---

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

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FORM 10-Q

(Mark One)

|/x/ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------

FOR THE QUARTER ENDED SEPTEMBER 23, 2000

OR

|/ / | 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                                                       |  | 04-2973769                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or Other Jurisdiction of
Incorporation or Organization) |  | (I.R.S. Employer
Identification No.)
|4 Batterymarch Park
Quincy, MA                                 |  | 02169                               
|(Address of Principal Executive Offices)                       |  | (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 /x/  No / /

Shares
outstanding of the Registrant's common stock (par value $0.01) at October 27, 2000: 10,064,797

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THE J. JILL GROUP, INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 23, 2000

|                             |         |                                                                                                                                |                                                                                       | Page
|---------------------------- | ------- | ------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------- | ----
|PART IFINANCIAL INFORMATION |         |                                                                                                                               
|                             | Item 1. |                                                                                                                                | Condensed Consolidated Financial Statements                                           |     
|                             |         | Consolidated Balance Sheets at September 23, 2000, September 25, 1999 and December 25, 1999                                    |                                                                                       | 3   
|                             |         | Consolidated Statements of Operations for the three months and the nine months ended September 23, 2000 and September 25, 1999 |                                                                                       | 4   
|                             |         | Consolidated Statements of Cash Flows for the nine months ended September 23, 2000 and September 25, 1999                      |                                                                                       | 5   
|                             |         | Notes to Condensed Consolidated Financial Statements                                                                           |                                                                                       | 6-14
|                             | Item 2. |                                                                                                                                | Management's Discussion and Analysis of Financial Condition and Results of Operations |     
|                             | Item 3. |                                                                                                                                | Quantitative and Qualitative Disclosures About Market Risk                            |     
|PART IIOTHER INFORMATION    |         |                                                                                                                               
|                             | Item 5. |                                                                                                                                | Other Information                                                                     |     
|                             | Item 6. |                                                                                                                                | Exhibits and Reports on Form 8-K                                                      |     
|Signatures                   |         | 25                                                                                                                            

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## 

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

|                                     |                                                                                                                                                                                                                 | September 23,
2000         |                                            | September 25,
1999 |        | December 25,
1999 |       
|------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | ------------------ | ------ | ----------------- | ------
|ASSETS                               |                                                                                                                                                                                                                
|Current assets:                      |                                                                                                                                                                                                                 |                            |                                            |                    |        |                   |       
|                                     | Cash and cash equivalents                                                                                                                                                                                       |                            | $                                          | 1,174              |        | $                 | 1,416 
|                                     | Cash held in escrow                                                                                                                                                                                             |                            |                                            | 507                |        |                   | 198   
|                                     | Assets held for sale                                                                                                                                                                                            |                            |                                            | 2,281              |        |                   | 2,423 
|                                     | Inventory                                                                                                                                                                                                       |                            |                                            | 39,025             |        |                   | 31,326
|                                     | Prepaid catalog expenses                                                                                                                                                                                        |                            |                                            | 4,630              |        |                   | 7,475 
|                                     | Deferred income taxes                                                                                                                                                                                           |                            |                                            | 8,235              |        |                   | 6,662 
|                                     | Other current assets                                                                                                                                                                                            |                            |                                            | 6,306              |        |                   | 7,744 
|                                     |                                                                                                                                                                                                                 |                            |                                            |                    |        |                   |       
|                                     |                                                                                                                                                                                                                 | Total current assets       |                                            |                    | 62,158 |                   |       
|Property and equipment, net          |                                                                                                                                                                                                                 |                            | 56,688                                     |                    |        | 44,614            |       
|Deferred income taxes                |                                                                                                                                                                                                                 |                            | 2,075                                      |                    |        | 3,926             |       
|Other non-current assets             |                                                                                                                                                                                                                 |                            | 1,755                                      |                    |        | 1,770             |       
|                                     |                                                                                                                                                                                                                 |                            |                                            |                    |        |                   |       
|                                     |                                                                                                                                                                                                                 |                            | Total assets                               |                    | $      | 122,676           |       
|                                     |                                                                                                                                                                                                                 |                            |                                            |                    |        |                   |       
|LIABILITIES AND STOCKHOLDERS' EQUITY |                                                                                                                                                                                                                
|Current liabilities:                 |                                                                                                                                                                                                                 |                            |                                            |                    |        |                   |       
|                                     | Accounts payable                                                                                                                                                                                                |                            | $                                          | 16,956             |        | $                 | 12,522
|                                     | Accrued expenses                                                                                                                                                                                                |                            |                                            | 10,282             |        |                   | 5,754 
|                                     | Accrued customer returns                                                                                                                                                                                        |                            |                                            | 6,134              |        |                   | 6,684 
|                                     | Current portion of long-term debt                                                                                                                                                                               |                            |                                            | 6,909              |        |                   | 1,815 
|                                     |                                                                                                                                                                                                                 |                            |                                            |                    |        |                   |       
|                                     |                                                                                                                                                                                                                 | Total current liabilities  |                                            |                    | 40,281 |                   |       
|Long-term debt, less current portion |                                                                                                                                                                                                                 |                            | 17,755                                     |                    |        | 25,010            |       
|Other non-current liabilities        |                                                                                                                                                                                                                 |                            | 2,124                                      |                    |        |                  |       
|Commitments                          |                                                                                                                                                                                                                 |                            |                                            |                    |        |                   |       
|Stockholders' equity:                |                                                                                                                                                                                                                 |                            |                                            |                    |        |                   |       
|                                     | Special preferred stock (par value $0.01) 1,000,000 shares authorized                                                                                                                                           |                            |                                            |                   |        |                   |      
|                                     | Common stock (par value $0.01) 15,000,000 shares authorized, 10,044,797, 9,988,671 and 9,990,421 shares issued and outstanding as of September 23, 2000, September 25, 1999 and December 25, 1999,
respectively |                            |                                            | 100                |        |                   | 100   
|                                     | Additional paid-in capital                                                                                                                                                                                      |                            |                                            | 63,060             |        |                   | 61,260
|                                     | Accumulated deficit                                                                                                                                                                                             |                            |                                            | (644               | )      |                   | (5,591
|                                     |                                                                                                                                                                                                                 |                            |                                            |                    |        |                   |       
|                                     |                                                                                                                                                                                                                 | Total stockholders' equity |                                            |                    | 62,516 |                   |       
|                                     |                                                                                                                                                                                                                 |                            |                                            |                    |        |                   |       
|                                     |                                                                                                                                                                                                                 |                            | Total liabilities and stockholders' equity |                    | $      | 122,676           |       
|                                     |                                                                                                                                                                                                                 |                            |                                            |                    |        |                   |       

