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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

(Mark One)

|ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 29, 2002
|- | ---------------------------------------------------------------------------------------------------------------------------

OR

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

Commission file number 0-22480

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

Delaware(State or Other Jurisdiction of
Incorporation or Organization)

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

02169(Zip Code)


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

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

Shares
outstanding of the Registrant's common stock (par value $0.01) at July 26, 2002: 19,339,299

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THE J. JILL GROUP, INC.    INDEX TO QUARTERLY REPORT ON FORM 10-Q    FOR THE QUARTER ENDED JUNE 29, 2002

|                             |         |                                                                                                                     |                                                                                       | Page
|---------------------------- | ------- | ------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ----
|PART IFINANCIAL INFORMATION |         |                                                                                                                    
|                             | Item 1. |                                                                                                                     | Condensed Consolidated Financial Statements                                           |     
|                             |         | Consolidated Balance Sheets at June 29, 2002, June 30, 2001 and
December 29, 2001                                   |                                                                                       | 3   
|                             |         | Consolidated Statements of Operations for the three months and the six months ended June 29, 2002 and June 30, 2001 |                                                                                       | 4   
|                             |         | Consolidated Statements of Cash Flows for the six months ended June 29, 2002 and June 30, 2001                      |                                                                                       | 5   
|                             |         | Notes to Condensed Consolidated Financial Statements                                                                |                                                                                       | 6   
|                             | Item 2. |                                                                                                                     | Management's Discussion and Analysis of Financial Condition and Results of Operations |     
|                             | Item 3. |                                                                                                                     | Quantitative and Qualitative Disclosures about Market Risk                            |     
|PART IIOTHER INFORMATION    |         |                                                                                                                    
|                             | Item 4. |                                                                                                                     | Submission of Matters to a Vote of Security Holders                                   |     
|                             | Item 5. |                                                                                                                     | Other Information                                                                     |     
|                             | Item 6. |                                                                                                                     | Exhibits and Reports on Form 8-K                                                      |     
|SIGNATURES                   |         | 23                                                                                                                 

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

|                                     |                                                                                                                                                                                                         | June 29,
2002                              |        | June 30,
2001 |         | December 29,
2001
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------ | ------------- | ------- | -----------------
|ASSETS                               |                                                                                                                                                                                                         |                                            |        |               |         |                  
|Current assets:                      |                                                                                                                                                                                                         |                                            |        |               |         |                  
|                                     | Cash and cash equivalents                                                                                                                                                                               |                                            | $      | 49,335        |         | $                
|                                     | Cash held in escrow                                                                                                                                                                                     |                                            |        | 805           |         |                  
|                                     | Accounts receivable, net                                                                                                                                                                                |                                            |        | 5,900         |         |                  
|                                     | Inventory                                                                                                                                                                                               |                                            |        | 29,775        |         |                  
|                                     | Prepaid catalog expenses                                                                                                                                                                                |                                            |        | 4,879         |         |                  
|                                     | Deferred income taxes                                                                                                                                                                                   |                                            |        | 7,202         |         |                  
|                                     | Other current assets                                                                                                                                                                                    |                                            |        | 4,747         |         |                  
|                                     |                                                                                                                                                                                                         |                                            |        |               |         |                  
|                                     |                                                                                                                                                                                                         | Total current assets                       |        |               | 102,643 |                  
|Property and equipment, net          |                                                                                                                                                                                                         |                                            | 97,429 |               |         | 72,292           
|Deferred income taxes                |                                                                                                                                                                                                         |                                            |       |               |         | 1,222            
|Other non-current assets             |                                                                                                                                                                                                         |                                            | 3,098  |               |         | 1,592            
|                                     |                                                                                                                                                                                                         |                                            |        |               |         |                  
|                                     |                                                                                                                                                                                                         | Total assets                               |        | $             | 203,170 |                  
|                                     |                                                                                                                                                                                                         |                                            |        |               |         |                  
|LIABILITIES AND STOCKHOLDERS' EQUITY |                                                                                                                                                                                                         |                                            |        |               |         |                  
|Current liabilities:                 |                                                                                                                                                                                                         |                                            |        |               |         |                  
|                                     | Accounts payable                                                                                                                                                                                        |                                            | $      | 14,264        |         | $                
|                                     | Accrued expenses                                                                                                                                                                                        |                                            |        | 14,726        |         |                  
|                                     | Accrued customer returns                                                                                                                                                                                |                                            |        | 6,422         |         |                  
|                                     | Current portion of long-term debt                                                                                                                                                                       |                                            |        | 1,731         |         |                  
|                                     |                                                                                                                                                                                                         |                                            |        |               |         |                  
|                                     |                                                                                                                                                                                                         | Total current liabilities                  |        |               | 37,143  |                  
|Long-term debt, less current portion |                                                                                                                                                                                                         |                                            | 14,707 |               |         | 16,410           
|Deferred credits from landlords      |                                                                                                                                                                                                         |                                            | 18,690 |               |         | 6,878            
|Deferred income taxes                |                                                                                                                                                                                                         |                                            | 639    |               |         |                 
|Commitments                          |                                                                                                                                                                                                         |                                            |        |               |         |                  
|Stockholders' equity:                |                                                                                                                                                                                                         |                                            |        |               |         |                  
|                                     | Special preferred stock (par value $0.01) 1,000,000 shares authorized                                                                                                                                   |                                            |        |              |         |                  
|                                     | Common stock (par value $0.01) 30,000,000 shares authorized, 19,301,799, 11,916,611 and 12,070,466 shares issued and outstanding as of June 29, 2002, June 30, 2001 and December 29, 2001,
respectively |                                            |        | 193           |         |                  
|                                     | Additional paid-in capital                                                                                                                                                                              |                                            |        | 103,920       |         |                  
|                                     | Retained earnings                                                                                                                                                                                       |                                            |        | 27,878        |         |                  
|                                     |                                                                                                                                                                                                         |                                            |        |               |         |                  
|                                     |                                                                                                                                                                                                         | Total stockholders' equity                 |        |               | 131,991 |                  
|                                     |                                                                                                                                                                                                         |                                            |        |               |         |                  
|                                     |                                                                                                                                                                                                         | Total liabilities and stockholders' equity |        | $             | 203,170 |                  
|                                     |                                                                                                                                                                                                         |                                            |        |               |         |                  

