | 14,255  |                    |         | 15,990           
|Deferred credits from landlords      |                                                                                                                                                                                                                |                                            | 21,147  |                    |         | 9,746            
|Deferred income taxes                |                                                                                                                                                                                                                |                                            | 1,332   |                    |         |                 
|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, 19,474,636, 11,999,178 and 12,070,466 shares issued and outstanding at September 28, 2002, September 29, 2001 and December 29, 2001, respectively |                                            |         | 195                |         |                  
|                                     | Additional paid-in capital                                                                                                                                                                                     |                                            |         | 106,225            |         |                  
|                                     | Retained earnings                                                                                                                                                                                              |                                            |         | 31,499             |         |                  
|                                     |                                                                                                                                                                                                                |                                            |         |                    |         |                  
|                                     |                                                                                                                                                                                                                | Total stockholders' equity                 |         |                    | 137,919 |                  
|                                     |                                                                                                                                                                                                                |                                            |         |                    |         |                  
|                                     |                                                                                                                                                                                                                | Total liabilities and stockholders' equity |         | $                  | 217,277 |                  
|                                     |                                                                                                                                                                                                                |                                            |         |                    |         |                  

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

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

|                                             |                                  | Three Months Ended |        | Nine Months Ended
|-------------------------------------------- | -------------------------------- | ------------------ | ------ | -----------------
|
|Net sales                                    |                                  | $                  | 80,012 |                  
|Cost of products and merchandising           |                                  |                    | 49,746 |                  
|                                             |                                  |                    |        |                  
|                                             | Gross margin                     |                    |        | 30,266           
|Selling, general and administrative expenses |                                  |                    | 24,012 |                  
|                                             |                                  |                    |        |                  
|                                             | Income before interest and taxes |                    |        | 6,254            
|Interest, net                                |                                  |                    | 167    |                  
|                                             |                                  |                    |        |                  
|                                             | Income before taxes              |                    |        | 6,087            
|Income tax provision                         |                                  |                    | 2,466  |                  
|                                             |                                  |                    |        |                  
|                                             | Net income                       |                    | $      | 3,621            
|                                             |                                  |                    |        |                  
|Earnings per share:                          |                                  |                    |        |                  
|                                             | Basic                            |                    | $      | 0.19             
|                                             | Diluted                          |                    | $      | 0.18             
|Weighted average shares outstanding:         |                                  |                    |        |                  
|                                             | Basic                            |                    |        | 19,420           
|                                             | Diluted                          |                    |        | 20,350           

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

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

|                                                     |                                                                                   | Nine 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 in inventory                           |        
|                                                     |                                                                                   | Increase in prepaid catalog expenses            |        
|                                                     |                                                                                   | Increase in other assets                        |        
|                                                     |                                                                                   | Increase (decrease) in accounts payable         |        
|                                                     |                                                                                   | Increase (decrease) in accrued expenses         |        
|                                                     |                                                                                   | Increase (decrease) in accrued customer returns |        
|                                                     |                                                                                   | Increase in deferred credits from landlords     |        
|                                                     |                                                                                   |                                                 |        
|Net cash provided by operating activities            |                                                                                   |                                                 | 19,892 
|Cash flows used in investing activities:             |                                                                                   |                                                 |        
|                                                     | Increase in cash held in escrow                                                   |                                                 |        
|                                                     | Investment in trust assets                                                        |                                                 |        
|                                                     | Additions to property and equipment                                               |                                                 |        
|                                                     |                                                                                   |                                                 |        
|Net cash used in investing activities                |                                                                                   |                                                 | (29,238
|Cash flows provided by financing activities:         |                                                                                   |                                                 |        
|                                                     | Borrowings under debt agreements                                                  |                                                 |        
|                                                     | Payments of debt borrowings                                                       |                                                 |        
|                                                     | Proceeds from stock transactions                                                  |                                                 |        
|                                                     |                                                                                   |                                                 |        
|Net cash provided by financing activities            |                                                                                   |                                                 | 6,331  
|Net increase (decrease) in cash and cash equivalents |                                                                                   |                                                 | (3,015 
|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.

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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 Company's 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. Stock split:

On June 4, 2002, the Company announced a three-for-two stock split effected in the form of a stock dividend paid on June 28, 2002 to shareholders of
record on June 14, 2002. All historical per share amounts and basic and diluted share amounts utilized in the calculations of earnings per share have been restated to reflect the effects of the
three-for-two stock split. The outstanding shares and common stock amounts presented on the consolidated balance sheets at December 29, 2001 and September 29, 2001 have not been restated
to include the effects of the stock split. All common stock amounts and activity after the date of the stock split reflect the three-for-two stock split.