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

3

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

|                                             |                                         | Three Months Ended |        | Nine Months Ended
|-------------------------------------------- | --------------------------------------- | ------------------ | ------ | -----------------
|
|Net sales                                    |                                         | $                  | 58,186 |                  
|Cost of products and merchandising           |                                         |                    | 36,851 |                  
|                                             |                                         |                    |        |                  
|                                             | Gross margin                            |                    |        | 21,335           
|Selling, general and administrative expenses |                                         |                    | 14,830 |                  
|Special charges                              |                                         |                    |       |                  
|                                             |                                         |                    |        |                  
|                                             | Income (loss) before interest and taxes |                    |        | 6,505            
|Interest, net                                |                                         |                    | 327    |                  
|                                             |                                         |                    |        |                  
|                                             | Income (loss) before taxes              |                    |        | 6,178            
|Income tax provision (benefit)               |                                         |                    | 2,595  |                  
|                                             |                                         |                    |        |                  
|                                             | Net income (loss)                       |                    | $      | 3,583            
|                                             |                                         |                    |        |                  
|Earnings per share:                          |                                         |                    |        |                  
|                                             | Basic                                   |                    | $      | 0.36             
|                                             | Diluted                                 |                    | $      | 0.34             
|Weighted average shares outstanding:         |                                         |                    |        |                  
|                                             | Basic                                   |                    |        | 10,037           
|                                             | Diluted                                 |                    |        | 10,401           

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

4

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## 

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

|                                                       |                                                                                             | Nine Months Ended                                                               |        
|------------------------------------------------------ | ------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | -------
|
|Cash flows provided by (used in) operating activities: |                                                                                             |                                                                                 |        
|                                                       | Net income                                                                                  |                                                                                 | $      
|                                                       | Adjustments to reconcile net income to net cash provided by (used in) operating activities: |                                                                                 |        
|                                                       |                                                                                             | Depreciation and amortization                                                   |        
|                                                       |                                                                                             | Deferred income taxes                                                           |        
|                                                       |                                                                                             | Non-cash write-down of assets held for sale                                     |        
|                                                       | Changes in assets and liabilities:                                                          |                                                                                 |        
|                                                       |                                                                                             | Increase in inventory                                                           |        
|                                                       |                                                                                             | Increase in prepaid catalog expenses                                            |        
|                                                       |                                                                                             | Increase in other assets                                                        |        
|                                                       |                                                                                             | Increase (decrease) in accounts payable, accrued expenses and other liabilities |        
|                                                       |                                                                                             | Decrease in accrued customer returns                                            |        
|                                                       |                                                                                             |                                                                                 |        
|Net cash provided by (used in) operating activities    |                                                                                             |                                                                                 | 6,601  
|Cash flows used in investing activities:               |                                                                                             |                                                                                 |        
|                                                       | Increase in cash held in escrow                                                             |                                                                                 |        
|                                                       | Additions to property and equipment                                                         |                                                                                 |        
|                                                       |                                                                                             |                                                                                 |        
|Net cash used in investing activities                  |                                                                                             |                                                                                 | (13,517
|Cash flows provided by (used in) financing activities: |                                                                                             |                                                                                 |        
|                                                       | Borrowings under debt agreements                                                            |                                                                                 |        
|                                                       | Payments of debt borrowings                                                                 |                                                                                 |        
|                                                       | Proceeds from stock transactions                                                            |                                                                                 |        
|                                                       |                                                                                             |                                                                                 |        
|Net cash provided by (used in) financing activities    |                                                                                             |                                                                                 | 2,590  
|Net decrease in cash and cash equivalents              |                                                                                             |                                                                                 | (4,326 
|Cash and cash equivalents at:                          |                                                                                             |                                                                                 |        
|                                                       | Beginning of period                                                                         |                                                                                 |        
|                                                       |                                                                                             |                                                                                 |        
|                                                       | End of period                                                                               |                                                                                 | $      
|                                                       |                                                                                             |                                                                                 |        

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

5

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## 

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

The financial statements included herein have been prepared by The J. Jill Group, Inc. (together with its wholly owned consolidated subsidiaries, the
"Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission, and in the opinion of management contain all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented. As a retailer, the Company is subject to seasonal fluctuations
in net sales. The results of operations for such interim periods are not necessarily indicative of the results to be expected for the full year. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. Accordingly, although the Company
believes that the disclosures are adequate to make the information presented not misleading, these financial statements should be read in conjunction with the consolidated financial statements and the
notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 25, 1999 ("fiscal 1999").

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. During fiscal 1999 the Company discontinued its Nicole Summers catalog concept, launched its e-commerce website (during August 1999) and began
opening retail stores (during November 1999), as it shifted from being a multiple catalog concept direct mail retailer to being a single brand retailer with multiple distribution channels.

B.  Summary of significant accounting policies:

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany balances and transactions have been
eliminated.

Fiscal year

The Company's fiscal year ends on the last Saturday in December. The twelve months ending December 30, 2000 ("fiscal 2000") will be a
53-week fiscal year. In a 53-week fiscal year, three of the quarters are 13-week periods and one is a 14-week period. The fourth quarter of fiscal 2000
will be a 14-week period.

Revenue recognition

The Company recognizes sales and the related cost of sales at the time the products are shipped to customers. Sales are final upon shipment of goods to the
customer. However, the customer may return ordered items for an exchange or refund. The Company provides an allowance based on projected merchandise returns, taking into consideration historical
experience and other factors. The returns allowance is recorded as a reduction to net sales for the estimated retail value of the projected merchandise returns and as a reduction in cost of products
for the corresponding cost amount. Shipping and handling fees charged to the customer are recognized at the time the products are shipped to the customer and are included in net sales. The cost of
shipping products to the customer is recognized at the time the products are shipped to the customer and is included in cost of products and merchandising.

6

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Cash and cash equivalents

Cash and cash equivalents consist primarily of cash on deposit in banks and may also include cash invested in money market mutual funds and overnight
repurchase agreements. The Company considers all highly liquid instruments, including certificates of deposit, with remaining maturity at time of purchase of three months or less to be cash
equivalents.

Pre-opening costs

Pre-opening costs for the Company's new retail stores include costs incurred prior to store opening (e.g. payroll costs and manager training
expenses). These costs are expensed as incurred and are included in selling, general and administrative expenses.

Cash held in escrow

Cash held in escrow consists of amounts the Company's wholly owned subsidiary, Birch Pond Realty Corporation, is required to keep in escrow associated with the
outstanding loan on the operations and fulfillment center in Tilton, New Hampshire (the "Tilton facility"). These amounts will be used to pay real estate taxes, insurance and various costs for repairs
and replacements related to the Tilton facility.

Inventory

Inventory, consisting of merchandise for sale, is stated at the lower of cost or market, with cost determined using the weighted average cost method. The
Company provides for markdown reserves based on expected net realizable market value.

Selling expenses

Selling expenses consist primarily of the cost to produce, print and distribute catalogs ("catalog costs"), retail store selling and administrative costs,
primarily salaries and benefits, and other marketing department costs. Costs associated with the Company's e-commerce website are also included in selling expenses. Catalog costs are
considered direct-response advertising and as such are capitalized as incurred and amortized over the expected sales life of each catalog, which is generally a period not exceeding six months.
Creative and production costs associated with the Company's e-commerce website are also considered direct response advertising and as such are capitalized as incurred and amortized over
the respective selling season, which is generally a period not to exceed six months. Strategy and planning costs associated with the Company's e-commerce website are expensed as incurred.