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

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

|                                             |                                  | Three Months Ended |        | Six Months Ended
|-------------------------------------------- | -------------------------------- | ------------------ | ------ | ----------------
|
|Net sales                                    |                                  | $                  | 86,355 |                 
|Cost of products and merchandising           |                                  |                    | 50,913 |                 
|                                             |                                  |                    |        |                 
|                                             | Gross margin                     |                    |        | 35,442          
|Selling, general and administrative expenses |                                  |                    | 24,488 |                 
|                                             |                                  |                    |        |                 
|                                             | Income before interest and taxes |                    |        | 10,954          
|Interest, net                                |                                  |                    | 173    |                 
|                                             |                                  |                    |        |                 
|                                             | Income before taxes              |                    |        | 10,781          
|Income tax provision                         |                                  |                    | 4,366  |                 
|                                             |                                  |                    |        |                 
|                                             | Net income                       |                    | $      | 6,415           
|                                             |                                  |                    |        |                 
|Earnings per share:                          |                                  |                    |        |                 
|                                             | Basic                            |                    | $      | 0.34            
|                                             | Diluted                          |                    | $      | 0.32            
|Weighted average shares outstanding:         |                                  |                    |        |                 
|                                             | Basic                            |                    |        | 19,051          
|                                             | Diluted                          |                    |        | 20,153          

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

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

|                                             |                                                                                   | Six Months Ended                            |        
|-------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------- | -------
|
|Cash flows provided by operating activities: |                                                                                   |                                             |        
|                                             | Net income                                                                        |                                             | $      
|                                             | Adjustments to reconcile net income to net cash provided by operating activities: |                                             |        
|                                             |                                                                                   | Depreciation and amortization               |        
|                                             |                                                                                   | Deferred income taxes                       |        
|                                             | Changes in assets and liabilities:                                                |                                             |        
|                                             |                                                                                   | Decrease in accounts receivable             |        
|                                             |                                                                                   | (Increase) decrease in inventory            |        
|                                             |                                                                                   | Increase in prepaid catalog expenses        |        
|                                             |                                                                                   | Increase in other assets                    |        
|                                             |                                                                                   | Increase (decrease) in accounts payable     |        
|                                             |                                                                                   | Increase (decrease) in accrued expenses     |        
|                                             |                                                                                   | Decrease in accrued customer returns        |        
|                                             |                                                                                   | Increase in deferred credits from landlords |        
|                                             |                                                                                   |                                             |        
|Net cash provided by operating activities    |                                                                                   |                                             | 32,395 
|Cash flows used in investing activities:     |                                                                                   |                                             |        
|                                             | Increase in cash held in escrow                                                   |                                             |        
|                                             | Investment in trust assets                                                        |                                             |        
|                                             | Additions to property and equipment                                               |                                             |        
|                                             |                                                                                   |                                             |        
|Net cash used in investing activities        |                                                                                   |                                             | (18,624
|Cash flows provided by financing activities: |                                                                                   |                                             |        
|                                             | Borrowings under debt agreements                                                  |                                             |        
|                                             | Payments of debt borrowings                                                       |                                             |        
|                                             | Proceeds from stock transactions                                                  |                                             |        
|                                             |                                                                                   |                                             |        
|Net cash provided by financing activities    |                                                                                   |                                             | 5,412  
|Net increase in cash and cash equivalents    |                                                                                   |                                             | 19,183 
|Cash and cash equivalents at:                |                                                                                   |                                             |        
|                                             | Beginning of period                                                               |                                             |        
|                                             |                                                                                   |                                             |        
|                                             | End of period                                                                     |                                             | $      
|                                             |                                                                                   |                                             |        
|Supplemental information:                    |                                                                                   |                                             |        
|Non-cash investing activities:               |                                                                                   |                                             |        
|                                             | Construction in progress accrued, not paid                                        |                                             | $      

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

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

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

A. Nature of business:

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

B. Stock split:

On June 4, 2002, the Company announced a three-for-two stock split effected in the form of a stock dividend paid on June 28,
2002 to shareholders of record on June 14, 2002. All historical per share amounts and basic and diluted share amounts utilized in the calculations of earnings per share have been restated to
reflect the effects of the three-for-two stock split. The outstanding shares and common stock amounts presented on the consolidated balance sheets as of December 29,
2001 and June 30, 2001 have not been restated to include the effects of the stock split. All common stock amounts and activity after the date of the stock split reflect the
three-for-two stock split.

C. Debt:

The Company's credit facilities at June 29, 2002 consisted of (i) a $50,000,000 revolving credit facility (the "Revolving Credit Facility");
(ii) a $12,000,000 real estate loan (the "Tilton Facility Loan"); and (iii) a $9,500,000 equipment loan (the "Equipment Loan").

The
Company entered into the Revolving Credit Facility on June 29, 2001 to replace its prior revolving credit facility. On July 25, 2002, the Revolving Credit Facility was
amended to extend its term and change certain lending conditions and compliance requirements including, among other things, changing the maximum number of new retail store openings allowed under the
agreement to 90 for the two-year period consisting of fiscal 2002 and fiscal 2003, and 50 for each subsequent fiscal year. In addition, the debt service coverage ratio was amended to be
less restrictive with respect to capital expenditures to the extent that the Company's cash balances exceed $28,706,000 at each reportable balance sheet date. The maturity date of the Revolving Credit
Facility, as amended, is June 1, 2004. The Revolving Credit Facility is collateralized by substantially all the personal property, both tangible and intangible, of the Company. At
June 29, 2002, the Revolving Credit Facility bore interest at 4.75% per annum. The amount available under the Revolving Credit Facility is reduced by outstanding borrowings and outstanding
letters of credit. Outstanding borrowings may not exceed $20,000,000 and bear interest at an annual rate equal to the prime lending rate announced by one of the participating

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banks or the LIBOR lending rate plus 1.75% per annum. There were no outstanding borrowings on the Revolving Credit Facility at June 29, 2002 or June 30, 2001. Outstanding letters of
credit totaled $29,825,000 and $22,084,000 at June 29, 2002 and June 30, 2001, respectively. Availability under the Revolving Credit Facility at June 29, 2002 and June 30,
2001 was $20,175,000 and $27,916,000, respectively. Outstanding letters of credit do not bear interest. The Company is required to pay a commitment fee of 1/4 of 1% per annum on the
unused portion of the Revolving Credit Facility.

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

The
Equipment Loan is collateralized by substantially all of the Company's materials handling equipment. The Equipment Loan requires monthly payments of principal and interest through
its maturity on December 1, 2005, and has a weighted average interest rate of 7.62% per annum.