C. Debt:

The Company's credit facilities at September 28, 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. On July 25, 2002, the Revolving Credit Facility was
amended to extend its term and change certain lending conditions and compliance requirements including, among other things, changing the maximum number of new retail store openings allowed under the
agreement to 90 for the two-year period consisting of fiscal 2002 and fiscal 2003, and 50 for each subsequent fiscal year. In addition, the debt service coverage ratio was amended to be
less restrictive with respect to capital expenditures to the extent that the Company's cash balances exceed a predetermined level. The maturity date of the Revolving Credit Facility, as amended, is
June 1, 2004. The Revolving Credit Facility is collateralized by substantially all the personal property, both tangible and intangible, of the Company. At September 28, 2002, the
Revolving Credit Facility 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

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LIBOR lending rate plus 1.75% per annum. There were no outstanding borrowings on the Revolving Credit Facility at September 28, 2002 or September 29, 2001. Outstanding letters of credit
totaled $17,581,000 and $8,290,000 at September 28, 2002 and September 29, 2001, respectively. Availability under the Revolving Credit Facility at September 28, 2002 and
September 29, 2001 was $32,419,000 and $41,710,000, respectively. 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.

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 and restrictions on permitted liens. In the case of the Revolving Credit Facility, these conditions and
covenants include certain financial coverage calculations and ratios, including (i) indebtedness and outstanding letter of credit balance to tangible net worth; (ii) hard current assets
to current liabilities; (iii) debt service coverage; (iv) indebtedness, outstanding letter of credit balance and net present value of operating leases to tangible net worth;
(v) minimum tangible net worth; and (vi) minimum net profit. The manner of making these calculations and computing these ratios is defined by the provisions of the Fifth Amended and
Restated Loan Agreement, as amended, which is part of the Revolving Credit Facility. The Company was in compliance with the covenants associated with its credit facilities as of and for the quarters
ended September 28, 2002 and September 29, 2001.

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

|                              |                                      | September 28,
2002 |        | September 29,
2001 |   | December 29,
2001 |       
|----------------------------- | ------------------------------------ | ------------------ | ------ | ------------------ | - | ----------------- | ------
|Real estate loans             |                                      | $                  | 11,020 |                    | $ | 11,334            |       
|Equipment loans               |                                      |                    | 4,942  |                    |   | 6,215             |       
|Furniture loans               |                                      |                    |       |                    |   | 176               |       
|Capitalized lease obligations |                                      |                    | 57     |                    |   | 105               |       
|                              |                                      |                    |        |                    |   |                   |       
|                              | Total long-term debt                 |                    |        | 16,019             |   |                   | 17,830
|Less current maturities       |                                      |                    | (1,764 | )                  |   | (1,840            | )     
|                              |                                      |                    |        |                    |   |                   |       
|                              | Long-term debt, less current portion |                    | $      | 14,255             |   | $                 | 15,990
|                              |                                      |                    |        |                    |   |                   |       

At
September 28, 2002, the Company estimated the fair value of its outstanding borrowings, including current maturities, to be $17,986,000.

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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). All
historical per share amounts and basic and diluted share amounts utilized in the calculations of earnings per share have been restated to reflect the three-for-two stock split.

|                      |                                             | Three Months Ended |   | Nine Months Ended
|--------------------- | ------------------------------------------- | ------------------ | - | -----------------
|
|Numerator:            |                                             |                    |   |                  
|                      | Net income                                  |                    | $ | 3,621            
|                      |                                             |                    |   |                  
|Denominator (shares): |                                             |                    |   |                  
|                      | Basic weighted average shares outstanding   |                    |   | 19,420           
|                      | Assumed exercise of stock options           |                    |   | 930              
|                      |                                             |                    |   |                  
|                      | Diluted weighted average shares outstanding |                    |   | 20,350           
|                      |                                             |                    |   |                  
|Earnings per share:   |                                             |                    |   |                  
|                      | Basic                                       |                    | $ | 0.19             
|                      | Diluted                                     |                    | $ | 0.18             

During
the third quarter of fiscal 2002, options to purchase 530,000 shares of the Company's common stock were granted and options to purchase 172,837 shares of common stock were
exercised pursuant to the Company's stock option plans. Also, during the third quarter of fiscal 2002, the Company received $1,338,000 in cash from the exercise of stock options and recorded a related
cash tax benefit of $969,000. During the nine months ended September 28, 2002, options to purchase 1,590,500 shares of the Company's common stock were granted and options to purchase 1,331,532
shares of common stock were exercised pursuant to the Company's stock option plans. Also, during the nine months ended September 28, 2002, the Company received $7,317,000 in cash from the
exercise of stock options and recorded a related cash tax benefit of $4,593,000.

At
September 28, 2002 and September 29, 2001, of the options then outstanding, options to purchase 530,000 and 221,250 shares of common stock were excluded from the
computation of diluted earnings per share on the basis that such options were antidilutive.

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 nine months ended September 28, 2002, the Company entered into leases for 34 retail stores, including one outlet store, each having terms of approximately
10 years. At September 28, 2002, the future minimum lease payments for operating leases having a remaining term in excess of one year

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at such date, including the 34 operating leases entered into during the nine months, were as follows (in thousands):

For the remainder of fiscal 2002

$
4,617Fiscal 2003


19,471Fiscal 2004


19,985Fiscal 2005


20,124Fiscal 2006


20,275Thereafter


102,567Total

$
187,039


Most
of the Company's retail store leases contain provisions that allow for early termination of the lease by either party if certain predetermined annual sales levels are not met.
Generally, these provisions only allow the lease to be terminated between the third and fifth year of the lease. Should the lease be terminated under these provisions, the unamortized portion of any
landlord allowances related to that property would be payable to the landlord.