Property and equipment

Property and equipment are stated at cost. Depreciation expense is computed using the straight-line method over the estimated useful lives of the
assets, which are 30 years for buildings and 1-7 years for computers, computer software, equipment, furniture and fixtures. Improvements to leased premises are amortized on a
straight-line basis over the shorter of the estimated useful life or the lease term. Maintenance and repairs are charged to expense as incurred. Upon retirement or sale, the cost of the
assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to income.

The
Company accounts for its internal-use software, including website development costs, in accordance with the American Institute of Certified Public Accountants' issued Statement of
Position No. 98-1

7

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("SOP 98-1"),"Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1 requires that
certain costs related to the development or purchase of internal-use software be capitalized and amortized over the estimated useful life of the software. SOP 98-1 also
requires that costs related to the preliminary project stage and the post-implementation/operations stage of an internal-use computer software development project be expensed
as incurred.

Long-lived assets

Management periodically considers whether there has been a permanent impairment in the value of its long-lived assets, primarily property and
equipment, by evaluating various factors, including current and projected future operating results and undiscounted cash flows. The value of impaired long-lived assets is adjusted
periodically based on changes in these factors. During fiscal 1999 the Company determined that certain long-lived assets were impaired. See Note C.

Fair value of financial instruments

The Company periodically assesses the fair value of its financial instruments. Based on such an analysis, the Company's long-term debt, including
current maturities, approximates fair value.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Risks and uncertainties

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of cash investments. The Company
maintains cash and cash equivalents with various major financial institutions. The Company performs periodic evaluations of the relative credit standing of these financial institutions to minimize
credit risk.

The
Company has evaluated its operations to determine if any risks and uncertainties exist that could severely impact its operations in the near term. The Company believes that its
concentration risks are limited, primarily due to the fact that it purchases its inventory through buying agents and directly from a variety of vendors. The buying agents generally purchase the
Company's inventory directly from a
variety of foreign vendors. During fiscal 1999 and the nine months ended September 23, 2000 the Company did not purchase more than 10% of its inventory directly from any one vendor, however it
did purchase between 15% - 20% of its inventory through one buying agent. Although the Company could purchase this inventory through alternative buying agents and or directly from vendors, loss of
this buying agent could temporarily disrupt operations. The Company attempts to mitigate this risk by working closely with key agents and vendors.

Reclassifications

Certain prior year financial statement amounts have been reclassified to be consistent with the presentation for the three months and nine months ended
September 23, 2000. During fiscal 1999 the

8

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Company changed its statement of operations presentation to be more in line with the way the Company views its operations and to be more consistent with the presentation used by other companies in the
industry. The most significant of these changes included combining prior year classifications of product costs and operations expense into cost of product and merchandising and combining prior year
classifications of selling expense and general and administrative expense into selling, general and administrative expenses. As part of these changes the Company reclassified approximately $1,030,000
and $2,528,000 from selling, general and administrative expenses to cost of product and merchandising respectively for the three months and the nine months ended September 25, 1999,
respectively.

Cost
of products and merchandising on the Company's consolidated statements of operations 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 new retail stores. Selling, general and administrative expenses on the Company's
consolidated statements of operations consist of costs to produce, print and distribute catalogs, and corporate administrative, e-commerce website, and retail store selling and
administrative costs.

C.  Accrued special charges:

During the second half of fiscal 1999 the Company recorded charges totaling $5,987,000 primarily associated with its decision to discontinue its Nicole Summers
catalog concept. These charges included a $3,628,000 special charge in the third quarter of fiscal 1999 shown separately on the consolidated statement of operations and a $2,359,000 ($1,648,000 in the
third quarter and $711,000 in the fourth quarter of fiscal 1999) inventory markdown charge included in cost of products and merchandising. The $3,628,000 special charge was comprised primarily of
asset impairments, lease commitment costs, severance costs and other costs related to the discontinuance of Nicole Summers. The inventory markdown charge includes a write-down of inventory
to the lower of cost or market as well as costs to exit certain inventory commitments made in the ordinary course of business.

The
Company's liquidation plan for the Nicole Summers inventory was substantially complete as of June 24, 2000 and had more favorable results than anticipated. During second
quarter 2000, the Company received proceeds from the Nicole Summers inventory liquidation greater than the estimated net realizable value established for the inventory. As a result, the Company
recorded an additional $250,000 of gross margin during second quarter 2000. The Company does not expect the proceeds related to the remaining Nicole Summers inventory to be material.

At
September 23, 2000, September 25, 1999 and December 25, 1999, accrued expenses included $173,000, $637,000 and $532,000, respectively, representing the
remaining accrued special charges related to the discontinuance of Nicole Summers. These accrued special charges are comprised of lease commitment costs, severance costs and certain other costs. The
change between December 25, 1999 and September 23, 2000 reflects payment of a portion of the lease commitment costs, the severance costs and other costs. The Company expects to complete
paying for the majority of these items during fiscal 2000. During December 1999, the Company leased its previous warehouse and distribution center located in Meredith, New Hampshire to a third
party. The Company is currently planning to dispose of this property during fiscal 2001.

D.  Debt:

The Company's credit facilities at September 23, 2000 consisted of (i) a $12,000,000 real estate loan (the "Tilton Facility Loan"); (ii) a
$9,500,000 equipment loan (the "Equipment Loan"); (iii) a $980,000

9

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furniture loan (the "Furniture Loan"); (iv) a $1,650,000 real estate loan (the "Meredith Facility Loan"); and (v) a $30,000,000 revolving line of credit (the "Revolver").

The
Tilton Facility Loan is collateralized by a mortgage lien on the Tilton facility. The Tilton facility is owned by the Company's wholly owned subsidiary, Birch Pond Realty
Corporation and leased to the Company. The Equipment Loan is collateralized by substantially all of the Company's materials handling equipment. The Furniture Loan is collateralized by certain
workstations and office furniture. The remaining credit facilities are collateralized by substantially all of the Company's remaining assets. The Company's credit facilities contain various lending
conditions and covenants including restrictions on permitted liens. Certain credit facilities also contain covenants that require compliance with certain debt service coverage and other financial
ratios. Effective March 24, 2000, the loan agreement relating to the Meredith Facility Loan and the Revolver was amended to exclude certain capital expenditures made during fiscal 2000 from the
debt service coverage ratio calculation and to adjust certain other requirements. On August 7, 2000, the loan agreement covering the Meredith Facility Loan and the Revolver was amended to
recognize certain modifications in the Company's corporate structure. Effective September 22, 2000, the loan agreement covering the Meredith Facility Loan and the Revolver was further amended
to exclude Revolver advances from the current ratio and to modify the definition of the debt service coverage ratio to be consistent with the definition originally included in the amendment dated
March 24, 2000. The Company is currently negotiating with its primary lender to replace the Revolver with a new larger revolving credit facility.