The
Company's credit facilities contain various lending conditions and covenants and restrictions on permitted liens. In the case of the Revolving Credit Facility, these conditions and
covenants include
certain financial coverage calculations and ratios, including (i) indebtedness and outstanding letter of credit balance to tangible net worth; (ii) hard current assets to current
liabilities; (iii) debt service coverage; (iv) indebtedness, outstanding letter of credit balance and net present value of operating leases to tangible net worth; (v) minimum
tangible net worth; and (vi) minimum net profit. The manner of making these calculations and computing these ratios is defined by the provisions of the Fifth Amended and Restated Loan
Agreement, as amended, which is part of the Revolving Credit Facility. The Company was in compliance with the covenants associated with its credit facilities as of and for the quarters ended
June 29, 2002 and June 30, 2001.

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

|                              |                                      | June 29,
2002 |        | June 30,
2001 |   | December 29,
2001 |       
|----------------------------- | ------------------------------------ | ------------- | ------ | ------------- | - | ----------------- | ------
|Real estate loans             |                                      | $             | 11,099 |               | $ | 11,408            |       
|Equipment loans               |                                      |               | 5,270  |               |   | 6,518             |       
|Furniture loans               |                                      |               |       |               |   | 263               |       
|Capitalized lease obligations |                                      |               | 69     |               |   | 117               |       
|                              |                                      |               |        |               |   |                   |       
|                              | Total long-term debt                 |               |        | 16,438        |   |                   | 18,306
|Less current maturities       |                                      |               | (1,731 | )             |   | (1,896            | )     
|                              |                                      |               |        |               |   |                   |       
|                              | Long-term debt, less current portion |               | $      | 14,707        |   | $                 | 16,410
|                              |                                      |               |        |               |   |                   |       

At
June 29, 2002, the Company estimated the fair value of its outstanding borrowings, including current maturities, to be $18,607,000.

D. Earnings per share:

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

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

|                      |                                             | Three Months Ended |   | Six Months Ended
|--------------------- | ------------------------------------------- | ------------------ | - | ----------------
|
|Numerator:            |                                             |                    |   |                 
|                      | Net income                                  |                    | $ | 6,415           
|                      |                                             |                    |   |                 
|Denominator (shares): |                                             |                    |   |                 
|                      | Basic weighted average shares outstanding   |                    |   | 19,051          
|                      | Assumed exercise of stock options           |                    |   | 1,102           
|                      |                                             |                    |   |                 
|                      | Diluted weighted average shares outstanding |                    |   | 20,153          
|                      |                                             |                    |   |                 
|Earnings per share:   |                                             |                    |   |                 
|                      | Basic                                       |                    | $ | 0.34            
|                      | Diluted                                     |                    | $ | 0.32            

During
the second quarter of fiscal 2002, options to purchase 669,000 shares of the Company's common stock were granted and options to purchase 704,091 shares of common stock were
exercised pursuant to the Company's stock option plans. Also during the second quarter of fiscal 2002, the Company received $3,491,000 in cash from the exercise of stock options and recorded a related
tax benefit of $2,062,000. During the six months ended June 29, 2002, options to purchase 1,060,500 shares of the Company's common stock were granted and options to purchase 1,158,695 shares of
common stock were exercised pursuant to the Company's stock option plans. Also, during the six months ended June 29, 2002, the Company received $5,979,000 in cash from the exercise of stock
options and recorded a related tax benefit of $3,624,000.

At
June 30, 2001, of the options then outstanding, options to purchase 135,000 shares of common stock were excluded from the computation of diluted earnings per share on the basis
that such options were antidilutive. At June 29, 2002, there were no options excluded from the computation.

E. Commitments:

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

During
the six months ended June 29, 2002, the Company entered into leases for 18 retail stores, each having terms of approximately 10 years. At June 29, 2002, the
future minimum lease payments for

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operating leases having a remaining term in excess of one year at such date, including the 18 operating leases entered into during the six months, were as follows (in thousands):

For the remainder of fiscal 2002

$
7,951Fiscal 2003


16,745Fiscal 2004


17,004Fiscal 2005


17,106Fiscal 2006


17,177Thereafter


82,712Total

$
158,695


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

F. Deferred credits from landlords:

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

G. Segment information:

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

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

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

|                                    |                                     | Three Months Ended               |   | Six Months Ended |       
|----------------------------------- | ----------------------------------- | -------------------------------- | - | ---------------- | ------
|
|Net sales:                          |                                     |                                  |   |                  |       
|                                    | Direct                              |                                  | $ | 56,010           |       
|                                    | Retail                              |                                  |   | 30,591           |       
|                                    | Other (1)                           |                                  |   | (246             | )     
|                                    |                                     |                                  |   |                  |       
|                                    |                                     | Total net sales                  |   | $                | 86,355
|                                    |                                     |                                  |   |                  |       
|Direct contribution reconciliation: |                                     |                                  |   |                  |       
|                                    | Direct                              |                                  | $ | 18,953           |       
|                                    | Retail                              |                                  |   | 4,462            |       
|                                    |                                     |                                  |   |                  |       
|                                    |                                     | Total direct contribution        |   | $                | 23,415
|                                    | Unallocated shared-service costs    |                                  |   | (5,940           | )     
|                                    | General and administrative expenses |                                  |   | (6,521           | )     
|                                    |                                     |                                  |   |                  |       
|                                    |                                     | Income before interest and taxes |   | $                | 10,954
|                                    |                                     |                                  |   |                  |       

|                     |               | Direct |   | Retail |  | Unallocated
Assets |        | Total
|-------------------- | ------------- | ------ | - | ------ |  | ------------------ | ------ | -----
|Identifiable assets: |               |        |   |        |  |                    |        |      
|                     | June 29, 2002 |        | $ | 4,976  |  | $                  | 73,127 |      
|                     | June 30, 2001 |        | $ | 4,454  |  | $                  | 38,926 |      

H. Deferred compensation:

Effective January 1, 2002, the Company established an unfunded deferred compensation plan (the "Plan") to provide benefits for management and members of
the Board of Directors. The Plan provides for (i) elective deferrals of salary, incentive compensation and board member fees on a pre-tax basis within limits specified by the Plan
("compensation deferrals"), (ii) discretionary contributions by the Company ("discretionary contributions"), which may be made subject to vesting requirements, and (iii) certain other
contributions by the Company to be made in connection with the Company's annual discretionary match for its 401(k) Plan, if any ("other contributions"). Participants in the Plan are required to
designate how they would like their compensation deferrals, discretionary contributions and other contributions to be measured based on the various measurement options provided by the Plan. At
June 29, 2002, a deferred compensation liability to participants of $1,475,000, including vested discretionary Company contributions, was part of accrued expenses in the accompanying
consolidated balance sheet. During the second quarter of fiscal 2002, the Company made a fully vested discretionary contribution into the deferred compensation plan for its President and Chief
Executive Officer of $1,000,000.

