Gross Margin increased approximately 470 basis points compared to the Second Quarter last yearImproved across all profitability measures compared to Second Quarter last yearAchieved the sixth consecutive quarter improvement in inventoryRaises full year profit guidance
DODGEVILLE, Wis., Sept. 05, 2024 (GLOBE NEWSWIRE) -- Lands' End, Inc. (NASDAQ:LE) today announced financial results for the second quarter ended August 2, 2024.
Andrew McLean, Chief Executive Officer, stated, "Our robust second quarter results continue to prove our solutions-based strategy is working. A focus on innovation across our business is evolving the Lands' End brand and assortment, attracting new customers and further improving our supply chain and inventory position. These achievements highlight our dedication to driving growth and efficiency while delivering value to our customers and shareholders."
Second Quarter Financial Highlights
In the second quarter of 2024, Gross Merchandise Value ("GMV") increased mid-single digits compared to the second quarter of 2023. GMV is total order value of all merchandise sold to customers through business-to-consumer and business-to-business channels, as well as the retail value of the merchandise sold through third party distribution channels.
For the second quarter, Net revenue decreased to $317.2 million compared to $323.3 million in the second quarter of fiscal 2023.
Global eCommerce Net revenue was $211.3 million, a decrease of $7.4 million from $218.7 million in the second quarter of fiscal 2023.
U.S. eCommerce Net revenue was $188.3 million, a decrease of 3.9% from $195.9 million in the second quarter of fiscal 2023. The decrease in U.S. eCommerce was primarily driven by the transition of kids and footwear products from a direct to a license model, lower promotional activity and improved inventory management resulting in increased gross profit from higher gross margins. Excluding the impact of transitioning the kids and footwear products to licensing arrangements, U.S. eCommerce revenue increased by mid-single digits year-over-year.
Compared to second quarter of fiscal 2023, International eCommerce Net revenue increased 0.9%, primarily driven by an increase in full price sales, lower promotional activity and improved inventory management resulting in increased gross profit from higher gross margins.
Outfitters Net revenue was $63.2 million, a decrease of $4.8 million or 7.1% from $68.0 million in the second quarter of fiscal 2023. The school uniform channel delivered a strong start to back to school season with a mid-single digit revenue increase over last year. The business uniform channel decreased year-over-year primarily due to the timing changes with certain national accounts and some pricing resistance from smaller accounts as a result of macroeconomic challenges.
Third Party Net revenue was $30.1 million, an increase of $5.7 million or 23.4% from $24.4 million in the second quarter of fiscal 2023. The increase was primarily due to revenue generated from licensing and wholesale arrangements.
Gross profit was $151.9 million, an increase of $12.3 million or 8.8% from $139.6 million in the second quarter of fiscal 2023. Gross margin increased approximately 470 basis points to 47.9%, compared to 43.2% in second quarter of fiscal 2023. The gross margin improvement was primarily driven by leveraging the strength in product solutions and newness across the channels, lower promotional activity, reduction in clearance inventory and improved supply chain costs.
Selling and administrative expenses increased $11.6 million to $135.5 million or 42.7% of Net revenue, compared to $123.9 million or 38.3% of Net revenue in second quarter of fiscal 2023. The approximately 440 basis points increase was driven by higher digital marketing spend focused on new customer acquisition, third party professional services and higher incentive related personnel costs.
Net loss was $5.3 million, or $0.17 loss per diluted share compared to Net loss of $8.0 million or $0.25 loss per diluted share in the second quarter of fiscal 2023.
Adjusted net loss was $0.7 million, or $0.02 loss per diluted share, driven by a non-cash charge related to long-lived asset impairment and restructuring costs, compared to an Adjusted net loss of $7.6 million or $0.24 loss per diluted share in the second quarter of fiscal 2023.
Adjusted EBITDA was $17.1 million in the second quarter of fiscal 2024 compared to $15.8 million in the second quarter of fiscal 2023.
Second Quarter Business Highlights:
Delivered a 470 basis point improvement in gross margin, driven by strength in product solutions and newness across the channels, lower promotional activity and improved inventory management.
Achieved the sixth consecutive quarter improvement in inventory with a year-over-year 21% reduction through improved flow and productivity.
Global new customer acquisition increased mid-single digits.
Balance Sheet and Cash Flow Highlights
Cash and cash equivalents were $25.6 million as of August 2, 2024, compared to $26.6 million as of July 28, 2023.
Inventories, net, was $312.0 million as of August 2, 2024, and $396.1 million as of July 28, 2023. The 21% decrease in inventory was driven by actions the Company has taken to improve inventory efficiency by reducing inventory purchases and capitalizing on speed-to-market initiatives.