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 applicable 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.

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, 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

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amounts and other corporate assets. In the third quarter of fiscal 2002, the Company changed its segment reporting related to identifiable assets such that all inventory is now fully allocated to
each operating segment. Segment information for fiscal 2001 has been presented to conform to current period presentation. The accounting policies of the Company's segments are the same as those
described in Note B in 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 Ended               |   | Nine Months Ended |       
|----------------------------------- | ----------------------------------- | -------------------------------- | - | ----------------- | ------
|
|Net sales:                          |                                     |                                  |   |                   |       
|                                    | Direct                              |                                  | $ | 50,410            |       
|                                    | Retail                              |                                  |   | 29,846            |       
|                                    | Other (1)                           |                                  |   | (244              | )     
|                                    |                                     |                                  |   |                   |       
|                                    |                                     | Total net sales                  |   | $                 | 80,012
|                                    |                                     |                                  |   |                   |       
|Direct contribution reconciliation: |                                     |                                  |   |                   |       
|                                    | Direct                              |                                  | $ | 16,945            |       
|                                    | Retail                              |                                  |   | 1,946             |       
|                                    |                                     |                                  |   |                   |       
|                                    |                                     | Total direct contribution        |   | $                 | 18,891
|                                    | Unallocated shared-service costs    |                                  |   | (6,142            | )     
|                                    | General and administrative expenses |                                  |   | (6,495            | )     
|                                    |                                     |                                  |   |                   |       
|                                    |                                     | Income before interest and taxes |   | $                 | 6,254 
|                                    |                                     |                                  |   |                   |       

|                     |                    | Direct |   | Retail |  | Unallocated
Assets |         | Total
|-------------------- | ------------------ | ------ | - | ------ |  | ------------------ | ------- | -----
|Identifiable assets: |                    |        |   |        |  |                    |         |      
|                     | September 28, 2002 |        | $ | 31,978 |  | $                  | 105,609 |      
|                     | September 29, 2001 |        | $ | 30,765 |  | $                  | 64,700  |      

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, incentive compensation and board member fees 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.

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At September 28, 2002, a deferred compensation liability to participants of $1,817,000, including vested discretionary Company contributions, was part of accrued expenses in the accompanying
consolidated balance sheet. During the second quarter of fiscal 2002, the Company made a fully vested discretionary contribution into the deferred compensation plan for its President and Chief
Executive Officer of $1,000,000.

Separately,
the Company, at its discretion, has transferred a total of $2,310,000 to a trust. The trust assets at September 28, 2002 totaled $2,143,000, net of investment gains
and losses and various fees and expenses. 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. Investments are exposed to various risks, such as interest rate, market and credit risks. Due to the level of risk associated with certain
investments, it is at least reasonably possible that changes in the values of these investments will occur in the near term and that such changes will also impact participant deferred compensation
balances based on the measurement designations made by the participant. 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 September 28, 2002.

I. 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 and nine months ended September 29, 2001 has been presented to conform to current
period presentation and management's current internal reporting structure.

J. Recent accounting standards:

In June 2002, the Financial Accounting Standards Board issued Statement No. 146 ("SFAS 146"),"Accounting for Costs
Associated with Exit or Disposal Activities."This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force Issue No. 94-3 ("EITF 94-3"),"Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)."SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability
is incurred. EITF 94-3 allowed for an exit cost liability to be recognized at the date
of an entity's commitment to an exit plan. SFAS 146 also requires that liabilities recorded in connection with exit plans be initially measured at fair value. The provisions of SFAS 146
are effective for exit or disposal activities that are initiated after December 31, 2002, with early adoption encouraged. The Company is evaluating the effect of the adoption of SFAS 146
and does not expect the adoption of SFAS 146 to have a material impact, if any, on the Company's consolidated financial statements.

11

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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
increases in expenses or delays in inventory receipts associated with the California dock workers labor dispute; 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.

On
June 4, 2002, the Company announced a three-for-two stock split effected in the form of a stock dividend paid on June 28, 2002 to shareholders of record on
June 14, 2002. All historical per share amounts and basic and diluted share amounts utilized in the calculations of earnings per share have been restated to reflect the effects of the
three-for-two stock split. The outstanding shares and common stock amounts presented on the consolidated balance sheets at December 29, 2001 and September 29, 2001 have not been restated
to include the effects of the stock split. All common stock amounts and activity after the date of the stock split reflect the three-for-two stock split.