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Separately, the Company, at its discretion, has transferred a total of $1,921,000 to a trust. The trust assets at June 29, 2002 totaled $1,861,000, net of investment gains and
losses and various fees and expenses. The trust assets are invested in corporate owned life insurance in a manner that is designed to approximate the measurement designations of the Plan participants,
for both vested and unvested balances. Investments are exposed to various risks, such as interest rate, market and credit risks. Due to the level of risk associated with certain investments, it is at
least reasonably possible that changes in the values of these investments will occur in the near term and that such changes will also impact participant deferred compensation balances based on the
measurement designations made by the participant. Changes in value of the trust assets are intended to mirror changes in value of the participants' deferred compensation accounts. The trust assets are
included in other non-current assets on the accompanying consolidated balance sheet at June 29, 2002.

I. Reclassifications:

Certain amounts in the prior year financial statements and related notes have been reclassified to conform to the current period presentation. In addition to
certain reclassifications in the accompanying financial statements, segment information for the three months and six months ended June 30, 2001 has been presented to conform to current period
presentation and management's current internal reporting structure.

J. Recent accounting standards:

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

In
April 2002, the FASB issued Statement No. 145 ("SFAS 145"),"Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections,"which supersedes FASB issued Statement No. 4, "Reporting Gains and Losses from Extinguishment of
Debt,"FASB issued Statement No. 44,"Accounting for Intangible Assets
of Motor Carriers,"and FASB issued Statement No. 64,"Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements."This statement also amends FASB issued Statement No. 13,"Accounting for
Leases,"to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the
required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This statement also amends other existing pronouncements to
make various technical corrections, clarify meanings or describe the applicability under changed conditions. SFAS 145 requires gains and losses from the extinguishment of debt to be classified
as extraordinary items only if they meet the criteria in Accounting Principal Board Opinion No. 30,"Reporting the Results of Operations-Reporting the Effects of
Disposal of a Segment of a Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions."This statement also requires lease modifications that have
economic effects similar to sale-leaseback transactions to be accounted for in the same manner as sale-leaseback transactions. The provisions in SFAS 145 relating to
sale-leaseback transactions are effective as of May 15, 2002. The remaining provisions in SFAS 145 will be effective for the Company beginning in fiscal 2003. The Company
does not expect the provisions of SFAS 145 to have a material impact, if any, on the Company's 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 the
Private Securities Litigation Reform Act of 1995 that involve substantial risks and uncertainties. For this purpose, any statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the generality of the foregoing, the words "projected," "anticipated," "planned," "expected" and similar expressions are intended to identify
forward-looking statements. In particular, statements regarding future financial targets or trends are forward-looking statements. Forward-looking statements are not guarantees of the Company's future
financial performance, and undue reliance should not be placed on them. The Company's actual results, performance or achievements may differ significantly from the results discussed in or implied by
the forward-looking statements. Factors that might cause such a difference include, but are not limited to, the following: the continued success or possible future failure of the retail store
initiative; the ability of the Company to effectively manage its operations and growth in a multiple distribution channel environment; significant changes in customer acceptance of the Company's
product offerings; changes in competition in the apparel industry; changes in consumer spending, fashion trends and consumer preferences; changes in, or the failure to comply with, federal and state
tax and other government regulations; the customary risks of purchasing merchandise abroad, including longer lead times, higher initial purchase commitments and foreign currency fluctuations; possible
future increases in expenses and labor and employee benefit costs; the ability of the Company to attract and retain qualified personnel; business abilities and judgment of management; the existence or
absence of brand awareness; the existence or absence of publicity, advertising and promotional efforts; the success or failure of operating initiatives; the mix of the Company's sales between full
price and liquidation merchandise; general economic and business conditions and other factors. See also Item 1A, "Risk Factors," included in the Company's Annual Report on Form 10-K
for the fiscal year ended December 29, 2001 ("fiscal 2001"). The Company disclaims any intent or obligation to update any forward-looking statements.

Overview

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

On
June 4, 2002, the Company announced a three-for-two stock split effected in the form of a stock dividend paid on June 28, 2002 to shareholders of
record on June 14, 2002. All historical per share amounts and basic and diluted share amounts utilized in the calculations of earnings per share have been restated to reflect the effects of the
three-for-two stock split. The outstanding shares and common stock amounts presented on the consolidated balance sheets as of December 29, 2001 and June 30, 2001
have not been restated to include the effects of the stock split. All common stock amounts and activity after the date of the stock split reflect the three-for-two stock split.

Net
sales for the three months ended June 29, 2002 ("second quarter fiscal 2002") increased by 30.5% to $86.4 million from $66.2 million for the three months ended
June 30, 2001 ("second quarter fiscal 2001"). Income before interest and taxes ("operating income") for second quarter fiscal 2002 was $11.0 million, or 12.7% of net sales, compared to
$4.6 million, or 7.0% of net sales, for second quarter fiscal 2001. Net income was $6.4 million, or $0.32 per diluted share, for second quarter fiscal 2002 compared to
$2.6 million, or $0.14 per diluted share, for second quarter fiscal 2001. For the six months ended June 29, 2002, net sales increased by 23.3% to $159.7 million from
$129.5 million during the six months ended June 30, 2001. Operating income for the six months ended June 29, 2002 was

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$15.7 million, or 9.8% of net sales, compared to $6.2 million, or 4.8% of net sales, for the six months ended June 30, 2001. Net income was $9.1 million, or $0.46 per
diluted share, for the six months ended June 29, 2002 compared to $3.4 million, or $0.18 per diluted share, for the six months ended June 30, 2001.

