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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 JUNE 24, 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(State or Other Jurisdiction of
Incorporation or Organization)

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

02169(Zip Code)


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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 July 31, 2000: 10,043,497

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## 

THE J. JILL GROUP, INC.  INDEX TO QUARTERLY REPORT ON FORM 10-Q  FOR THE QUARTER ENDED JUNE 24, 2000

|                             |                                                                                               | Page                                                                                                               
|---------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------
|PART IFINANCIAL INFORMATION
|                             | Item 1. Condensed Consolidated Financial Statements                                           |                                                                                                                    
|                             |                                                                                               | Consolidated Balance Sheets at June 24, 2000, June 26, 1999 and December 25, 1999                                  
|                             |                                                                                               | Consolidated Statements of Operations for the three months and the six months ended June 24, 2000 and June 26, 1999
|                             |                                                                                               | Consolidated Statements of Cash Flows for the six months ended June 24, 2000 and June 26, 1999                     
|                             |                                                                                               | Notes to Condensed Consolidated Financial Statements                                                               
|                             | 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 4. Submission of Matters to a Vote of Security Holders                                   |                                                                                                                    
|                             | Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                                    
|Signatures                   |                                                                                               | 20                                                                                                                 

2

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THE J. JILL GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

|                                     |                                                                                                                                                                                                       | June 24,
2000              |                                            | June 26,
1999 |        | December 25,
1999 |       
|------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | ------------- | ------ | ----------------- | ------
|
|ASSETS                               |                                                                                                                                                                                                       |                            |                                            |               |        |                   |       
|Current assets:                      |                                                                                                                                                                                                       |                            |                                            |               |        |                   |       
|                                     | Cash and cash equivalents                                                                                                                                                                             |                            | $                                          | 3,129         |        | $                 | 11,967
|                                     | Cash held in escrow                                                                                                                                                                                   |                            |                                            | 596           |        |                   | 309   
|                                     | Assets held for sale                                                                                                                                                                                  |                            |                                            | 2,281         |        |                   |      
|                                     | Inventory                                                                                                                                                                                             |                            |                                            | 23,143        |        |                   | 22,058
|                                     | Prepaid catalog expenses                                                                                                                                                                              |                            |                                            | 3,682         |        |                   | 4,311 
|                                     | Deferred income taxes                                                                                                                                                                                 |                            |                                            | 9,160         |        |                   | 6,934 
|                                     | Other current assets                                                                                                                                                                                  |                            |                                            | 5,752         |        |                   | 4,443 
|                                     |                                                                                                                                                                                                       |                            |                                            |               |        |                   |       
|                                     |                                                                                                                                                                                                       | Total current assets       |                                            |               | 47,743 |                   |       
|Property and equipment, net          |                                                                                                                                                                                                       |                            | 53,749                                     |               |        | 49,369            |       
|Deferred income taxes                |                                                                                                                                                                                                       |                            | 1,926                                      |               |        | 4,520             |       
|Other non-current assets             |                                                                                                                                                                                                       |                            | 1,755                                      |               |        | 1,723             |       
|                                     |                                                                                                                                                                                                       |                            |                                            |               |        |                   |       
|                                     |                                                                                                                                                                                                       |                            | Total assets                               |               | $      | 105,173           |       
|                                     |                                                                                                                                                                                                       |                            |                                            |               |        |                   |       
|LIABILITIES AND STOCKHOLDERS' EQUITY |                                                                                                                                                                                                       |                            |                                            |               |        |                   |       
|Current liabilities:                 |                                                                                                                                                                                                       |                            |                                            |               |        |                   |       
|                                     | Accounts payable                                                                                                                                                                                      |                            | $                                          | 8,037         |        | $                 | 8,565 
|                                     | Accrued expenses                                                                                                                                                                                      |                            |                                            | 10,910        |        |                   | 5,387 
|                                     | Accrued customer returns                                                                                                                                                                              |                            |                                            | 6,038         |        |                   | 8,565 
|                                     | Current portion of long-term debt                                                                                                                                                                     |                            |                                            | 3,118         |        |                   | 1,911 
|                                     |                                                                                                                                                                                                       |                            |                                            |               |        |                   |       
|                                     |                                                                                                                                                                                                       | Total current liabilities  |                                            |               | 28,103 |                   |       
|Long-term debt, less current portion |                                                                                                                                                                                                       |                            | 18,219                                     |               |        | 21,344            |       
|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, 10,016,697, 9,919,221 and 9,990,421 shares issued and outstanding as of June 24, 2000, June 26, 1999 and December 25, 1999, respectively |                            |                                            | 100           |        |                   | 99    
|                                     | Additional paid-in capital                                                                                                                                                                            |                            |                                            | 62,978        |        |                   | 61,128
|                                     | Accumulated deficit                                                                                                                                                                                   |                            |                                            | (4,227        | )      |                   | (1,365
|                                     |                                                                                                                                                                                                       |                            |                                            |               |        |                   |       
|                                     |                                                                                                                                                                                                       | Total stockholders' equity |                                            |               | 58,851 |                   |       
|                                     |                                                                                                                                                                                                       |                            |                                            |               |        |                   |       
|                                     |                                                                                                                                                                                                       |                            | Total liabilities and stockholders' equity |               | $      | 105,173           |       
|                                     |                                                                                                                                                                                                       |                            |                                            |               |        |                   |       