Net
sales for the three months ended September 28, 2002 ("third quarter fiscal 2002") increased by 21.6% to $80.0 million from $65.8 million for the three months
ended September 29, 2001 ("third quarter fiscal 2001"). Income before interest and taxes ("operating income") for third quarter fiscal 2002 was $6.3 million, or 7.8% of net sales,
compared to $5.0 million, or 7.5% of net sales, for third quarter fiscal 2001. Net income was $3.6 million, or $0.18 per diluted share, for third quarter fiscal 2002 compared to
$2.8 million, or $0.15 per diluted share, for third quarter fiscal 2001. The Company's third quarter fiscal 2002 results include a one-time charge of approximately $1.0 million, or $0.03
per

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diluted share, for costs incurred related to a potential strategic acquisition by the Company that was abandoned. Excluding these non-recurring expenses, the Company's operating income would have
been $7.2 million, or 9.1% of net sales, and net income and diluted earnings per share would have been $4.2 million and $0.21, respectively.

For
the nine months ended September 28, 2002, net sales increased by 22.7% to $239.7 million from $195.3 million during the nine months ended September 29,
2001. Operating income for the nine months ended September 28, 2002 was $22.0 million, or 9.1% of net sales, compared to $11.2 million, or 5.7% of net sales, for the nine months
ended September 29, 2001. Net income was $12.7 million, or $0.64 per diluted share, for the nine months ended September 28, 2002 compared to $6.1 million, or $0.33 per
diluted share, for the nine months ended September 29, 2001.

Results of Operations

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

|                                             |                                  | Three Months Ended |      | Nine Months Ended |     
|-------------------------------------------- | -------------------------------- | ------------------ | ---- | ----------------- | ----
|
|Net sales                                    |                                  | 100.0              | %    | 100.0             | %   
|Cost of products and merchandising           |                                  | 62.2               |      | 67.2              |     
|                                             |                                  |                    |      |                   |     
|                                             | Gross margin                     |                    | 37.8 |                   | 32.8
|Selling, general and administrative expenses |                                  | 30.0               |      | 25.3              |     
|                                             |                                  |                    |      |                   |     
|                                             | Income before interest and taxes |                    | 7.8  |                   | 7.5 
|Interest, net                                |                                  | 0.2                |      | 0.3               |     
|                                             |                                  |                    |      |                   |     
|                                             | Income before taxes              |                    | 7.6  |                   | 7.2 
|Income tax provision                         |                                  | 3.1                |      | 3.0               |     
|                                             |                                  |                    |      |                   |     
|                                             | Net income                       |                    | 4.5  | %                 | 4.2 
|                                             |                                  |                    |      |                   |     

The
following table presents certain selected operating data:

|              |                                           | Three Months Ended          |           | Nine Months Ended
|------------- | ----------------------------------------- | --------------------------- | --------- | -----------------
|
|Direct        |                                           |                             |           |                  
|              | Circulation (1):                          |                             |           |                  
|              |                                           | Catalogs (in thousands)     |           | 15,100           
|              |                                           | Square inches (in millions) |           | 100,600          
|              | Twelve-month buyers (2)                   |                             | 1,028,000 |                  
|              | Customer e-mail addresses                 |                             | 737,000   |                  
|Retail(3)     |                                           |                             |           |                  
|              | Stores open:                              |                             |           |                  
|              |                                           | Beginning of period         |           | 67               
|              |                                           | End of period               |           | 75               
|              | Weighted average stores open (4)          |                             | 70        |                  
|              | Weighted average square footage (5)       |                             | 339,900   |                  
|Total Company |                                           |                             |           |                  
|              | J. Jill private label credit card holders |                             | 412,000   |                  

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

|         |                 | Three Months Ended |        | Nine Months Ended |  
|-------- | --------------- | ------------------ | ------ | ----------------- | -
|
|Direct   |                 | $                  | 50,410 |                   | $
|Retail   |                 |                    | 29,846 |                   |  
|Other(1) |                 |                    | (244   | )                 |  
|         |                 |                    |        |                   |  
|         | Total net sales |                    | $      | 80,012            |  
|         |                 |                    |        |                   |  

Comparison of the Three and Nine Months Ended September 28, 2002 with the Three and Nine Months Ended September 29, 2001

Net sales increased by $14.2 million, or 21.6%, to $80.0 million during third quarter fiscal 2002 from $65.8 million during third quarter
fiscal 2001. During the nine months ended September 28, 2002, net sales increased by $44.4 million, or 22.7%, to $239.7 million from $195.3 million during the nine months
ended September 29, 2001. For the three-month and nine-month periods ended September 28, 2002, retail segment net sales increased by 63.7% and 83.8%, respectively, as compared to the
three-month and nine-month periods ended September 29, 2001, as a result of increased store count. During the nine months ended September 28, 2002, the Company opened 24 retail stores,
of which eight were opened during third quarter fiscal 2002. At September 28, 2002, the Company had 75 retail stores open
compared to 37 at September 29, 2001. The Company expects to have a total of 88 retail stores open by the end of fiscal 2002. Direct segment net sales increased by 5.3% and square inches
circulated increased by 18.1% during third quarter fiscal 2002 compared to third quarter fiscal 2001. During the nine months ended September 28, 2002, direct segment net sales increased by 4.2%
and square inches circulated increased by 13.1% compared to the nine months ended September 29, 2001. These increases in net sales were as a result of higher circulation levels compared to the
prior year periods. E-commerce net sales represented 31.4% of total direct segment net sales during third quarter fiscal 2002 compared to 24.4% during third quarter fiscal 2001. E-commerce net sales
represented 30.0% of total direct segment net sales during the nine months ended September 28, 2002 compared to 24.5% during the nine months ended September 29, 2001.