Results of Operations

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

|                                             |                                  | Three Months Ended |      | Six Months Ended |     
|-------------------------------------------- | -------------------------------- | ------------------ | ---- | ---------------- | ----
|
|Net sales                                    |                                  | 100.0              | %    | 100.0            | %   
|Cost of products and merchandising           |                                  | 59.0               |      | 67.6             |     
|                                             |                                  |                    |      |                  |     
|                                             | Gross margin                     |                    | 41.0 |                  | 32.4
|Selling, general and administrative expenses |                                  | 28.3               |      | 25.4             |     
|                                             |                                  |                    |      |                  |     
|                                             | Income before interest and taxes |                    | 12.7 |                  | 7.0 
|Interest, net                                |                                  | 0.2                |      | 0.3              |     
|                                             |                                  |                    |      |                  |     
|                                             | Income before taxes              |                    | 12.5 |                  | 6.7 
|Income tax provision                         |                                  | 5.1                |      | 2.8              |     
|                                             |                                  |                    |      |                  |     
|                                             | Net income                       |                    | 7.4  | %                | 3.9 
|                                             |                                  |                    |      |                  |     

The
following table presents certain selected operating data:

|              |                                           | Three Months Ended          |           | Six Months Ended
|------------- | ----------------------------------------- | --------------------------- | --------- | ----------------
|
|Direct        |                                           |                             |           |                 
|              | Circulation (1):                          |                             |           |                 
|              |                                           | Catalogs (in thousands)     |           | 20,100          
|              |                                           | Square inches (in millions) |           | 119,600         
|              | Twelve-month buyers (2)                   |                             | 1,036,000 |                 
|              | Customer e-mail addresses                 |                             | 695,000   |                 
|Retail(3)     |                                           |                             |           |                 
|              | Stores open                               |                             |           |                 
|              |                                           | Beginning of period         |           | 55              
|              |                                           | End of period               |           | 67              
|              | Store weeks in operation (4)              |                             | 790       |                 
|Total Company |                                           |                             |           |                 
|              | J. Jill private label credit card holders |                             | 376,000   |                 

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

|         |                 | Three Months Ended |        | Six Months Ended |  
|-------- | --------------- | ------------------ | ------ | ---------------- | -
|
|Direct   |                 | $                  | 56,010 |                  | $
|Retail   |                 |                    | 30,591 |                  |  
|Other(1) |                 |                    | (246   | )                |  
|         |                 |                    |        |                  |  
|         | Total net sales |                    | $      | 86,355           |  
|         |                 |                    |        |                  |  

Comparison of the Three and Six Months Ended June 29, 2002 with the Three and Six Months Ended June 30, 2001

Net sales increased by $20.2 million, or 30.5%, to $86.4 million during second quarter fiscal 2002 from $66.2 million during second quarter
fiscal 2001. During the six months ended June 29, 2002, net sales increased by $30.2 million, or 23.3%, to $159.7 million from $129.5 million during the six months ended
June 30, 2001. For the three-month and six-month periods ended June 29, 2002, retail segment net sales increased by 90.4% and 97.4%, respectively, as compared to the
three-month and six-month periods ended June 30, 2001, primarily as a result of increased store count. During the six months ended June 29, 2002, the Company opened 16 retail
stores, of which 12 were opened during second quarter fiscal 2002. At June 29, 2002, the Company had 67 retail stores open compared to 30 at June 30, 2001.
The Company expects to have a total of 87 retail stores open by the end of fiscal 2002. Direct segment net sales increased by 11.0% and square inches circulated increased by 24.1% during second
quarter fiscal 2002 compared to second quarter fiscal 2001. During the six months ended June 29, 2002, direct segment net sales increased by 3.6% and square inches circulated increased by 11.0%
compared to the six months ended June 30, 2001. These increases in net sales were primarily a result of the solid response to the Company's full price merchandise offerings and higher
circulation levels compared to the prior year periods. E-commerce net sales represented 30.4% of total direct segment net sales during second quarter fiscal 2002 compared to 25.9% during
second quarter fiscal 2001. E-commerce net sales represented 29.3% of total direct segment net sales during the six months ended June 29, 2002 compared to 24.6% during the six
months ended June 30, 2001.

Gross
margin represents net sales less cost of products and merchandising. Cost of products and merchandising consists primarily of merchandise development, control and acquisition
costs, provisions for markdowns, order processing and customer service costs, distribution facility costs and occupancy costs for the Company's stores. During second quarter fiscal 2002, gross margin
increased by $14.0 million, or 65.2%, to $35.4 million from $21.5 million during second quarter fiscal 2001. As a percentage of net sales, gross margin increased to 41.0% during
second quarter fiscal 2002 from 32.4% during second quarter fiscal 2001. During the six months ended June 29, 2002, gross margin increased by $20.4 million, or 50.3%, to
$60.9 million from $40.5 million during the six months ended June 30, 2001. As a percentage of net sales, gross margin increased to 38.1% during the six months ended
June 29, 2002 from 31.3% during the six months ended June 30, 2001. These increases in gross margin as a percentage of net sales were primarily attributable to increased full price sales
volumes, better inventory management and higher initial markups.

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Selling,
general and administrative expenses consist of costs to produce, print and distribute catalogs, as well as e-commerce website, retail store selling and corporate
administrative costs. During second quarter fiscal 2002, selling, general and administrative expenses increased by $7.7 million, or 45.5%, to $24.5 million from $16.8 million
during second quarter fiscal 2001. As a percentage of net sales, selling, general and administrative expenses increased to 28.3% during second quarter fiscal 2002 from 25.4% during second quarter
fiscal 2001. During the six months ended June 29, 2002, selling, general and administrative expenses increased by $10.9 million, or 31.7%, to $45.2 million from
$34.3 million during the six months ended June 30, 2001. As a percentage of net sales, selling, general and administrative expenses increased to 28.3% during the six months ended
June 29, 2002 from 26.5% during the six months ended June 30, 2001. These increases in selling, general and administrative expenses as a percentage of net sales were primarily
attributable to the growing impact of the retail segment on the Company's overall results and the current tendency for retail selling costs to be higher as a percentage of net sales than direct
selling costs. In addition, catalog productivity was lower for the three-month and six-month periods ended June 29, 2002 as compared to the corresponding periods in the prior year,
primarily as a result of increased prospecting, deeper circulation to the Company's own customer list and lower off price sales as a percentage of total net sales. Finally, higher employee benefit and
compensation expenses, primarily related to a $1.0 million fully vested discretionary Company contribution into the deferred compensation plan for the Company's President and Chief Executive
Officer during second quarter fiscal 2002, also contributed to the increased selling, general and administrative expenses as percentage of net sales.

Second
quarter fiscal 2002 interest income was unchanged from second quarter fiscal 2001 levels of $0.2 million. Interest expense for second quarter fiscal 2002 was unchanged from
second quarter fiscal 2001 levels of $0.4 million. During the six months ended June 29, 2002, interest income decreased to $0.3 million from $0.4 million for the six months
ended June 30, 2001. Interest expense during the six months ended June 29, 2002 decreased to $0.7 million from $0.8 million for the six months ended June 30, 2001.