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 |        | Six Months Ended
|-------------------------------------------- | -------------------------------- | ------------------ | ------ | ----------------
|
|Net sales                                    |                                  | $                  | 52,065 |                 
|Cost of products and merchandising           |                                  |                    | 33,630 |                 
|                                             |                                  |                    |        |                 
|                                             | Gross margin                     |                    |        | 18,435          
|Selling, general and administrative expenses |                                  |                    | 14,455 |                 
|                                             |                                  |                    |        |                 
|                                             | Income before interest and taxes |                    |        | 3,980           
|Interest, net                                |                                  |                    | 319    |                 
|                                             |                                  |                    |        |                 
|                                             | Income before taxes              |                    |        | 3,661           
|Income tax provision                         |                                  |                    | 1,501  |                 
|                                             |                                  |                    |        |                 
|                                             | Net income                       |                    | $      | 2,160           
|                                             |                                  |                    |        |                 
|Earnings per share:                          |                                  |                    |        |                 
|                                             | Basic                            |                    | $      | 0.22            
|                                             | Diluted                          |                    | $      | 0.21            
|Weighted average shares outstanding:         |                                  |                    |        |                 
|                                             | Basic                            |                    |        | 10,013          
|                                             | Diluted                          |                    |        | 10,251          

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)

|                                                                                  |                                                              | Six Months Ended |       
|--------------------------------------------------------------------------------- | ------------------------------------------------------------ | ---------------- | ------
|
|Cash flows provided by operating activities:                                      |                                                              |                  |       
|Net income                                                                        |                                                              | $                | 2,910 
|Adjustments to reconcile net income to net cash provided by operating activities: |                                                              |                  |       
|                                                                                  | Depreciation and amortization                                |                  |       
|                                                                                  | Deferred taxes                                               |                  |       
|Changes in assets and liabilities:                                                |                                                              |                  |       
|                                                                                  | (Increase) decrease in inventory                             |                  |       
|                                                                                  | Decrease in prepaid catalog expenses                         |                  |       
|                                                                                  | Increase in other assets                                     |                  |       
|                                                                                  | Increase (decrease) in accounts payable and accrued expenses |                  |       
|Increase (decrease) in accrued customer returns                                   |                                                              |                  | (1,319
|                                                                                  |                                                              |                  |       
|Net cash provided by operating activities                                         |                                                              |                  | 7,662 
|Cash flows used in investing activities:                                          |                                                              |                  |       
|Increase in cash held in escrow                                                   |                                                              |                  | (148  
|Additions to property and equipment                                               |                                                              |                  | (9,066
|                                                                                  |                                                              |                  |       
|Net cash used in investing activities                                             |                                                              |                  | (9,214
|Cash flows used in financing activities:                                          |                                                              |                  |       
|Borrowings under debt agreements                                                  |                                                              |                  |      
|Payments of debt borrowings                                                       |                                                              |                  | (898  
|Proceeds from stock transactions                                                  |                                                              |                  | 79    
|                                                                                  |                                                              |                  |       
|Net cash used in financing activities                                             |                                                              |                  | (819  
|Net decrease in cash and cash equivalents                                         |                                                              |                  | (2,371
|Cash and cash equivalents at:                                                     |                                                              |                  |       
|Beginning of period                                                               |                                                              |                  | 5,500 
|                                                                                  |                                                              |                  |       
|End of period                                                                     |                                                              | $                | 3,129 
|                                                                                  |                                                              |                  |       