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 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. Interest on the Furniture Loan is fixed at 6.25% per annum and requires monthly payments of
principal and interest through its maturity on March 30, 2002. Payments of principal and interest on the Meredith Facility Loan, a 5-year loan, are due monthly, based on a
15-year amortization, with a balloon payment of the remaining balance payable on July 30, 2002. Interest on the Meredith Facility Loan is fixed at 7.60%. Prior to
September 7, 2000 interest on the Meredith Facility Loan had been fixed at 6.74%. The weighted average interest rate on the Meredith Facility Loan was 6.79% for the nine months ended
September 23, 2000. The Revolver matures on June 1, 2001 and at September 23, 2000 bore interest at 9.50% per annum. The availability under the Revolver is reduced by outstanding
borrowings and outstanding letters of credit. Outstanding borrowings under the Revolver totaled $3,785,000 and $4,000,000 respectively at September 23, 2000 and September 25, 1999.
Outstanding letters of credit totaled $17,972,000 and $8,664,000 at September 23, 2000 and September 25, 1999, respectively. The outstanding letters of credit do not bear interest. The
Company is required to pay a commitment fee of 1/8 of 1% per annum on the unused portion of the Revolver.

10

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

September 23,
2000

September 25,
1999

December 25,
1999Real estate loans

$
12,938

$
13,316

$
13,222Equipment loans


7,393


8,639


8,220Furniture loans


540


855


778Revolver loans


3,785


4,000


Capitalized lease obligations


8


15


15Total long-term debt


24,664


26,825


22,235Less current maturities


6,909


1,815


3,137Long-term debt, less current portion

$
17,755

$
25,010

$
19,098


E.  Earnings per share:

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

Three Months Ended

Nine Months EndedSeptember 23,
2000

September 25,
1999

September 23,
2000

September 25,
1999Numerator:Net income (loss)

$
3,583

$
(4,226
)
$
6,493

$
862Denominator (shares):Basic weighted average shares outstanding


10,037


9,956


10,019


9,842Assumed exercise of stock options


364





267


719Diluted weighted average shares outstanding


10,401


9,956


10,286


10,561Earnings per share:Basic

$
0.36

$
(0.42
)
$
0.65

$
0.09Diluted

$
0.34

$
(0.42
)
$
0.63

$
0.08


At
September 23, 2000 and September 25, 1999, of the options then outstanding, options to purchase 100,000 and 327,500 shares of common stock respectively were excluded
from the computation of diluted EPS on the basis that such options were antidilutive. Between September 23, 2000 and October 28, 2000, the Company granted options to purchase 830,000
shares of common stock to employees.

F.  Commitments:

During the nine months ended September 23, 2000 the Company entered into lease agreements for fifteen retail stores each beginning during fiscal 2000
and having terms of approximately ten years. In addition to the commitments identified in Note J of the Company's Annual Report on Form 10-K for the

11

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fiscal year ended December 25, 1999, the Company's commitments include combined future annual minimum lease payments due under these additional retail store leases as follows (in thousands):

Fiscal 2000

$
1,348Fiscal 2001


3,230Fiscal 2002


3,230Fiscal 2003


3,309Fiscal 2004


3,413Thereafter


20,725Total

$
35,255


Between
September 23, 2000 and October 28, 2000, the Company entered into leases for an additional four retail stores. Included in other non-current
liabilities are deferred credits related to retail store leases.

G.  Options:

During April 2000 the Company paid approximately $60,000 to certain option holders as an incentive to have their options cancelled. A total of 879,000
outstanding options under the 1993 Stock Option Plan were cancelled as a result of this incentive. The following table reflects activity under the 1993 Stock Option Plan between December 25,
1999 and September 23, 2000. The Company incorporated the guidance of the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 44 ("FIN 44"), "Accounting for Certain Transactions
Involving Stock Compensationan interpretation of APB
Opinion No. 25", as it relates to the option activity listed below as well as other potential transactions involving stock compensation and there was no effect on the
Company's consolidated financial statements.

Number
of Shares

Exercise
Price
Per Share

Wtd. Avg.
Exercise
PriceBalance at December 25, 1999

1,806,621

$
1.38 - 20.83

$
10.60Granted

55,000


4.06 - 6.00


5.12Exercised

(37,550
)

1.83 - 5.00


2.71CancelledTerminations

(102,500
)

4.38 - 14.75


10.83CancelledOther

(879,000
)

10.13 - 20.83


15.16Balance at September 23, 2000

842,571

$
1.38 - 20.83

$
5.81


H.  Recent accounting standards:

In December 1999 the Securities and Exchange Commission (the "SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"),
"Revenue Recognition in Financial Statements," which provides guidance on properly applying Generally Accepted Accounting Principles to revenue
recognition in financial statements. In March and June 2000 the SEC issued Staff Accounting Bulletins No. 101A and No. 101B, respectively, to delay the implementation date of SAB
101. As a result of these two recent Staff Accounting Bulletins, the implementation date of SAB 101 has been delayed until the fourth fiscal quarter of fiscal years beginning after December 15,
1999. The Company is currently evaluating the impact of SAB 101 on the Company's consolidated financial statements, primarily the impact of recording sales upon shipment of

12

---

goods to customers versus at time of customer receipt, and will adopt the provisions of SAB 101 in the fourth quarter of fiscal 2000.

In
March 2000 the FASB issued FIN 44, "Accounting for Certain Transactions Involving Stock Compensationan interpretation of APB Opinion
No. 25."The Company incorporated the guidance of FIN 44 during fiscal 2000 and there was no effect on the Company's consolidated financial statements.

In
July 2000 the Emerging Issues Task Force ("EITF") of the FASB concluded on Issue 1 of EITF issue No. 00-10"Accounting for
Shipping and Handling Fees and Costs,"which provides guidance on the presentation of shipping and handling revenue and costs in the statement of operations. EITF issue
No. 00-10 is a clarification of EITF issue 99-19,"Reporting Revenue Gross as a Principal versus Net as an Agent"and the
effective date of the issue is no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999. Shipping and handling fees charged to the customer are included in net
sales as required by EITF issue No. 00-10 and 99-19. The cost of shipping products to the customer is recognized at the time the products are shipped to the customer and
is included in cost of products
and merchandising. The Company has determined that Issue No. 00-10 and 99-19 had no effect on the Company's consolidated financial statements.

I.  Segment information:

The Company currently has two reportable business segments, direct and retail. Both of these segments are focused on selling J. Jill apparel, accessories and
footwear. Each segment is separately managed and utilizes distinct distribution and marketing strategies. The direct segment utilizes catalogs and an e-commerce website, www.jjill.com, to
market J. Jill merchandise. The retail segment sells similar merchandise through retail stores. The Company began operation of its retail segment in November 1999. Prior to the third quarter of
fiscal 2000, the Company aggregated its segments. Segment information for fiscal 1999 has been restated to conform to current period presentation. Results from the Company's catalog outlet stores and
the discontinued Nicole Summers catalog 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". It
designates the Company's internal management reporting structure as the basis for determining the Company's reportable segments, as well as the basis for determining the information to be disclosed
for those segments.

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

13

---

equivalents, the Company's corporate headquarters and distribution facility, corporate information systems, deferred tax amounts, all inventory except inventory in stores, assets held for sale and
other corporate assets.

The
following tables provide financial information by segment for the third quarter and for the nine months ended September 2000 and 1999.