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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 third quarter fiscal 2002, gross margin
increased by $8.7 million, or 40.1%, to $30.3 million from $21.6 million during third quarter fiscal 2001. As a percentage of net sales, gross margin increased to 37.8% during
third quarter fiscal 2002 from 32.8% during third quarter fiscal 2001. During the nine months ended September 28, 2002, gross margin increased by $29.0 million, or 46.7%, to
$91.1 million from $62.1 million during the nine months ended September 29, 2001. As a percentage of net sales, gross margin increased to 38.0% during the nine months ended
September 28, 2002 from 31.8% during the nine months ended September 29, 2001. These increases in gross margin as a percentage of net sales were primarily attributable to increased full
price sales volumes, better inventory management, lower markdown charges and higher initial markups.

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 third quarter fiscal 2002, selling, general and administrative expenses increased by $7.4 million, or 44.3%, to $24.0 million from $16.6 million
during third quarter fiscal 2001. As a percentage of net sales, selling, general and administrative expenses increased to 30.0% during third quarter fiscal 2002 from 25.3% during third quarter fiscal
2001. During the nine months ended September 28, 2002, selling, general and administrative expenses increased by $18.2 million, or 35.8%, to $69.2 million from
$50.9 million during the nine months ended September 29, 2001. As a percentage of net sales, selling, general and administrative expenses increased to 28.9% during the nine months ended
September 28, 2002 from 26.1% during the nine months ended September 29, 2001. These increases in selling, general and administrative expenses as a percentage of net sales were primarily
attributable to lower sales productivity in both the direct and retail segments, as well as higher employee benefits and compensation expenses. Selling, general and administrative expenses in third
quarter fiscal 2002 also include the impact of a one-time charge of approximately $1.0 million for costs incurred related to a potential strategic acquisition by the Company that
was abandoned. In addition, the nine-month period ended September 28, 2002 includes a $1.0 million fully vested discretionary Company contribution into the deferred
compensation plan for the Company's President and Chief Executive Officer.

Third
quarter fiscal 2002 interest income was unchanged from third quarter fiscal 2001 levels of $0.2 million. Interest expense for third quarter fiscal 2002 was unchanged from
third quarter fiscal 2001
levels of $0.4 million. During the nine months ended September 28, 2002, interest income decreased to $0.5 million from $0.6 million for the nine months ended
September 29, 2001. Interest expense during the nine months ended September 28, 2002 decreased to $1.1 million from $1.2 million for the nine months ended
September 29, 2001.

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 both the three-month and
nine-month periods ended September 28, 2002 was 40.5% compared to 42.0% for both the three-month and nine-month periods ended September 29, 2001. The decline in the effective tax rate
for the fiscal 2002 periods reflects a decrease in the projected amount of non-deductible expenses for fiscal 2002 as compared to fiscal 2001.

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 Company evaluates its segment
profitability based on the direct contribution of each segment. Direct contribution represents each segment's net sales less direct costs

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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 accounting policies of
the Company's segments are the same as those described in Note B in the Company's Annual Report on Form 10-K for fiscal 2001. In addition, inter-segment balances and transactions have
been eliminated.

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

|       |                           | Three Months Ended |        | Nine Months Ended
|------ | ------------------------- | ------------------ | ------ | -----------------
|
|Direct |                           | $                  | 16,945 |                  
|Retail |                           |                    | 1,946  |                  
|       |                           |                    |        |                  
|       | Total direct contribution |                    | $      | 18,891           
|       |                           |                    |        |                  

Direct Segment

The direct segment's third quarter fiscal 2002 direct contribution increased by $3.1 million, or 22.6%, compared to third quarter fiscal 2001. As a
percentage of segment net sales, direct contribution increased to 33.6% during third quarter fiscal 2002 from 28.9% during third quarter fiscal 2001. For the nine months ended September 28,
2002, direct contribution increased by $12.7 million, or 31.9%, compared to the nine months ended September 29, 2001. As a percentage of segment net sales, direct contribution increased
to 33.2% during the nine months ended September 28, 2002 from 26.2% for the nine months ended September 29, 2001. These increases in direct contribution as a percentage of segment net
sales were primarily attributable to higher gross margins associated with increased full price sales volumes, better inventory management, lower markdown charges and higher initial markups. This gross
margin improvement was partially offset by higher selling expenses as a percentage of segment net sales as a result of lower catalog productivity. Catalog productivity was lower for the three-month
and nine-month periods ended September 28, 2002 as compared to the corresponding periods in the prior year, primarily as a result of increased prospecting, deeper circulation to the Company's
own customer list and a lower percentage of off price sales which are typically more productive on the top line than full price sales.