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

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THE J. JILL GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The financial statements included herein have been prepared by The J. Jill Group, Inc. (together with its wholly owned consolidated subsidiaries, the "Company" or "The J. Jill
Group"), 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. 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 marketer of high quality women's apparel, accessories and gifts. During fiscal 1999 the Company began its transition from a
multi-catalog concept direct mail retailer into a single brand retailer with multiple distribution channels. The Company previously marketed its products through two catalog concepts, J. JillandNicole Summers.During fiscal 1999, the Company decided to discontinue its Nicole Summerscatalog concept and recorded certain special charges related to
the discontinuance. The Company launched its e-commerce
website, jjill.com, during August 1999 and began opening retail stores during November 1999 to provide additional channels of distribution to market itsJ.
Jillmerchandise. In an effort to better focus on each of these distribution channels, The J. Jill Group, Inc. formed three additional wholly owned subsidiaries
effective as of the end of June 2000: 1) J. Jill Direct, Inc. (catalog and internet business), 2) The Birch Pond Group, Inc. (retail store business), and
3) QT Services Group, Inc. (a service entity).

B. 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.

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 Summerscatalog concept. These charges included a $3,628,000 special charge shown separately on the consolidated statement of operations and a
$2,359,000 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 ofNicole 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 theNicole Summersinventory was substantially complete as of June 24, 2000 and had more
favorable results than anticipated. During second quarter 2000, the Company received proceeds from theNicole Summerinventory liquidation greater than
the estimated net realizable value established for the inventory. As a result, the Company recorded an additional $250,000 of gross

6

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margin during second quarter 2000. The Company does not expect the proceeds related to the remainingNicole Summersinventory to be material.

At
June 24, 2000 and December 25, 1999, accrued expenses included $395,000 and $532,000, respectively, representing the remaining accrued special charges related to the
discontinuance ofNicole Summers. These accrued special charges are comprised of lease commitment costs, severance costs and certain other costs. The
change between December 25, 1999 and June 24, 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 planning to dispose of this property during fiscal 2000.

D. Debt:

The Company's credit facilities at June 24, 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 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 J. Jill Group's wholly owned subsidiary, Birch Pond Realty
Corporation ("Birch Pond"), and leased to The J. Jill Group. 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 require compliance with
certain debt service coverage ratios. Effective March 24, 2000, the loan agreement covering 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 the Company's newly formed wholly owned subsidiaries. The Company is currently reevaluating the terms of its Revolver, including the maturity date, availability needs
and covenants.

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 6.74%. The Revolver matures on June 1, 2001 and
at June 24, 2000 bore interest at 9.50% per annum. The availability under the Revolver is reduced by outstanding borrowings and outstanding letters of credit. There were no borrowings
outstanding on the Revolver at either June 24, 2000 or June 26, 1999. Outstanding letters of credit totaled $20,208,000 and $10,880,000 at June 24, 2000 and June 26, 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.

7

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

|                              |                                      | June 24,
2000 |        | June 26,
1999 |   | December 25,
1999
|----------------------------- | ------------------------------------ | ------------- | ------ | ------------- | - | -----------------
|Real estate loans             |                                      | $             | 13,032 |               | $ | 13,403           
|Equipment loans               |                                      |               | 7,674  |               |   | 8,905            
|Furniture loans               |                                      |               | 621    |               |   | 930              
|Capitalized lease obligations |                                      |               | 10     |               |   | 17               
|                              |                                      |               |        |               |   |                  
|                              | Total long-term debt                 |               |        | 21,337        |   |                  
|Less current maturities       |                                      |               | 3,118  |               |   | 1,911            
|                              |                                      |               |        |               |   |                  
|                              | Long-term debt, less current portion |               | $      | 18,219        |   | $                
|                              |                                      |               |        |               |   |                  