Net cash provided by operating activities was $4.9 million for the 26 weeks ended August 2, 2024, compared to $54.8 million for the 26 weeks ended July 28, 2023. Through our concerted efforts to decrease inventory levels during 2023, we provided cash of $30.4 million through the end of the second quarter 2023. We have maintained our lower inventory level realized at the end of fiscal year 2023 through efficient inventory management and therefore we used cash of $10.3 million through the end of the second quarter 2024.
As of August 2, 2024, the Company had $20.0 million of borrowings outstanding and $117.5 million of availability under its ABL Facility, compared to $70.0 million of borrowings and $128.8 million of availability as of July 28, 2023. Additionally, as of August 2, 2024, the Company had $253.5 million of term loan debt outstanding compared to $237.2 million outstanding as of July 28, 2023.
During the second quarter of fiscal 2024, the Company repurchased $3.7 million of the Company's common stock under its share repurchase program announced on March 15, 2024. As of August 2, 2024, additional purchases of up to $20.3 million could be made under the program through March 31, 2026.
Outlook
Bernie McCracken, Chief Financial Officer, stated, "We are pleased with our performance during the quarter, which resulted in Net revenue and Adjusted EBITDA at the high end of our guidance range and strong growth in Gross Merchandise Value. Additionally, our deliberate efforts to prioritize profitability and balance sheet efficiency is evidenced by a 9% increase in gross profit, driven by our sixth consecutive quarter of gross margin expansion."
For the third quarter of fiscal 2024 the Company expects:
Net revenue to be between $300.0 million and $340.0 million.
Gross Merchandise Value expected to deliver mid-to-high single digits percentage growth.
Net (loss) income to be between $(1.5) million and $1.5 million and diluted (loss) earnings per share to be between $(0.05) and $0.05.
Adjusted net income to be between $0.0 million and $3.0 million and Adjusted diluted earnings per share to be between $0.00 and $0.10.
Adjusted EBITDA in the range of $19.0 million to $23.0 million.
For fiscal 2024 the Company now expects:
Net revenue to be between $1.35 billion and $1.43 billion.
Gross Merchandise Value expected to deliver mid-to-high single digits percentage growth.
Net income to be between $5.0 million and $11.0 million and diluted earnings per share to be between $0.16 and $0.35.
Adjusted net income to be between $9.0 million and $15.0 million and Adjusted diluted earnings per share to be between $0.29 and $0.48.
Adjusted EBITDA in the range of $90.0 million to $98.0 million.
Capital expenditures of approximately $35.0 million.
Conference Call
The Company will host a conference call on Thursday, September 5, 2024, at 8:30 a.m. ET to review its second quarter financial results and related matters. The call may be accessed through the Investor Relations section of the Company's website at http://investors.landsend.com.
About Lands' End, Inc.
Lands' End, Inc. (NASDAQ:LE) is a leading digital retailer of solution-based apparel, swimwear, outerwear, accessories, footwear, home products and uniforms. Lands' End offers products online at www.landsend.com, through third-party distribution channels, our own Company Operated stores and third-party license agreements. Lands' End also offers products to businesses and schools, for their employees and students, through the Outfitters distribution channel. Lands' End is a classic American lifestyle brand that creates solutions for life's every journey.
Forward-Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding the Company's execution and expected results of its strategy; the impact of the innovation focus on the Lands' End brand and assortment, new customer acquisition and improvement on supply chain and inventory position; the Company's dedication to driving growth and efficiency while delivering value to customers and shareholders; the Company's efforts and expected results of prioritizing profitability and balance sheet efficiency; the Company's outlook and expectations as to Net revenue, Gross Merchandise Value, Net (loss) income, (loss) earnings per share, Adjusted net income, Adjusted earnings per share and Adjusted EBITDA for the third quarter of fiscal 2024 and for the full year of fiscal 2024, and capital expenditures for fiscal 2024; and the potential for additional purchases under the Company's share repurchase program. The following important factors and uncertainties, among others, could cause actual results to differ materially from those described in these forward-looking statements: global supply chain challenges and their impact on inbound transportation costs and delays in receiving product; disruption in the Company's supply chain, including with respect to its distribution centers, third-party manufacturing partners and logistics partners, caused by limits in freight capacity, increases in transportation costs, port congestion, other logistics constraints, and closure of certain manufacturing facilities and production lines due to public health crises and other global economic conditions; the impact of global economic conditions, including inflation, on consumer discretionary spending; the impact of public health crises on operations, customer demand and the Company's supply chain, as well as its consolidated results of operation, financial position and cash flows; the Company may be unsuccessful in implementing its strategic initiatives, or its initiatives may not have their desired impact on its