Direct

Retail

Other(1)

TotalNet salesThird quarter 2000

$
51,529

$
6,955

$
(298
)
$
58,186Third quarter 1999


46,767





(444
)

46,323Nine months ended September 23, 2000


148,900


11,535


(806
)

159,629Nine months ended September 25, 1999


190,634





(1,551
)

189,083Direct contributionThird quarter 2000

$
14,928

$
527


*

$
15,455Third quarter 1999


8,323


(140
)

*


8,183Nine months ended September 23, 2000


38,700


(345
)

*


38,355Nine months ended September 25, 1999


37,642


(221
)

*


37,421


---

Direct

Retail

Unallocated
assets

TotalAssetsSeptember 23, 2000

$
8,172

$
17,371

$
97,133

$
122,676September 25, 1999


11,330


372


95,852


107,554


The
following table provides a reconciliation of segment direct contribution to income (loss) before interest and taxes.

Three Months Ended

Nine Months EndedSeptember 23,
2000

September 25,
1999

September 23,
2000

September 25,
1999Direct contribution

$
15,455

$
8,183

$
38,355

$
37,421Unallocated shared-service costs


(4,936
)

(6,096
)

(15,067
)

(19,640
)General and administrative expenses


(4,014
)

(3,445
)

(11,247
)

(9,893
)Special charges





(5,276
)




(5,276
)Income (loss) before interest and taxes

$
6,505

$
(6,634
)
$
12,041

$
2,612


14

---

## 

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
Section 21E of the Securities Exchange Act of 1934, as amended, which involve 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. The Company's actual results, performance or achievements may differ significantly from the results discussed in or implied by the forward-looking statement.
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; the availability, terms and deployment of capital; significant changes in customer acceptance of the
Company's product offerings; changes in competition in the apparel industry; changes in consumer spending, fashion trends and consumer preferences; changes in, or the failure to comply with, federal
and state tax and other government regulations; the customary risks of purchasing merchandise abroad, including longer lead times, higher initial purchase commitments and foreign currency
fluctuations; possible future increases in expenses and labor and employee benefit costs; the ability of the Company to attract and retain qualified personnel; business abilities and judgment of
management; the existence or absence of brand awareness; the existence or absence of publicity, advertising and promotional efforts; the success or failure of operating initiatives; the mix of the
Company's sales between full price and liquidation merchandise; general economic and business conditions and other factors. See also Item 1A, Risk Factors, included in the Company's Annual Report on
Form 10-K for the fiscal year ended December 25, 1999.

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. During fiscal 1999 the Company discontinued its Nicole Summers
catalog concept, launched its e-commerce website www.jjill.com (during August 1999) and began opening retail stores (during November 1999), as it shifted from being a
multiple catalog concept direct mail retailer to being a single brand retailer with multiple distribution channels.

During
the three months ended September 23, 2000 ("third quarter 2000") net sales increased by 25.6%, or $11.9 million, to $58.2 million from $46.3 million
during the three months ended September 25, 1999 ("third quarter 1999"). Income before interest and taxes ("operating income") for third quarter
2000 totaled $6.5 million or 11.2% of net sales compared to a loss from operations of $6.6 million during third quarter 1999. Net income for third quarter 2000 was $3.6 million or
$0.34 per diluted share versus a net loss of $4.2 million or $0.42 per diluted share in the third quarter of last year. During third quarter 1999 the Company recorded special charges totaling
$5.3 million primarily associated with its decision to shutdown its Nicole Summers catalog concept.

The
Company's operations are segregated into two distinct business segments, direct and retail. Each segment is separately managed and utilizes distinct distribution and marketing
strategies. During third quarter 2000, both segments were favorably impacted by positive customer response to the Company's fall season merchandise offerings. Direct segment net sales, excluding those
relating to the Company's discontinued Nicole Summers catalog concept, increased 21.8% as compared to third quarter 1999. Retail segment net sales levels continue to exceed management's expectations
and contributed 12.0% of total Company net sales for the quarter. The Company continues to make significant investments in its retail and e-commerce channels of distribution. Even with
these investments, the Company experienced a significant leveraging of its expense structure during third quarter 2000, resulting in the highest quarterly operating
margin11.2%in the Company's recent history. The Company is now benefiting from the significant investments previously made in systems, facilities and staffing.

15

---

Business Strategy Update

The Company remains committed to and confident in its multi-channel strategy. The Company believes that its J. Jill brand is positioned to capture share in a
market segment that is large, growing and under-served. The Company also believes that the combination of "mail, mall and web" is a powerful retailing model which leverages the J. Jill brand and the
Company's infrastructure.

Direct strategy

Within the direct segment the strategy for the catalog business will be to focus on productivity, with the aim of maintaining the size of the business at
roughly $200 million in net sales. However, in light of the results of the fall season to date, the Company may cautiously experiment with increasing catalog circulation in an attempt to
achieve modest top-line growth for the channel without sacrificing productivity. The Company's e-commerce strategy is to maintain the sophistication and functionality of the
Company's website, to enhance the site prudently and appropriately, to encourage existing customers to
use the site, to explore cost-effective ways to direct new customers to the site and to further enhance the site's off-price liquidation capacities.

Retail strategy

The Company expects that its growth in the foreseeable future will come primarily from its retail business. At September 23, 2000, the Company had
twelve stores open and by the end of November 2000 it will have twenty-two open. The sales per square foot performance of the stores currently open is projected to be greater than $500 per
square foot on an annualized basis. The Company believes that specialty stores are acquiring market share at the expense of department stores, and that the women's apparel industry currently lacks a
focus on the mature female customerJ. Jill's target customer. The Company believes that it is positioned to meet this customer's needs and therefore to capture share in this underserved
market. For fiscal 2001 the Company expects to open twenty-five additional stores. The Company currently believes there is a total market potential for three hundred to five hundred of its
stores throughout the United States. The Company has initially committed to fifteen locations for fiscal 2001. These commitments would add three new stores in California, two new stores in Colorado,
Missouri and New Jersey and one new store in Arizona, Massachusetts, Ohio, Tennessee, Texas and Utah. In locating sites for new stores, the Company continues to target prime locations within upscale
malls around the country.

Results of Operations

The following table sets forth, for the fiscal periods indicated, certain items from the Company's consolidated statements of operations expressed as a
percentage of net sales. Certain prior year financial statement amounts have been reclassified to be consistent with the presentation for the three and nine months ended September 23, 2000.
During the fourth quarter of fiscal 1999 the Company changed its income statement presentation to be more in line with the way the Company views its operations and to be more consistent with the
presentation used by other companies in the industry. The most significant of these changes included combining prior year classifications of product costs and operations expense into

16

---

cost of product and merchandising and combining prior year classifications of selling expense and general and administrative expense into selling, general and administrative expenses.