The
Company provides for income taxes at an effective tax rate that includes the full federal and state statutory tax rates. The Company's effective tax rate for both the three-month and
six-month periods ended June 29, 2002 was 40.5% compared to 42.0% for both the three-month and six-month periods ended June 30, 2001. The decline in the effective
tax rate for the fiscal 2002 periods reflects a decrease in the projected amount of non-deductible expenses for fiscal 2002 as compared to fiscal 2001.

Segment Direct Contribution

The Company currently has two reportable business segments, direct and retail. Segment reporting is intended to give financial statement users a view of the
Company "through the eyes of management." The Company's internal management reporting is the basis for the information disclosed for its business segments. The Company evaluates its segment
profitability based on the direct contribution of each segment. Direct contribution represents each segment's net sales less direct costs related to the segment's operations. Direct costs for both
segments include merchandise acquisition and control costs and provisions for markdowns. Direct costs also include catalog costs, certain order processing costs and e-commerce selling
costs for the direct segment and retail store selling, occupancy and administrative costs for the retail segment. The accounting policies of the Company's segments are the same as those described in
Note B in the Company's Annual Report on Form 10-K for fiscal 2001. In addition, inter-segment balances and transactions have been eliminated.

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

|       |                           | Three Months Ended |        | Six Months Ended |  
|------ | ------------------------- | ------------------ | ------ | ---------------- | -
|
|Direct |                           | $                  | 18,953 |                  | $
|Retail |                           |                    | 4,462  |                  |  
|       |                           |                    |        |                  |  
|       | Total direct contribution |                    | $      | 23,415           |  
|       |                           |                    |        |                  |  

The
direct segment's second quarter fiscal 2002 direct contribution increased by $5.2 million, or 37.7%, compared to second quarter fiscal 2001. As a percentage of direct segment
net sales, the direct segment's direct contribution increased to 33.8% during second quarter fiscal 2002 from 27.3% during second quarter fiscal 2001. For the six months ended June 29, 2002,
the direct segment's direct contribution increased by $9.5 million, or 36.9%, compared to the six months ended June 30, 2001. As a percentage of direct segment net sales, the direct
segment's direct contribution increased to 33.0% during the six months ended June 29, 2002 from 25.0% for the six months ended June 30, 2001. These increases in direct contribution as a
percentage of direct segment net sales were primarily attributable to higher gross margins associated with increased full price sales volumes, better inventory management and higher initial markups.
This gross margin improvement was partially offset by higher direct selling expenses as a percentage of direct segment net sales as a result of lower catalog productivity.

The
retail segment's second quarter fiscal 2002 direct contribution increased by $3.6 million to $4.5 million from $0.9 million during second quarter fiscal 2001. As
a percentage of retail segment net sales, the retail segment's direct contribution increased to 14.6% during second quarter fiscal 2002 from 5.5% during second quarter fiscal 2001. For the six months
ended June 29, 2002, the retail segment's direct contribution increased by $4.0 million to $3.6 million from a direct deficit of $0.4 million for the six months ended
June 30, 2001. As a percentage of retail segment net sales, the retail segment's direct contribution increased to 6.8% during the six months ended June 29, 2002 from a direct deficit of
1.4% for the six months ended June 30, 2001. These increases in direct contribution as a percentage of retail segment net sales were primarily attributable to higher gross margins associated
with increased full
price sales volumes, better inventory management and higher initial markups. In addition, retail selling expenses increased at a slower rate than retail segment net sales.

Seasonality and Quarterly Fluctuations

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

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Liquidity and Capital Resources

The Company's principal working capital needs arise from the need to support costs incurred in advance of revenue generation, primarily inventory acquisition and
catalog development, production and mailing costs incurred prior to the beginning of each selling season. The Company has two selling seasons that correspond to the fashion seasons. The spring season
begins in January and ends in July. The fall season begins in July and ends in January. The Company's capital investment needs arise from initiatives intended to support the growth of the Company,
including the retail store rollout and improvements to the Company's physical and operating infrastructure. During the six months ended June 29, 2002, the Company funded its working capital and
capital investment needs with cash generated from operations and its existing credit facilities.

Cash
and cash equivalents ("cash") increased by $19.2 million during the six months ended June 29, 2002. Approximately $32.4 million in cash was generated from
operations and $6.3 million in cash was received from stock transactions, primarily from the exercise of stock options during the period. Approximately $16.4 million was invested in
property and equipment, primarily related to the Company's retail store rollout and $1.9 million was invested in trust assets associated with the Company's deferred compensation plan. During
the six months ended June 29, 2002, net income before depreciation and amortization, collections on accounts receivable and additional deferred credits from landlords were the primary sources
of cash from operations. The primary use of cash from operations was related to increased other assets, including increased prepaid rent and prepaid insurance expenses.

Cash
increased by $18.4 million during the six months ended June 30, 2001 largely as a result of proceeds received from the Company's private placement of common stock in
February 2001. In addition, $4.8 million in cash was generated from operating activities during the period. Approximately $3.1 million in cash was used to pay down debt and
$12.0 million was invested in property and equipment, primarily related to the Company's retail store rollout. During the six months ended June 30, 2001, net income before deprecation
and amortization and collections on accounts receivable were the primary sources of cash from operations. The primary use of cash from operations was decreases in accounts payable.

Inventory
levels at June 29, 2002 were 6.5% and 24.5% lower than at December 29, 2001 and June 30, 2001, respectively. The decrease in inventory levels at
June 29, 2002 compared to June 30, 2001 is primarily attributable to lower levels of prior season merchandise combined with ordering inventory more conservatively and timing receipts
closer to need. This tighter inventory management has resulted in lower overstocks and lower overall inventory levels.

Accounts
receivable balances at June 29, 2002 were 56.7% lower than at December 29, 2001 primarily as a result of collections associated with the Company's Holiday deferred
billing program and landlord allowance receivables. Accounts receivable balances at June 29, 2002 were 282.4% higher than at June 30, 2001 primarily as a result of increased landlord
allowance receivables associated with new retail stores.

Accounts
payable balances at June 29, 2002 were 41.1% higher than at June 30, 2001 primarily as a result of increased amounts payable for inventory and catalog costs at
June 29, 2002. Accrued expense balances at June 29, 2002 were 34.6% higher than at June 30, 2001 primarily due to increased accrued amounts associated with the Company's deferred
compensation plan. Accounts payable and accrued expense balances at June 29, 2002 and December 29, 2001 were at similar levels.

Deferred
credits from landlords relate to the Company's retail stores leases. The increase in deferred credits from landlords since June 30, 2001 is related to retail stores
opened since that date.