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 |   | Six Months Ended
|--------------------- | ------------------------------------------- | ------------------ | - | ----------------
|
|Numerator:            |                                             |                    |   |                 
|                      | Net income                                  |                    | $ | 2,160           
|                      |                                             |                    |   |                 
|Denominator (shares): |                                             |                    |   |                 
|                      | Basic weighted average shares outstanding   |                    |   | 10,013          
|                      | Assumed exercise of stock options           |                    |   | 238             
|                      |                                             |                    |   |                 
|                      | Diluted weighted average shares outstanding |                    |   | 10,251          
|                      |                                             |                    |   |                 
|Earnings per share:   |                                             |                    |   |                 
|                      | Basic                                       |                    | $ | 0.22            
|                      | Diluted                                     |                    | $ | 0.21            

Options
to purchase 378,275 and 345,000 shares of common stock were outstanding at June 24, 2000 and June 26, 1999, respectively, but were not included in the
computation of diluted EPS since the options were antidilutive. During April 2000 879,000 options were cancelled as a result of an incentive provided by the Company (See Note H).

F. Reclassifications:

Certain prior year financial statement amounts have been reclassified to be consistent with the presentation for the three months and six months ended
June 24, 2000. During fiscal 1999 the Company changed its income statement presentation to be more in line with the way the Company reviews 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 $780,000
and $1,498,000 from selling,

8

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general and administrative expenses to cost of product and merchandising respectively for the three months ended June 26, 1999 and the six months ended June 26, 1999.

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.

G. Commitments:

During the six months ended June 24, 2000 the Company entered into lease agreements for seven retail stores each beginning during fiscal 2000 and having
terms of approximately ten years. Combined future annual minimum lease payments due under these leases are as follows (in thousands):

Fiscal 2000

$
932Fiscal 2001


1,535Fiscal 2002


1,535Fiscal 2003


1,610Fiscal 2004


1,666Thereafter


9,726Total

$
17,004


H. 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 June 24, 2000. The Company has evaluated FASB Interpretation No. 44,"Accounting for Certain Transactions Involving Stock Compensationan
interpretation of APB Opinion No. 25"("FIN 44"), and how it relates to the option activity listed below as well as other potential transactions involving stock
compensation and has determined that there is no impact to the financial results.

|                             |  | Number
of Shares |   | Exercise
Price
Per Share |             | Wtd. Avg.
Exercise
Price
|---------------------------- |  | ---------------- | - | ------------------------ | ----------- | ------------------------
|Balance at December 25, 1999 |  | 1,806,621        |   | $                        | 1.38-20.83  |                         
|Granted                      |  | 55,000           |   |                          | 4.06-6.00   |                         
|Exercised                    |  | (9,450           | ) |                          | 1.83-2.17   |                         
|CancelledTerminations       |  | (102,500         | ) |                          | 4.38-14.75  |                         
|CancelledOther              |  | (879,000         | ) |                          | 10.13-20.83 |                         
|                             |  |                  |   |                          |             |                         
|Balance at June 24, 2000     |  | 870,671          |   | $                        | 1.38-20.83  |                         
|                             |  |                  |   |                          |             |                         

9

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I. 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. The SEC is in the process of drafting a frequently-asked-questions document that may
aid companies in evaluating the effects of SAB 101.

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 the three months
ended June 24, 2000 and determined there was no effect on these consolidated financial statements.

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

This Form 10-Q, including the following discussion, contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, which involve risks and uncertainties. For this purpose, any statements contained herein or incorporated 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 "anticipate", "plans", "expects" 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
statements. Factors that might cause such a difference include, but are not limited to, the following: the success or failure of the J. Jill retail store and e-commerce initiatives;
significant changes in customer response rates; changes in competition in the apparel industry; the success or failure of new customer acquisition efforts; availability, terms and deployment of
capital; changes in, or the failure to comply with, federal and state tax and other government regulation; changes in consumer spending and consumer preferences; the existence or absence of brand
awareness; the ability of the Company to effectively liquidate its overstocked merchandise; labor and employee benefit costs; quality of management; general economic and business conditions; business
abilities and judgment of personnel; availability of qualified personnel; the existence or absence of publicity, advertising and promotional efforts; changes in business strategy; success or failure
of operating initiatives; the success or failure of the Nicole Summers wind-down strategy; possible future increases in expenses 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.