|                                             |                                         | Three Months Ended |      | Nine Months Ended |      
|-------------------------------------------- | --------------------------------------- | ------------------ | ---- | ----------------- | -----
|
|Consolidated Statements of Operations:       |                                         |                    |      |                   |      
|Net sales                                    |                                         | 100.0              | %    | 100.0             | %    
|Cost of products and merchandising           |                                         | 63.3               |      | 73.5              |      
|                                             |                                         |                    |      |                   |      
|                                             | Gross margin                            |                    | 36.7 |                   | 26.5 
|Selling, general and administrative expenses |                                         | 25.5               |      | 33.0              |      
|Special charge                               |                                         |                   |      | 7.8               |      
|                                             |                                         |                    |      |                   |      
|                                             | Income (loss) before interest and taxes |                    | 11.2 |                   | (14.3
|Interest, net                                |                                         | 0.6                |      | 0.9               |      
|                                             |                                         |                    |      |                   |      
|                                             | Income (loss) before taxes              |                    | 10.6 |                   | (15.2
|Income tax provision (benefit)               |                                         | 4.4                |      | (6.1              | )    
|                                             |                                         |                    |      |                   |      
|                                             | Net income (loss)                       |                    | 6.2  | %                 | (9.1 
|                                             |                                         |                    |      |                   |      



|                            |                                           | Three Months Ended          |         | Nine Months Ended |          
|--------------------------- | ----------------------------------------- | --------------------------- | ------- | ----------------- | ---------
|
|Selected Operating Data(1): |                                           |                             |         |                   |          
|Direct:                     |                                           |                             |         |                   |          
|                            | Circulation(2)                            |                             |         |                   |          
|                            |                                           | Catalogs (in thousands)     |         | 14,600            |          
|                            |                                           | Square inches (in millions) |         | 96,400            |          
|                            | Twelve-month buyers(3)                    |                             | 983,000 |                   | 1,069,000
|                            | Customer e-mail addresses                 |                             | 401,000 |                   | n/a      
|Retail:                     |                                           |                             |         |                   |          
|                            | Stores open(4)                            |                             |         |                   |          
|                            |                                           | Beginning of period         |         | 7                 |          
|                            |                                           | End of period               |         | 12                |          
|                            | Store weeks in operation(5)               |                             | 107     |                   |         
|Total Company               |                                           |                             |         |                   |          
|                            | J. Jill private label credit card holders |                             | 179,800 |                   | 127,500  

---

17

---



Significant Event

During the second half of fiscal 1999 the Company recorded charges totaling $6.0 million primarily associated with its decision to discontinue its Nicole
Summers catalog concept. These charges included a $3.6 million special charge in the third quarter of fiscal 1999 shown separately on the consolidated statement of operations and a $2.4 million ($1.6
million in the third quarter and $0.7 million in the fourth quarter of fiscal 1999) inventory markdown charge included in cost of products and merchandising. The $3.6 million special charge was
comprised primarily of asset impairments, lease commitment costs, severance costs and other costs related to the discontinuance of Nicole Summers. The inventory markdown charge includes a
write-down of inventory to the lower of cost or market as well as costs to exit certain inventory commitments made in the ordinary course of business.

The
Company's liquidation plan for the Nicole Summers inventory was substantially complete as of June 24, 2000 and had more favorable results than anticipated. During second
quarter 2000, the Company received proceeds from the Nicole Summers inventory liquidation greater than the estimated net realizable value established for the inventory. As a result, the Company
recorded an additional $0.3 million of gross margin during second quarter 2000. The Company does not expect the proceeds related to the remaining Nicole Summers inventory to be material.

Comparison of the Three and Nine Months Ended September 23, 2000 with the Three and Nine Months Ended September 25, 1999

During third quarter 2000 net sales increased by 25.6%, or $11.9 million, to $58.2 million from $46.3 million during third quarter 1999.
During the nine months ended September 23, 2000 net sales decreased by 15.6%, or $29.5 million, to $159.6 million from $189.1 million during the nine months ended
September 25, 1999. The decline in year to date net sales is primarily attributable to the discontinuation of the Nicole Summers concept and to catalog circulation reductions at J.
Jill.The table below summarizes the changes in net sales by segment (in thousands):

|         |                | Three Months Ended |       | Nine Months Ended |       
|-------- | -------------- | ------------------ | ----- | ----------------- | ------
|
|Direct:  |                |                    |       |                   |       
|         | J. Jill        |                    | $     | 51,462            |       
|         | Nicole Summers |                    |       | 67                |       
|         |                |                    |       |                   |       
|         |                | Total Direct       |       |                   | 51,529
|Retail   |                |                    | 6,955 |                   |       
|Other(1) |                |                    | (298  | )                 |       
|         |                |                    |       |                   |       
|         |                | Total net sales    |       | $                 | 58,186
|         |                |                    |       |                   |       

---

Within
the direct segment, J. Jill's net sales increased by $9.2 million, or 21.8%, during third quarter 2000 as compared to third quarter 1999. This increase was driven by
improved productivity per catalog as J. Jill catalog circulation decreased by 1.4% to 14.6 million catalogs. Additionally, customer response rates increased by 9.8% to 3.0% and average
order size grew by 1.8% to $157 per order for J. Jill during third quarter 2000. During the nine months ended September 23, 2000 J. Jill's net sales declined by $13.6 million, or 8.4%,
as compared to the nine months ended September 25, 1999 as a result of a 19.3% decrease in J. Jill catalog circulation offset by improved catalog productivity. E-commerce net sales
represented 15.4% of all direct segment net sales for J. Jill during third quarter 2000 as compared to 0.6% during third quarter

18

---

1999. During the nine months ended September 23, 2000 e-commerce net sales represented 13.8% of all direct segment net sales for J. Jill as compared to 0.2% during the nine months
ended September 25, 1999.

Retail
segment net sales were $7.0 million during third quarter 2000 and $11.5 million during the nine months ended September 23, 2000, as compared to zero for
third quarter 1999 and the nine months ended September 25, 1999. The Company began opening retail stores during November 1999 and had twelve stores opened at September 23, 2000.
The Company expects to open an additional ten stores by the end of fiscal 2000.

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 new retail stores. During third quarter 2000 gross margin
increased by $9.1 million, or 74.1%, to $21.3 million from $12.3 million during third quarter 1999. As a percentage of net sales, gross margin increased to 36.7% during third
quarter 2000 from 26.5% (30.0% before special markdown charges) during third quarter 1999. This increase in gross margin as a percentage of net sales is a result of (i) lower product costs due
to the elimination of the Nicole Summers concept with its lower product margins; (ii) lower markdowns due to the favorable impact of off-price liquidation using the Company's
e-commerce website and an improved J. Jill business versus last year; and (iii) productivity improvements in order processing. These productivity gains were further enhanced by the
leveraging of certain fixed order processing costs over higher sales volume.

During
the nine months ended September 23, 2000 gross margin decreased by $5.2 million, or 8.7%, to $54.6 million from $59.8 million during the nine months
ended September 25, 1999. As a percentage of net sales, gross margin increased to 34.2% during the nine months ended September 23, 2000 from 31.6% (32.5% before special markdown charges)
during the nine months ended September 25, 1999.
This increase as a percentage of net sales is a result of (i) lower product costs due to the elimination of the Nicole Summers concept with its lower product margins; (ii) lower
markdowns due to the favorable impact of off-price liquidation using the Company's e-commerce website and an improved J. Jill business versus last year; and
(iii) productivity efficiencies gained in the customer contact center. These improvements were partially offset by the deleveraging impact of the Company's fixed cost structure over lower sales
volume.