The
Company's credit facilities at June 29, 2002 consisted of (i) a $50.0 million revolving credit facility (the "Revolving Credit Facility"); (ii) a
$12.0 million real estate loan (the "Tilton Facility Loan"); and (iii) a $9.5 million equipment loan (the "Equipment Loan").

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The
Company entered into the Revolving Credit Facility on June 29, 2001 to replace its prior revolving credit facility. On July 25, 2002, the Revolving Credit Facility was
amended to extend its term and change certain lending conditions and compliance requirements including, among other things, changing the maximum number of new retail store openings allowed under the
agreement to 90 for the two-year period consisting of fiscal 2002 and fiscal 2003, and 50 for each subsequent fiscal year. In addition, the debt service coverage ratio was amended to be
less restrictive with respect to capital expenditures to the extent that the Company's cash balances exceed $28.7 million at each reportable balance sheet date. The maturity date of the
Revolving Credit Facility, as amended, is June 1, 2004. The Revolving Credit Facility is collateralized by substantially all the personal property, both tangible and intangible, of the Company.
At June 29, 2002, the Revolving Credit Facility bore interest at 4.75% per annum. The amount available under the Revolving Credit Facility is reduced by outstanding borrowings and outstanding
letters of credit. Outstanding borrowings may not exceed $20.0 million and bear interest at an annual rate equal to the prime lending rate announced by one of the participating banks or the
LIBOR lending rate plus 1.75% per annum. There were no outstanding borrowings on the Revolving Credit Facility at June 29, 2002 or June 30, 2001. Outstanding letters of credit totaled
$29.8 million and $22.1 million at June 29, 2002 and June 30, 2001, respectively. Availability under the Revolving Credit Facility at June 29, 2002 and
June 30, 2001 was $20.2 million and $27.9 million, respectively. Outstanding letters of credit do not bear interest. The Company is required to pay a commitment fee of
1/4 of 1% per annum on the unused portion of the Revolving Credit Facility.

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

The
Equipment Loan is collateralized by substantially all of the Company's materials handling equipment. The Equipment Loan requires monthly payments of principal and interest through
its maturity on December 1, 2005, and has a weighted average interest rate of 7.62% per annum.

The
weighted average interest rate for amounts outstanding under the Company's credit facilities during the six months ended June 29, 2002 was 7.40% per annum.

The
Company's credit facilities contain various lending conditions and covenants and restrictions on permitted liens. In the case of the Revolving Credit Facility, these conditions and
covenants include certain financial coverage calculations and ratios, including (i) indebtedness and outstanding letter of credit balance to tangible net worth; (ii) hard current assets
to current liabilities; (iii) debt service coverage; (iv) indebtedness, outstanding letter of credit balance and net present value of operating leases to tangible net worth;
(v) minimum tangible net worth; and (vi) minimum net profit. The manner of making these calculations and computing these ratios is defined by the provisions of the Fifth Amended and
Restated Loan Agreement, as amended, which is part of the Revolving Credit Facility. The Company was in compliance with the covenants associated with its credit facilities as of and for the quarters
ended June 29, 2002 and June 30, 2001.

At
June 29, 2002, the Company had 67 retail stores open. The Company plans to open an additional 20 retail stores during the remainder of fiscal 2002. The cash requirements
related to the Company's retail store initiative are significant and are primarily comprised of leasehold improvements, net of landlord allowances, and initial inventory acquisition costs. The initial
cash requirements for opening a new retail store are currently estimated at an average of approximately $0.7 million per store. In addition, at June 29, 2002, the combined future minimum
lease payments due under the

18

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Company's retail store leases were approximately $143.8 million in aggregate and ranged up to $16.0 million per year.

A
summary of the Company's cash requirements related to its outstanding long-term debt and its future minimum lease payments at June 29, 2002 are as follows (in
thousands):

|                                 |       | Long-Term
Debt |       | Lease
Commitments |   | Total Debt and
Lease Payments
|-------------------------------- | ----- | -------------- | ----- | ----------------- | - | -----------------------------
|For the remainder of fiscal 2002 |       | $              | 848   |                   | $ | 7,951                        
|Fiscal 2003                      |       |                | 1,788 |                   |   | 16,745                       
|Fiscal 2004                      |       |                | 1,878 |                   |   | 17,004                       
|Fiscal 2005                      |       |                | 2,028 |                   |   | 17,106                       
|Fiscal 2006                      |       |                | 501   |                   |   | 17,177                       
|Thereafter                       |       |                | 9,395 |                   |   | 82,712                       
|                                 |       |                |       |                   |   |                              
|                                 | Total |                | $     | 16,438            |   | $                            
|                                 |       |                |       |                   |   |                              

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

The
Company's sources of cash include cash on hand of $49.3 million, available borrowing capacity under its Revolving Credit Facility of $20.0 million and anticipated cash
flow from operations. If the current trend of business continues, the Company expects to fund its entire retail store rollout in fiscal 2002 with cash generated from operations in fiscal 2002. The
Company estimates that approximately $16.0 million in cash, before landlord allowances, will be invested in property and equipment during the remaining six months of fiscal 2002, primarily for
retail store construction. Based on current operating conditions, the Company believes it has sufficient sources of cash to execute its operating plans. Should current operating conditions
deteriorate, the Company may generate less cash flow from operating
activities than expected and be required to use more of its cash on hand than planned. In addition, the Company may need to borrow on its Revolving Credit Facility. The Company believes that it has
some flexibility to adjust its mid-to-long-term operating plans to respond to a significant decrease in its cash resources. For example, the Company could adjust the timing and extent of its retail
store rollout for fiscal 2003 and beyond or change its catalog circulation strategy.

Future Financial Targets

With respect to fiscal 2002, and assuming the current economic environment does not deteriorate further, the Company is targeting net sales for the year to range
between $342.0 and $349.0 million and diluted earnings per share to range between $1.04 and $1.07, compared to $0.70 for fiscal 2001. The Company is targeting net sales to range between $76.0
and $79.0 for the third quarter of fiscal 2002 and between $106.0 and $110.0 million for the fourth quarter of fiscal 2002, respectively. Diluted earnings per share are targeted to range
between $0.17 and $0.18 for the third quarter of fiscal 2002 and $0.41 and $0.43 for the fourth quarter of fiscal 2002, respectively.