Retail Segment

The retail segment's third quarter fiscal 2002 direct contribution increased by $1.2 million to $1.9 million from $0.8 million during third
quarter fiscal 2001. As a percentage of segment net sales, direct contribution increased to 6.5% during third quarter fiscal 2002 from 4.2% during third quarter fiscal 2001. For the nine months ended
September 28, 2002, direct contribution increased by $5.2 million to $5.6 million from $0.4 million for the nine months ended September 29, 2001. As a percentage of
segment net sales, direct contribution increased to 6.7% during the nine months ended September 28, 2002 from 0.9% for the nine months ended September 29, 2001. These increases in direct
contribution as a percentage of segment net sales were primarily attributable to higher gross margins associated with increased full price sales volumes, better inventory management, lower markdown
charges and higher initial markups. This gross margin improvement was partially offset by higher occupancy, depreciation and selling costs as a percentage of segment net sales primarily as a result of
lower sales productivity attributable to the difficult retail environment.

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Seasonality and Quarterly Fluctuations

As the Company's retail business becomes a greater portion of the 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 and net income. 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 those 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 Company's physical and operating infrastructure. During the nine months ended September 28, 2002, the Company funded its working
capital and capital investment needs with cash generated from operations and its existing credit facilities.

Cash
and cash equivalents ("cash") decreased by $3.0 million during the nine months ended September 28, 2002. Approximately $19.9 million in cash was generated from
operations and $7.7 million in cash was received from stock transactions, primarily from the exercise of stock options during the period. Approximately $26.7 million was invested in
property and equipment, primarily related to the Company's retail store rollout and $2.3 million was transferred to a trust associated with the Company's deferred compensation plan. During the
nine months ended September 28, 2002, net income before depreciation and amortization and additional deferred credits from landlords were the primary sources of cash from operations. The
primary use of cash from operations was related to increases in inventory.

Cash
increased by $9.7 million during the nine months ended September 29, 2001 largely as a result of proceeds received from the Company's private placement of common stock
in February 2001, as well as $2.9 million in cash generated from operations during the period. Approximately $19.1 million was invested in property and equipment, primarily
related to the Company's retail store rollout, and $3.6 million was used to pay down debt. During the nine months ended September 29, 2001, net income before depreciation and
amortization, collections on accounts receivable and additional deferred credits from landlords were the primary sources of cash from operations. The primary use of cash from operations was related to
increases in inventory.

Inventory
levels at September 28, 2002 were 56.2% higher than at December 29, 2001. The increase in inventory levels is primarily attributable to inventory received in
advance of the 2002 Holiday season as well as higher inventory balances associated with the growth of the Company's retail business. Retail segment inventory totaled $28.8 million at
September 28, 2002 compared to $13.7 million at December 29, 2001. Direct segment inventory totaled $21.0 million at September 28, 2002 compared to
$18.2 million at December 29, 2001.

Inventory
levels at September 28, 2002 were at similar levels as compared to September 29, 2001. Retail segment inventory was $5.9 million higher at
September 28, 2002 than at September 29, 2001. Retail inventory per store at September 28, 2002 was 38.0% lower than at September 29, 2001. Direct segment inventory was
$5.2 million lower at September 28, 2002 than at September 29, 2001. These decreases in inventory per store and direct segment inventory levels are the result of ordering
inventory more conservatively and scheduling receipts closer to projected need.

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Additionally,
with much of the Company's Holiday merchandise in stock at September 28, 2002, the Company does not anticipate any significant fourth quarter impact on its
operations from the California dock workers labor dispute. Until the dispute is resolved, it is the Company's intent to ship virtually all of its spring merchandise by boat to east coast ports. The
Company is working with its freight forwarders to minimize the impact of the dispute on the Company's 2003 operations, but at this time the Company cannot predict the ultimate impact of the dispute.

Accounts
receivable balances at September 28, 2002 were 13.9% lower than at December 29, 2001 primarily as a result of the timing of the Company's Holiday deferred billing
program. At December 28, 2001 the Holiday deferred billing program was essentially complete whereas at September 28, 2002 the Holiday deferred billing program was only partially
complete. Accounts receivable balances at September 28, 2002 were 185.8% higher than at September 29, 2001 primarily as a result of deferred billing receivables associated with the
earlier offering of the Company's Holiday deferred billing program this year as compared to last year and increased landlord allowance receivables associated with new retail stores.

Accounts
payable balances at September 28, 2002 were 32.9% and 72.7% higher than at December 29, 2001 and September 29, 2001, respectively, primarily as a result of
increased amounts payable for inventory due to the timing of inventory receipts.

Accrued
expense balances at September 28, 2002 were 4.2% and 25.7% higher than at December 29, 2001 and September 29, 2001, respectively. The increase in accrued
expenses at September 28, 2002 compared to September 29, 2001 was primarily due to increased accrued amounts associated with the Company's deferred compensation plan and the retail store
rollout.

Deferred
credits from landlords relate to the Company's retail store leases. Deferred credits from landlords at September 28, 2002 were 50.5% and 117.0% higher than at
December 29, 2001 and September 29, 2001, respectively, primarily as a result of the additional retail stores opened since those dates.