Selling,
general and administrative expenses consist of costs to produce, print and distribute catalogs, and corporate administrative, e-commerce website, and retail store
selling and administrative costs. During the third quarter of 2000 selling, general and administrative expenses decreased by $0.4 million, or 2.8%, to $14.8 million from
$15.3 million during third quarter 1999. As a percentage of net sales, selling, general and administrative expenses decreased to 25.5% during third quarter 2000 from 33.0% during third quarter
1999. During the nine months ended September 23, 2000 selling, general and administrative expenses decreased by $11.0 million, or 20.6%, to $42.5 million from $53.5 million
during the nine months ended September 25, 1999. As a percentage of net sales, selling, general and administrative expenses decreased to 26.7% during the nine months ended September 23,
2000 from 28.3% during the nine months ended September 25, 1999. These decreases in selling, general and administrative expenses as a percent of net sales are a result of increased catalog
productivity which was partially offset by increased retail and e-commerce selling expenses and increases in general and administrative spending, primarily in the areas of compensation and
occupancy costs.

Income Taxes

The Company provides for income taxes at an effective tax rate that includes the federal and state statutory tax rates. The Company's effective tax rates for
third quarter 2000 and the nine months ended September 23, 2000 were 42.0% and 41.6% respectively as compared to 40.0% for third quarter 1999 and the nine months ended September 25,
1999. The increases in effective tax rate reflect the effect of an increased state statutory tax rate due to the Company doing business in states with higher tax rates.

19

---

Segment Direct Contribution

The Company currently has two reportable business segments, direct and retail. Both of these segments are focused on selling J. Jill apparel, accessories and
footwear. Each segment is separately managed and utilizes distinct distribution and marketing strategies. The direct segment utilizes catalogs and an
e-commerce website, www.jjill.com, to market J. Jill merchandise. The retail segment sells similar merchandise through retail stores. The Company began operation of its retail segment in
November 1999. Prior to the third quarter of fiscal 2000, the Company aggregated its segments. Segment information for fiscal 1999 has been restated to conform to current period presentation.
Results from the Company's catalog outlet stores and the discontinued Nicole Summers catalog 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". It designates the Company's internal management reporting structure as the basis for determining the Company's reportable segments, as well as the
basis for determining the information to be disclosed for those segments.

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

During
third quarter 2000, the direct contribution of the direct segment increased by 79.4%, or $6.6 million, to $14.9 million from $8.3 million during third
quarter 1999. During the nine months ended September 23, 2000 the direct contribution of the direct segment increased by 2.8%, or $1.1 million, to $38.7 million from
$37.6 million during the nine months ended September 25, 1999. J. Jill customer response rates increased by 9.8% during third quarter 2000 and 11.4% during the nine months ended
September 23, 2000 as compared to third quarter 1999 and the nine months ended September 25, 1999, respectively. This improvement in customer response rates resulted in significant
improvement in the direct contribution of the direct segment for the third quarter of this year as compared to last year's third quarter as selling costs were better leveraged over higher sales
volume. Current year cumulative results showed a slight improvement over the prior year as catalog productivity improvements were significant for only part of the nine-month period.

Third
quarter retail direct contribution increased to a $0.5 million direct contribution from a $0.1 million negative direct contribution during third quarter 1999. For
the nine months ended September 23, 2000 and September 25, 1999 negative direct contributions were generated by the retail segment of $0.3 million and $0.2 million,
respectively.

Seasonality

Unlike the direct business, the retail business is expected to be seasonal. With respect to fiscal 2001 retail net sales, the Company currently projects that
slightly less than 20% will occur during the first quarter, slightly more than 20% will occur during each of the second and third quarters and approximately 35% will occur during the fourth quarter.
The Company has only limited experience operating retail stores, however, and actual experience could vary significantly from these projected results. The impact of this seasonality will be especially
evident when comparing the Company's first quarter fiscal 2001 results to the first quarter of fiscal 2000, as the Company will be supporting the infrastructure for twenty-two stores in the first
quarter of fiscal 2001 as compared to only two in the first quarter of fiscal 2000. The impact of this seasonality will also be evident when comparing the Company's first quarter fiscal 2001 results
to the fourth quarter of fiscal 2000. During the first quarter of fiscal 2001 the Company expects that its retail

20

---

stores will generate approximately half of the net sales volume that they will in the fourth quarter of fiscal 2000, yet much of the cost structure will remain unchanged.

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 for 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. Capital needs arise from capital expenditures necessary to support the growth of the Company,
including the new retail store initiative and improvements to the Company's physical and operating infrastructure. During the nine months ended September 23, 2000 the Company funded its working
capital and capital investment needs with cash generated from operations and with borrowings under the Company's revolving line of credit.

During
the nine months ended September 23, 2000 the Company's cash and cash equivalents ("cash") decreased by $4.3 million. This cash, as well as $6.6 million in
cash provided by operations and $2.4 million in cash provided by borrowings during the period funded nearly all of the $13.5 million in capital expenditures made during the period. These
capital expenditures included approximately $10.0 million associated with retail store construction and $1.9 million for the construction of the Company's new corporate headquarters in
Quincy, Massachusetts.

Working
capital during the nine months ended September 23, 2000 was primarily provided by $10.4 million in net income before depreciation and amortization and
$13.3 million in increased accounts payable, accrued expenses and other liabilities. Working capital was primarily used to purchase inventory during the nine months ended September 23,
2000. Inventory levels at September 23, 2000 were 79.8% higher than at December 25, 1999 and 24.6% higher than at September 25, 1999. This increase in inventory reflects the
current and future projected growth in the J. Jill direct and retail businesses as well as lower required markdown reserves as a percent of total inventory due to the favorable impact of
off-price liquidation using the Company's e-commerce website and an improved J. Jill business versus last year. Accounts payable and accrued expense balances at
September 23, 2000 were 71.3% higher than at December 25, 1999 and 49.0% higher than at September 25, 1999. Most of the increase in accounts payable and accrued expenses is
associated with the increase in inventory described above. In addition, accounts payable, accrued expenses and other liabilities at September 23, 2000 include increased payables and accrued
amounts related to the retail store roll-out and management bonuses.

During
the nine months ended September 25, 1999 the Company's cash decreased by $18.6 million. This decrease resulted from a combination of $6.1 million in net
debt payments made in connection with the refinancing of the Company's operations and fulfillment center in Tilton, New Hampshire (the "Tilton facility") on a long term basis, $5.8 million used
for capital expenditures and net cash used in operating activities of $7.8 million. Capital expenditures during the nine months ended September 25, 1999 were primarily for the
construction of the Tilton facility. The $7.8 million of cash used in operations was primarily a result of increased inventory and other current asset balances, partially offset by net income
before depreciation.