For
the third and fourth quarters of fiscal 2002, gross margin as a percentage of net sales is targeted to be 37.9% and 40.8%, respectively, compared to 32.8% and 39.2% for the third and
fourth quarters of fiscal 2001, respectively. Selling, general and administrative expenses as a percentage of net sales for the third and fourth quarters of fiscal 2002 are targeted to be 30.3% and
27.4%, respectively, compared to 25.3% and 25.7% for the third and fourth quarters of fiscal 2001, respectively. These are the Company's targets, not predictions of actual performance. Historically,
the Company's performance has deviated, often materially, from its targets. See the first paragraph of this Item 2 for factors that might cause such deviations.

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Recent Accounting Standards

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

In
April 2002, the FASB issued Statement No. 145 ("SFAS 145"),"Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections,"which supersedes FASB issued Statement No. 4, "Reporting Gains and Losses from Extinguishment of
Debt,"FASB issued Statement No. 44,"Accounting for Intangible Assets
of Motor Carriers,"and FASB issued Statement No. 64,"Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements."This statement also amends FASB issued Statement No. 13,"Accounting for
Leases,"to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the
required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This statement also amends other existing pronouncements to
make various technical corrections, clarify meanings or describe the applicability under changed conditions. SFAS 145 requires gains and losses from the extinguishment of debt to be classified
as extraordinary items only if they meet the criteria in Accounting Principal Board Opinion No. 30,"Reporting the Results of Operations-Reporting the Effects of
Disposal of a Segment of a Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions."This statement also requires lease modifications that have
economic effects similar to sale-leaseback transactions to be accounted for in the same manner as sale-leaseback transactions. The provisions in SFAS 145 relating to
sale-leaseback transactions are effective as of May 15, 2002. The remaining provisions in SFAS 145 will be effective for the Company beginning in fiscal 2003. The Company
does not expect the provisions of SFAS 145 to have a material impact, if any, on the Company's consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

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

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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 May 31, 2002. At the Annual Meeting, the stockholders of the Company voted to approve the following
actions by the following votes:



For

Withholding
AuthorityGordon R. Cooke

9,135,739

2,346,066Thomas J. Litle

10,751,325

730,480




Number of
SharesFor

9,111,421Against

1,768,891Abstain

601,493


The
preceeding vote totals have not been adjusted to reflect the three-for-two stock split effected in the form of a stock dividend paid on June 28, 2002. The number of shares
available for issuance under the 2001 Incentive and Non-Statutory Stock Option Plan increased to 2,250,000 shares automatically as a result of the three-for-two stock split.

Item 5. Other Information

Certification Under Sarbanes-Oxley Act

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

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Item 6. Exhibits and Reports on Form 8-K

(1)  Exhibits

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

Material Contracts

|10.1 |  | Second Amendment to Fifth Amended and Restated Loan Agreement, dated July 25, 2002, by and among the Company and Citizens Bank of Massachusetts, HSBC Bank USA and Banknorth, N.A. f/k/a Peoples Heritage Bank, N.A.,
successor by merger to Bank of New Hampshire, N.A. and Citizens Bank of Massachusetts as agent for the Lenders
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.2 |  | First Amendment to Revolving Note, dated July 25, 2002, between the Company and Citizens Bank of Massachusetts                                                                                                                                                                                                                      
|10.3 |  | First Amendment to Revolving Note, dated July 25, 2002, between the Company and HSBC Bank USA                                                                                                                                                                                                                                       
|10.4 |  | First Amendment to Revolving Note, dated July 25, 2002, between the Company and Banknorth, N.A. f/k/a Peoples Heritage Bank, N.A., successor by merger to Bank of New Hampshire, N.A.                                                                                                                                               
|10.5 |  | Letter of Confirmation of Guarantee and Agreement, dated July 25, 2002, by The Birch Pond Group, Inc. to Citizens Bank of Massachusetts, individually and as agent for the benefit of, and on behalf of, all lenders                                                                                                                
|10.6 |  | Letter of Confirmation of Guarantee and Agreement, dated July 25, 2002, by QT Services Group, Inc. to Citizens Bank of Massachusetts, individually and as agent for the benefit of, and on behalf of, all lenders                                                                                                                   
|10.7 |  | Letter of Confirmation of Guarantee and Agreement, dated July 25, 2002, by J. Jill Direct, Inc. to Citizens Bank of Massachusetts, individually and as agent for the benefit of, and on behalf of, all lenders                                                                                                                      
|10.8 |  | Amended and Restated 2001 Incentive and Non-Statutory Stock Option Plan (included as Exhibit 4.1 to the Company's Registration Statement on Form S-8 filed July 25, 2002, File No. 333-97105, and incorporated herein by
reference)                                                                                                 

(2) Reports on Form 8-K

The Company did not file any reports on Form 8-K during the quarter ended June 29, 2002.

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SIGNATURES

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

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

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THE J. JILL GROUP, INC.    FORM 10-Q    FOR THE QUARTER ENDED JUNE 29, 2002    EXHIBIT INDEX

Material Contracts

|10.1 |  | Second Amendment to Fifth Amended and Restated Loan Agreement, dated July 25, 2002, by and among the Company and Citizens Bank of Massachusetts, HSBC Bank USA and Banknorth, N.A. f/k/a Peoples Heritage Bank, N.A.,
successor by merger to Bank of New Hampshire, N.A. and Citizens Bank of Massachusetts as agent for the Lenders
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.2 |  | First Amendment to Revolving Note, dated July 25, 2002, between the Company and Citizens Bank of Massachusetts                                                                                                                                                                                                                      
|10.3 |  | First Amendment to Revolving Note, dated July 25, 2002, between the Company and HSBC Bank USA                                                                                                                                                                                                                                       
|10.4 |  | First Amendment to Revolving Note, dated July 25, 2002, between the Company and Banknorth, N.A. f/k/a Peoples Heritage Bank, N.A., successor by merger to Bank of New Hampshire, N.A.                                                                                                                                               
|10.5 |  | Letter of Confirmation of Guarantee and Agreement, dated July 25, 2002, by The Birch Pond Group, Inc. to Citizens Bank of Massachusetts, individually and as agent for the benefit of, and on behalf of, all lenders                                                                                                                
|10.6 |  | Letter of Confirmation of Guarantee and Agreement, dated July 25, 2002, by QT Services Group, Inc. to Citizens Bank of Massachusetts, individually and as agent for the benefit of, and on behalf of, all lenders                                                                                                                   
|10.7 |  | Letter of Confirmation of Guarantee and Agreement, dated July 25, 2002, by J. Jill Direct, Inc. to Citizens Bank of Massachusetts, individually and as agent for the benefit of, and on behalf of, all lenders                                                                                                                      

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