The
Company's credit facilities at September 28, 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. On July 25, 2002, the Revolving Credit Facility was
amended to extend its term and change certain lending conditions and compliance requirements including, among other things, changing the maximum number of new retail store openings allowed under the
agreement to 90 for the two-year period consisting of fiscal 2002 and fiscal 2003, and 50 for each subsequent fiscal year. In addition, the debt service coverage ratio was amended to be
less restrictive with respect to capital expenditures to the extent that the Company's cash balances exceed a predetermined level. The maturity date of the Revolving Credit Facility, as amended, is
June 1, 2004. The Revolving Credit Facility is collateralized by substantially all the personal property, both tangible and intangible, of the Company. At September 28, 2002, the
Revolving Credit Facility 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 $20.0 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 plus 1.75% per
annum. There were no outstanding borrowings on the Revolving Credit Facility at September 28, 2002 or September 29, 2001. Outstanding letters of credit totaled $17.6 million and
$8.3 million at September 28, 2002 and September 29, 2001, respectively. Availability under the Revolving Credit Facility at September 28, 2002 and September 29,
2001 was $32.4 million and $41.7 million, respectively.
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. 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
weighted average interest rate for amounts outstanding under the Company's credit facilities during the nine months ended September 28, 2002 was 7.41% per annum.

The
Company's credit facilities contain various lending conditions and covenants and restrictions on permitted liens. In the case of the Revolving Credit Facility, these conditions and
covenants include certain financial coverage calculations and ratios, including (i) indebtedness and outstanding letter of credit balance to tangible net worth; (ii) hard current assets
to current liabilities; (iii) debt service coverage; (iv) indebtedness, outstanding letter of credit balance and net present value of operating leases to tangible net worth;
(v) minimum tangible net worth; and (vi) minimum net profit. The manner of making these calculations and computing these ratios is defined by the provisions of the Fifth Amended and
Restated Loan Agreement, as amended, which is part of the Revolving Credit Facility. The Company was in compliance with the covenants associated with its credit facilities as of and for the quarters
ended September 28, 2002 and September 29, 2001.

The
Company plans to have 88 retail stores open by the end of 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 September 28, 2002, the combined future minimum lease payments due under the Company's retail store leases were
approximately $171.6 million in aggregate and ranged up to $19.1 million per year.

A
summary of the Company's cash requirements related to its outstanding long-term debt and its future minimum lease payments at September 28, 2002 are as follows (in thousands):

|                                 |       | Long-Term
Debt |       | Lease
Commitments |   | Total Debt and
Lease Payments
|-------------------------------- | ----- | -------------- | ----- | ----------------- | - | -----------------------------
|For the remainder of fiscal 2002 |       | $              | 429   |                   | $ | 4,617                        
|Fiscal 2003                      |       |                | 1,788 |                   |   | 19,471                       
|Fiscal 2004                      |       |                | 1,878 |                   |   | 19,985                       
|Fiscal 2005                      |       |                | 2,028 |                   |   | 20,124                       
|Fiscal 2006                      |       |                | 501   |                   |   | 20,275                       
|Thereafter                       |       |                | 9,395 |                   |   | 102,567                      
|                                 |       |                |       |                   |   |                              
|                                 | Total |                | $     | 16,019            |   | $                            
|                                 |       |                |       |                   |   |                              

Most of the Company's retail store leases contain provisions that allow for early termination of the lease by either party if certain
predetermined annual sales levels are not met. Generally, these provisions only allow the lease to be terminated between the third and fifth year of the lease. Should the lease be terminated under
these provisions, the unamortized portion of any landlord allowances related to that property would be payable to the landlord.

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The
Company's sources of cash include cash on hand of $27.1 million, available borrowing capacity under the Company's Revolving Credit Facility of $20.0 million and
anticipated cash flow from operations. If the current trend of business continues, the Company expects to fund its entire retail store rollout in fiscal 2002 with cash generated from operations in
fiscal 2002. The Company estimates that approximately $10.1 million in cash, before landlord allowances, will be invested in property and equipment during the remaining three months of fiscal
2002, primarily for retail store construction. Based on current operating conditions, the Company believes it has sufficient sources of cash to execute its operating plans. Should current operating
conditions deteriorate, the Company may generate less cash flow from operating activities than expected and be required to use more of its cash on hand than planned. In addition, the Company may need
to borrow on its Revolving Credit Facility. The Company believes that it has some flexibility to adjust its mid-to-long-term operating plans to respond to a significant decrease in its cash resources.
For example, the Company could adjust the timing and extent of its retail store rollout for fiscal 2003 and beyond or change its catalog circulation strategy.

Future Financial Targets

With respect to fiscal 2002, and assuming the current economic environment continues substantially unchanged, the Company is targeting net sales for the year to
range between $346.0 and $350.0 million and diluted earnings per share to range between $1.05 and $1.07, compared to $0.70 for fiscal 2001. The Company is targeting net sales to range between
$106.0 and $110.0 million for the fourth quarter of fiscal 2002. Diluted earnings per share are targeted to range between $0.41 and $0.43 for the fourth quarter of fiscal 2002.