The
Company's credit facilities at September 23, 2000 consisted of (i) a $12.0 million real estate loan (the "Tilton Facility Loan"); (ii) a
$9.5 million equipment loan (the "Equipment Loan"); (iii) a $1.0 million furniture loan (the "Furniture Loan"); (iv) a $1.7 million real estate loan (the "Meredith
Facility Loan"); and (v) a $30.0 million revolving line of credit (the "Revolver"). At September 23, 2000 there were $18.0 million of letters of credit and
$3.8 million in borrowings outstanding under the Revolver, leaving $8.2 million available under the Revolver. The Revolver matures on June 1, 2001. The weighted average interest
rate for amounts outstanding under the Company's credit facilities during the nine months ended September 23, 2000 was 7.38%. The Tilton Facility Loan is collateralized by a mortgage lien on
the Tilton facility. The Tilton facility is owned by the Company's wholly owned subsidiary, Birch Pond Realty

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Corporation, and leased to the Company. The Equipment Loan is collateralized by substantially all of the Company's materials handling equipment. The Furniture Loan is collateralized by certain
workstations and office furniture. The remaining credit facilities are collateralized by substantially all of the Company's remaining assets. The Company's credit facilities contain various lending
conditions and
covenants including restrictions on permitted liens. Certain credit facilities also contain covenants that require compliance with certain debt service coverage and other financial ratios. Effective
March 24, 2000, the loan agreement relating to the Meredith Facility Loan and the Revolver was amended to exclude certain capital expenditures made during fiscal 2000 from the debt service
coverage ratio calculation and to adjust certain other requirements. On August 7, 2000, the loan agreement covering the Meredith Facility Loan and the Revolver was amended to recognize certain
modifications in the Company's corporate structure. Effective September 22, 2000, the loan agreement covering the Meredith Facility Loan and the Revolver was further amended to exclude Revolver
advances from the current ratio and to modify the definition of the debt service coverage ratio to be consistent with the definition originally included in the amendment dated March 24, 2000.
The Company is currently negotiating with its primary lender to replace the Revolver with a new larger revolving credit facility.

The
Company opened two retail stores in the fourth quarter of fiscal 1999 and opened ten additional retail stores during the first nine months of 2000. The Company currently plans to
have a total of twenty-two retail stores open by the end of November 2000. During the nine months ended September 23, 2000 the Company entered into lease agreements for fifteen
retail stores. In aggregate, the minimum combined lease payments for these fifteen stores range from $1.3 million in fiscal 2000 to a maximum of $3.6 million per year (see Note F to the
accompanying condensed consolidated financial statements). Each lease has terms of approximately ten years. Between September 23, 2000 and October 28, 2000, the Company entered into
leases for an additional four retail stores. The Company's cash requirements related to its retail store initiative are significant and are primarily comprised of leasehold improvements, net of tenant
improvement allowances, and initial inventory acquisition costs. The cash requirements for opening a new retail store are currently estimated at an average of between $0.9 million and
$1.0 million per store.

During
December 1999, the Company leased its previous warehouse and distribution center located in Meredith, New Hampshire to a third party. The Company is currently planning
to dispose of this property during fiscal 2001.

The
Company expects that its cash and cash equivalents, existing credit facilities, and cash flows from operations will be sufficient to support the Company's capital and operating
needs during the remainder of fiscal 2000. The Company is currently evaluating the financing alternatives available to fund its growth and believes it will require additional financing during fiscal
2001 to support its current growth strategy, including the plan to open twenty-five retail stores during fiscal 2001. The Company can not assure that funds will be available on acceptable
terms when needed, or at all. Should the Company be unable to obtain additional financing, the timing of its retail store roll-out could be affected. The Company expects to utilize a significant
portion of its cash generated from operations in fiscal 2001 to fund its planned fiscal 2001 retail roll-out.

Future Financial Targets

With respect to the fourth quarter of fiscal 2000 and full-year fiscal 2001, the Company has set the following targets for its financial
performance:



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These
estimates 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 December 1999 the Securities and Exchange Commission (the "SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"),
"Revenue Recognition in Financial Statements," which provides guidance on properly applying Generally Accepted Accounting Principles to revenue
recognition in financial statements. In March and June 2000 the SEC issued Staff Accounting Bulletins No. 101A and No. 101B,
respectively, to delay the implementation date of SAB 101. As a result of these two recent Staff Accounting Bulletins, the implementation date of SAB 101 has been delayed until the fourth fiscal
quarter of fiscal years beginning after December 15, 1999. The Company is currently evaluating the impact of SAB 101 on the Company's consolidated financial statements, primarily the impact of
recording sales upon shipment of goods to customers versus at time of customer receipt, and will adopt the provisions of SAB 101 in the fourth quarter of fiscal 2000.

In
March 2000 the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 44 ("FIN 44"), "Accounting for Certain
Transactions Involving Stock Compensationan interpretation of APB Opinion No. 25."The Company incorporated the guidance of FIN 44 during fiscal 2000 and
there was no effect on the Company's consolidated financial statements.

In
July 2000 the Emerging Issues Task Force ("EITF") of the FASB concluded on Issue 1 of EITF issue No. 00-10"Accounting for
Shipping and Handling Fees and Costs,"which provides guidance on the presentation of shipping and handling revenue and costs in the statement of operations. EITF issue
No. 00-10 is a clarification of EITF issue 99-19,"Reporting Revenue Gross as a Principal versus Net as an Agent"and the
effective date of the issue is no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999. Shipping and handling fees charged to the customer are included in net
sales as required by EITF issue No. 00-10 and 99-19. The cost of shipping products to the customer is recognized at the time the products are shipped to the customer and
is included in cost of products and merchandising. The Company has determined that Issue No. 00-10 and 99-19 had no effect on the Company's consolidated financial
statements.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

The Company's objective in managing its 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 identifies these risks and manages them through its regular operating and financing activities,
including periodic refinancing of debt obligations to lower financing costs and adjust fixed and variable rate debt positions. The Company does not currently use derivative financial instruments or
enter into foreign currency denominated contracts. Management has calculated the effect of a 10% change in interest rates over a month and determined the effect to be immaterial. Management does not
foresee or expect any significant changes in the management of foreign currency or interest rate exposures or in the strategies it employs to manage such exposures in the near future.

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PART IIOTHER INFORMATION

Item 5.Other Information

The Company has learned that the Securities and Exchange Commission is conducting a formal investigation regarding trading in the securities of the Company in
the period prior to the Company's September 20, 1999 announcement of an anticipated operating loss for the third quarter of fiscal 1999 and the shutdown of the Company's Nicole Summers catalog.
This investigation is ongoing, and the Company is cooperating with it fully.

Item 6.Exhibits and Reports on Form 8-K



Certificate of Incorporation and By-Laws3.1

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 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

By-Laws of the Company, as amended (included as Exhibit 99.1 to the Company's Current Report on Form 8-K dated November 24, 1999, File No. 0-22480, and incorporated herein by reference)Material Contracts10.1

First Amendment to Fourth Amended and Restated Loan Agreement between the Company and Citizens Bank of Massachusetts, dated September 22, 2000Financial Data Schedule27.1

Financial Data Schedule






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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 6, 2000 |  | By:                    
|Dated: November 6, 2000 |  | By:                    
|                        |  |                        

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THE J. JILL GROUP, INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 23, 2000

EXHIBIT INDEX

|Material Contracts     
|-----------------------
|10.1                   
|Financial Data Schedule
|27.1                   
|                       

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