Results of Operations

The J. Jill Group, Inc. (together with its wholly owned consolidated subsidiaries, the "Company" or "The J. Jill Group") is a specialty marketer of high
quality women's apparel, accessories and gifts. 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 six months ended June 24, 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 reviews 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

11

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

|                                             |                                  | Three Months Ended |      | Six Months Ended |     
|-------------------------------------------- | -------------------------------- | ------------------ | ---- | ---------------- | ----
|
|Consolidated Statements of Operations:       |                                  |                    |      |                  |     
|Net sales                                    |                                  | 100.0              | %    | 100.0            | %   
|Cost of products and merchandising           |                                  | 64.6               |      | 64.8             |     
|                                             |                                  |                    |      |                  |     
|                                             | Gross margin                     |                    | 35.4 |                  | 35.2
|Selling, general and administrative expenses |                                  | 27.8               |      | 26.7             |     
|                                             |                                  |                    |      |                  |     
|                                             | Income before interest and taxes |                    | 7.6  |                  | 8.5 
|Interest, net                                |                                  | 0.6                |      | 0.4              |     
|                                             |                                  |                    |      |                  |     
|                                             | Income before taxes              |                    | 7.0  |                  | 8.1 
|Income tax provision                         |                                  | 2.9                |      | 3.3              |     
|                                             |                                  |                    |      |                  |     
|                                             | Net income                       |                    | 4.1  | %                | 4.8 
|                                             |                                  |                    |      |                  |     
|Selected Operating Data (in thousands):      |                                  |                    |      |                  |     
|Catalog circulation (1)                      |                                  | 16,400             |      | 30,400           |     
|Twelve-month buyers (2)                      |                                  | 982                |      | 1,047            |     

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Overview

During the fiscal year ended December 25, 1999 the Company began its transition from a multi-catalog concept direct mail retailer to a single brand
retailer with multiple distribution channels. The Company previously marketed its products through two catalog concepts,J. Jilland Nicole Summers.During
fiscal 1999, the Company decided to discontinue itsNicole Summerscatalog
concept to concentrate its resources on theJ. Jillbrand. The Company launched its e-commerce website, jjill.com, in August 1999 and began opening
upscale retail stores in November 1999 as additional distribution channels to market
itsJ. Jillmerchandise. The Company plans to have a total of twenty to twenty-two retail stores open by the end of fiscal 2000. In an
effort to better focus on each of these distribution channels, The J. Jill Group, Inc. formed three additional wholly owned subsidiaries effective as of the end of June,
2000:  1) J. Jill Direct, Inc. (catalog and internet business), 2) The Birch Pond Group, Inc. (retail store business), and 3) QT Services
Group, Inc. (a service entity).

Comparison of the Three and Six Months Ended June 24, 2000 with the Three and Six Months Ended June 26, 1999

During the three months ended June 24, 2000 ("second quarter 2000") net sales decreased by 33.3%, or $25.9 million, to $52.1 million from
$78.0 million during the three months ended June 26, 1999 ("second quarter 1999"). During the six months ended June 24, 2000 ("the first half of 2000") net sales decreased by

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28.9%, or $41.4 million, to $101.4 million from $142.8 million during the six months ended June 26, 1999 ("the first half of 1999"). The decline in net sales is primarily
attributable to the discontinuation of theNicole Summersconcept and to circulation reductions atJ.
Jill.The table below summarizes the changes in net sales (in millions):

|                             |         | Three Months Ended |      | Six Months Ended |  
|---------------------------- | ------- | ------------------ | ---- | ---------------- | -
|
|J. Jill Catalog and Internet |         | $                  | 48.2 |                  | $
|J. Jill Retail               |         |                    | 3.6  |                  |  
|                             |         |                    |      |                  |  
|                             | J. Jill |                    |      | 51.8             |  
|Nicole Summers               |         |                    | 0.3  |                  |  
|                             |         |                    |      |                  |  
|Total                        |         | $                  | 52.1 |                  | $
|                             |         |                    |      |                  |  

The
Company'sJ. Jillcatalog and internet net sales decreased by $17.1 million or 26.2% during second quarter 2000 and
$22.4 million or 19.0% during the first half of 2000. These decreases were attributable to decreases in catalog circulation of 38.0% and 25.8%, respectively. The reductions in catalog
circulation were intended to improve catalog productivity and profitability. The Company'sJ. Jillcatalogs were more productive during first quarter
2000 and the first half of 2000 as response rates increased by 18.3% and 12.5%, respectively, over the comparable periods in 1999. The Company's average order size also grew during these periods by
8.6% and 4.2%, respectively. Total twelve-month buyers forJ. Jilldecreased 6.2% to 982,000 at June 24, 2000 from 1,047,000 at June 26,
1999. The Company expects to increase circulation levels slightly during the remainder of fiscal 2000 as compared to the first half of 2000.