For
the fourth quarter of fiscal 2002, gross margin as a percentage of net sales is targeted to be 40.8%, compared to 39.2% for the fourth quarter of fiscal 2001. Selling, general and
administrative expenses as a percentage of net sales for the fourth quarter of fiscal 2002 are targeted to be 27.4%, compared to 25.7% for the fourth quarter of fiscal 2001. 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 June 2002, the Financial Accounting Standards Board issued Statement No. 146 ("SFAS 146"),"Accounting for Costs
Associated with Exit or Disposal Activities."This statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force Issue No. 94-3 ("EITF 94-3"),"Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)."SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability
is incurred. EITF 94-3 allowed for an exit cost liability to be recognized at the date of an entity's commitment to an exit plan. SFAS 146 also requires that liabilities recorded in connection
with exit plans be initially measured at fair value. The provisions of SFAS 146 are effective for exit or disposal activities that are initiated after December 31, 2002, with early
adoption encouraged. The
Company is evaluating the effect of the adoption of SFAS 146 and does not expect the adoption of SFAS 146 to have a material impact, if any, 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

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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.

The
Company has established a trust in connection with its deferred compensation plan. 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. Investments are exposed to various risks, such as interest rate, market and credit risks. Due
to the level of risk associated with certain investments, it is at least reasonably possible that changes in the values of these investments will occur in the near term and that such changes will also
impact participant deferred compensation balances based on the measurement designations made by the participant. Changes in value of the trust assets are intended to mirror changes in value of the
participants' deferred compensation accounts.

Item 4.    Controls and Procedures

Within 90 days prior to the filing date of this report, the Company carried out an evaluation, under the supervision and with the participation of the
Company's principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on this evaluation,
the Company's principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information
required to be included in the Company's reports filed or submitted under the Securities Exchange Act of 1934. Since this evaluation, there have not been any significant changes in the Company's
internal controls or in other factors that could significantly affect those controls, including any corrective actions with regard to significant deficiencies and material weaknesses.

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PART IIOTHER INFORMATION

Item 5. Other Information

Certification Under Sarbanes-Oxley Act

The Company's Chief Executive Officer and Chief Financial Officer have furnished to the Securities and Exchange Commission the certification with respect to this
Quarterly Report on Form 10-Q that is required by Section 906 of the Sarbanes-Oxley Act of 2002.

Item 6.    Exhibits and Reports on Form 8-K

(1)    Exhibits

|    |  | 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)                                                                                

Material Contracts

|10.1 |  | Amended and Restated Split Dollar Agreement and Assignment of Life Insurance Policy as Collateral, dated September 25, 2002, between the Company and Olga Conley     
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.2 |  | Amended and Restated Split Dollar Agreement and Assignment of Life Insurance Policy as Collateral, dated September 19, 2002, between the Company and John Hayes      
|10.3 |  | Amended and Restated Split Dollar Agreement and Assignment of Life Insurance Policy as Collateral, dated September 25, 2002, between the Company and Patricia Lee    
|10.4 |  | Amended and Restated Split Dollar Agreement and Assignment of Life Insurance Policy as Collateral, dated September 18, 2002, between the Company and Dennis Adomaitis

(2)    Reports on Form 8-K

The Company did not file any reports on Form 8-K during the quarter ended September 28, 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: November 12, 2002 |  | By:                    
|Dated: November 12, 2002 |  | By:                    

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Certification Pursuant to Rule 13a-14 or 15d-14 promulgated under the  Securities Exchange Act of 1934, as amended

I,
Gordon R. Cooke, President, Chief Executive Officer and Chairman of the Board of Directors, certify that:





Date:
November 12, 2002

| | /s/GORDON R. COOKEGordon R. Cooke
President, Chief Executive Officer
and Chairman of the Board of Directors (Principal Executive Officer)
| | -----------------------------------------------------------------------------------------------------------------------------------------

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Certification Pursuant to Rule 13a-14 or 15d-14 promulgated under the  Securities Exchange Act of 1934, as amended

I,
Olga L. Conley, PresidentCorporate Services, Chief Financial Officer and Treasurer, certify that:





Date:
November 12, 2002

| | /s/OLGA L. CONLEYOlga L. Conley
PresidentCorporate Services,
Chief Financial Officer and Treasurer (Principal Financial Officer)
| | ---------------------------------------------------------------------------------------------------------------------------------

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THE J. JILL GROUP, INC.    FORM 10-Q    FOR THE QUARTER ENDED SEPTEMBER 28, 2002    EXHIBIT INDEX

Material Contracts

|10.1 |  | Amended and Restated Split Dollar Agreement and Assignment of Life Insurance Policy as Collateral, dated September 25, 2002, between the Company and Olga Conley     
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.2 |  | Amended and Restated Split Dollar Agreement and Assignment of Life Insurance Policy as Collateral, dated September 19, 2002, between the Company and John Hayes      
|10.3 |  | Amended and Restated Split Dollar Agreement and Assignment of Life Insurance Policy as Collateral, dated September 25, 2002, between the Company and Patricia Lee    
|10.4 |  | Amended and Restated Split Dollar Agreement and Assignment of Life Insurance Policy as Collateral, dated September 18, 2002, between the Company and Dennis Adomaitis

26

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