business; the Company's ability to obtain additional financing on commercially acceptable terms or at all, including, the condition of the lending and debt markets; the Company's ability to offer merchandise and services that customers want to purchase; changes in customer preference from the Company's branded merchandise; the Company's results may be materially impacted if tariffs on imports to the United States increase and it is unable to offset the increased costs from current or future tariffs through pricing negotiations with its vendor base, moving production out of countries impacted by the tariffs, passing through a portion of the cost increases to the customer, or other savings opportunities; customers' use of the Company's digital platform, including customer acceptance of its efforts to enhance its eCommerce websites, including the Outfitters website; customer response to the Company's marketing efforts across all types of media; the Company's maintenance of a robust customer list; the Company's retail store strategy may be unsuccessful; the Company's Third Party channel may not develop as planned or have its desired impact; the Company's dependence on information technology; failure of information technology systems, including with respect to its eCommerce operations, or an inability to upgrade or adapt its systems; failure to adequately protect against cybersecurity threats or maintain the security and privacy of customer, employee or company information and the impact of cybersecurity events on the Company; fluctuations and increases in costs of raw materials as well as fluctuations in other production and distribution-related costs; impairment of the Company's relationships with its vendors; the Company's failure to compete effectively in the apparel industry; legal, regulatory, economic and political risks associated with international trade and those markets in which the Company conducts business and sources its merchandise; the Company's failure to protect or preserve the image of its brands and its intellectual property rights; increases in postage, paper and printing costs; failure by third parties who provide the Company with services in connection with certain aspects of its business to perform their obligations; the Company's failure to timely and effectively obtain shipments of products from its vendors and deliver merchandise to its customers; reliance on promotions and markdowns to encourage customer purchases; the Company's failure to efficiently manage inventory levels; unseasonal or severe weather conditions; natural disasters, political crises or other catastrophic events; the adverse effect on the Company's reputation if its independent vendors or licensees do not use ethical business practices or comply with contractual obligations, applicable laws and regulations; assessments for additional state taxes; incurrence of charges due to impairment of other intangible assets and long-lived assets; the impact on the Company's business of adverse worldwide economic and market conditions, including inflation and other economic factors that negatively impact consumer spending on discretionary items; the stock repurchase program may not be executed to the full extent within its duration, due to business or market conditions or Company credit facility limitations; the ability of the Company's principal stockholders to exert substantial influence over the Company; and other risks, uncertainties and factors discussed in the "Risk Factors" section of the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 2024. The Company intends the forward-looking statements to speak only as of the time made and does not undertake to update or revise them as more information becomes available, except as required by law.
CONTACTS
Lands' End, Inc.Bernard McCrackenChief Financial Officer(608) 935-4100
Investor Relations:ICR, Inc.Tom Filandro(646)
-Financial Tables Follow-
LANDS' END, INC.Condensed Consolidated Balance Sheets(Unaudited)
(in thousands, except per share data)
August 2, 2024
July 28, 2023
February 2,2024*
ASSETS
Current assets
Cash and cash equivalents
$
25,648
$
26,610
$
25,314
Restricted cash
2,239
1,833
1,976
Accounts receivable, net
27,420
25,095
35,295
Inventories, net
312,014
396,087
301,724
Prepaid expenses and other current assets
47,443
43,195
45,951
Total current assets
414,764
492,820
410,260
Property and equipment, net
106,758
125,325
118,033
Operating lease right-of-use asset
21,182
29,685
23,438
Goodwill
—
106,700
—
Intangible asset
257,000
257,000
257,000
Other assets
2,812
2,949
2,748
TOTAL ASSETS
$
802,516
$
1,014,479
$
811,479
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt
$
13,000
$
13,750
$
13,000
Accounts payable
143,886
156,342
131,922
Lease liability – current
5,351
5,643
6,024
Accrued expenses and other current liabilities
91,190
100,632
108,972
Total current liabilities
253,427
276,367
259,918
Long-term borrowings under ABL Facility
20,000
70,000
—
Long-term debt, net
230,227
218,022
236,170
Lease liability – long-term
20,843
29,973
22,952
Deferred tax liabilities
48,631
51,066
48,020
Other liabilities
2,874
3,283
2,826
TOTAL LIABILITIES
576,002
648,711
569,886
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, par value $0.01 authorized: 480,000 shares;issued and outstanding: 31,256, 32,087 and 31,433, respectively
313
321
315
Additional paid-in capital
354,768
360,091
356,764
(Accumulated deficit) Retained earnings
(112,284
)
21,597
(99,417
)
Accumulated other comprehensive loss
(16,283
)
(16,241
)
(16,069
)
TOTAL STOCKHOLDERS' EQUITY
226,514
365,768
241,593
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