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 second quarter 2000 cost of products and merchandising decreased by $16.9 million, or 33.5%, to
$33.6 million from $50.6 million during second quarter 1999. As a percentage of net sales, cost of products and merchandising decreased to 64.6% during second quarter 2000 from 64.8%
during second quarter 1999. This decrease as a percentage of net sales is a result of the impact of lower clearance volume, the elimination of theNicole
Summersconcept with its lower product margins and productivity efficiencies gained in the customer contact center. These improvements were almost completely offset by the
deleveraging of the Company's fixed cost structure over lower sales volume. During the first half of 2000 cost of products and merchandising decreased by $27.0 million, or 28.4%, to
$68.2 million from $95.3 million during the first half of 1999. As a percentage of net sales, cost of products and merchandising increased to 67.3% during the first half of 2000 from
66.7% during the first half of 1999. This overall increase was attributable to processing more units per order at a lower average unit price, increased shipments per order resulting from lower initial
fulfillment rates, as well as the deleveraging of the fixed cost structure discussed above. Partially offsetting this increase is the impact of lower clearance volume and the discontinuance of the Nicole
Summerscatalog concept also discussed above. The Company expects cost of products and merchandising as a percentage of net sales for the
remainder of fiscal 2000 to be slightly lower than those levels achieved during the first half of 2000.

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 second quarter of 2000 selling, general and administrative expenses decreased by $6.4 million, or 30.6%, to $14.5 million from
$20.8 million during second quarter 1999. As a percentage of net sales, selling, general and administrative expenses increased to 27.8% during second quarter 2000 from 26.7% during second
quarter 1999. During the first half of 2000 selling, general and administrative expenses decreased by $10.6 million, or 27.6%, to $27.7 million from $38.3 million during the first
half of 1999. As a percentage of net sales, selling, general and administrative expenses increased to 27.2% during the first

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half of 2000 from 26.8% during the first half of 1999. These increases in selling, general and administrative expenses as a percentage of net sales are a result of increased general and administrative
spending, primarily in the areas of compensation and occupancy, being deleveraged over lower net sales partially offset by the previously mentioned improved catalog productivity. During the remainder
of fiscal 2000 the Company expects selling, general and administrative expenses as a percentage of net sales to increase slightly over those levels achieved during the second quarter 2000.

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
second quarter 2000 and the first half of 2000, and second quarter 1999 and the first half of 1999, were 41.0% and 40.0%, respectively. The increase in effective tax rate reflects the effect of an
increased state statutory tax rate due to the Company doing business in states with higher tax rates.

Liquidity and Capital Resources

The J. Jill Group's principal working capital needs arise from the need to support costs incurred in advance of revenue generation, primarily inventory
acquisition and catalog development, production and mailing costs incurred prior to the beginning of each selling season. The Company has two selling seasons that correspond to the fashion seasons.
The spring season begins in January and ends in July. The fall season begins in July and ends in January. 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 six months ended June 24, 2000 the Company funded its working
capital and capital investment needs with cash generated from operations and cash held at December 25, 1999.

The
Company's cash and cash equivalents balance decreased by $2.4 million during the first half of 2000 primarily as a result of $9.1 million used for capital
expenditures and $0.9 million used to pay down debt partly offset by $7.7 million in cash provided by operating activities. Capital expenditures during the first half of 2000 were mainly
comprised of $6.3 million paid out for the Company's new retail store initiative
and $1.4 million for the construction of and furniture for the new corporate headquarters in Quincy, Massachusetts (the "Quincy facility"). Substantially all leasehold improvements and
furniture expenditures for the Quincy facility had been made as of June 24, 2000. The $7.7 million of cash provided by operating activities was derived from net income before
depreciation and increased accounts payable and accrued expense balances.

The
Company's cash and cash equivalents balance decreased by $8.0 million for the first half of 1999. This decrease resulted from a combination of net payments of debt of
$9.7 million in connection with refinancing of the Company's operations and fulfillment center in Tilton, New Hampshire (the "Tilton facility") on a long term basis, and $4.8 million
used for capital expenditures partly offset by net cash provided by operating activities of $5.6 million. Capital expenditures during the first half of 1999 were primarily for the construction
of the Tilton facility. The $5.6 million of cash provided by operating activities came from net income before depreciation and decreased inventory balances, offset by lower accounts payable and
accrued expense balances.

The
Company's credit facilities at June 24, 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 June 24, 2000 there were $20.2 million of letters of credit outstanding under the Revolver and no
borrowings, leaving $9.8 million available under the Revolver. The weighted average interest rate for amounts outstanding under the Company's credit facilities during the six months ended
June 24, 2000 was 7.35%. The Tilton Facility Loan is collateralized

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by a mortgage lien on the Tilton facility. The Tilton facility is owned by The J. Jill Group's wholly owned subsidiary, Birch Pond Realty Corporation ("Birch Pond"), and leased to The J. Jill Group.
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 require compliance with certain debt service coverage 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 adjusting certain other
requirements. On August 7, 2000, the loan agreement covering the Meredith Facility Loan and the Revolver was amended to recognize the Company's newly formed wholly owned subsidiaries. The
Company is currently reevaluating the terms of its Revolver, including the maturity date, availability needs and covenants.

The
Company opened two retail stores in the fourth quarter of fiscal 1999 and opened five additional retail stores during the first half of 2000. The Company currently plans to have a
total of twenty to twenty-two retail stores open by the end of fiscal year 2000. During the six months ended June 24, 2000 the Company entered into lease agreements for seven retail
stores with combined minimum annual lease payments ranging between $1.5 million and $1.8 million per year, each with terms of approximately 10 years. Cash requirements, primarily
comprised of leasehold improvements, net of tenant improvement allowances, and initial inventory acquisition, for the new retail stores are currently estimated at an average of between
$0.9 million and $1.0 million per retail 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 planning to dispose
of this property during fiscal 2000.

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 fiscal year 2000. The Company is currently evaluating its financing alternatives and believes it will require additional financing during fiscal year 2001 to support its current growth
strategy, including the plan to open thirty to fifty retail stores during fiscal 2001.

New 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. The SEC is in the process of drafting a
frequently-asked-question document that may aid companies in evaluating the effects of SAB 101.

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 the three
months ended June 24, 2000 and there was no effect on these consolidated financial statements.

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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 4.Submission of Matters to a Vote of Security Holders

The Company held an Annual Meeting of Stockholders on June 1, 2000. At the Annual Meeting, the stockholders of the Company voted to approve the
following actions by the following votes:



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Item 6.Exhibits and Reports on Form 8-K

|Certificate of Incorporation and By-Laws
|----------------------------------------
|3.1                                     
|3.2                                     
|3.3                                     
|Material Contracts                      
|10.1                                    
|10.2                                    
|10.3                                    
|10.4                                    
|10.5                                    
|10.6                                    
|10.7                                    
|10.8                                    
|10.9                                    
|10.10                                   
|10.11                                   
|10.12                                   
|10.13                                   
|10.14                                   
|10.15                                   
|                                        

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|10.16                   |  | Letter of Confirmation, dated August 7, 2000, by QT Services Group, Inc. to Citizens Bank of Massachusetts                     
|----------------------- |  | -------------------------------------------------------------------------------------------------------------------------------
|10.17                   |  | First Amendment to Third Replacement Revolving Note dated August 7, 2000 between the Company and Citizens Bank of Massachusetts
|Financial Data Schedule
|27.1                    |  | 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: August 7, 2000 |  | By:                    
|Dated: August 7, 2000 |  | By:                    

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## 

THE J. JILL GROUP, INC.  FORM 10-Q  FOR THE QUARTER ENDED JUNE 24, 2000  EXHIBIT INDEX

|Material Contracts     
|-----------------------
|10.1                   
|10.2                   
|10.3                   
|10.4                   
|10.5                   
|10.6                   
|10.7                   
|10.8                   
|10.9                   
|10.10                  
|10.11                  
|10.12                  
|10.13                  
|10.14                  
|10.15                  
|10.16                  
|10.17                  
|Financial Data Schedule
|27.1                   
|                       



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