Lands’ End Sees Red in Q2, but Beats Expectations

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Land’s End, impacted by global supply chain issues and softening consumer demand, fell into the red last quarter off a drop in revenues, though the results beat expectations.

The net loss for the quarter ended July 29 was $2.18 million, or $7 cents per diluted share, compared to a profit $16.2 million, or 48 cents, in the year-ago period.

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Adjusted earnings before interest, taxes, depreciation and amortization decreased to $15.8 million compared to $41.4 million in the second quarter of fiscal 2021.

Revenues slipped 8.6 percent to $351.18 million, from $384.1 million in the year-ago period.

“We exceeded our revenue and earnings expectations,” Jerome Griffith, Lands’ End’s chief executive officer, told WWD. “We beat the consensus from the analysts.”

“We felt pretty good about the quarter considering it’s a tough environment,” Griffith said. “Despite global supply chain and consumer challenges, our teams continue to successfully navigate these challenges.”

On the upside, “The business was led by our third-party partnerships and Outfitters,” Griffith said. “The third-party business was up 43 percent over led by Kohl’s, where the strength of the business was with swim selling in Kohl’s stores, and with swim and knits selling on,, and on Amazon.

“Our uniform business (Outfitters) was up about 8 percent led by larger accounts geared towards travel, airlines, hotels and car rental services,” Griffith noted.

“Everybody is returning to the office somewhat, I wouldn’t say completely. Consumers wanted things a little less super casual and more dressy for work and going out at night.”

Lands’ End products that sold the best last quarter were men’s no-iron dress shirts, no-iron chinos, Supima cotton polos, and linens.

In women’s, best sellers were no-iron shirts, performance tops, early fall outerwear and wear-to-work styles.

Griffith was also encouraged by what he saw as little resistance to higher prices which helped the company offset higher costs.

“Everyone is very nervous about holiday, but there is plenty of opportunity if certain things work out, if you get goods into the warehouses, and consumer demand is good. The supply chain seems to be starting to stabilize in terms of both deliveries and costs, but longer lead times are still needed and costs are still higher than pre-pandemic.”

Given the results and what Griffith described as a “tenuous” industry environment, he said Lands’ End “slightly” lowered its guidance as have several other retailers, including Kohl’s, Macy’s and Nordstrom.

For fiscal 2022 Lands’ End now expects:

  • Net revenue to be between $1.6 billion and $1.64 billion, versus the earlier forecast for $1.62 billion to $1.68 billion.

  • Net income to be between $16.5 million and $23.5 million, and diluted earnings per share between 49 cents and 70 cents, versus the prior guidance of $20 million to $29 million, and shares between 60 cents and 88 cents.

  • Adjusted EBITDA in the range of $95 million to $105 million, versus earlier guidance of $100 million to $112 million.

In other results, gross margin decreased approximately 530 basis points to 41 percent compared to 46.3 percent in second quarter of fiscal 2021. The decline was attributed to an incremental $11.7 million of transportation costs from global supply chain challenges, in addition to increased promotional activity and margin mix from growth in the third party business.

Global e-commerce net revenue decreased 16 percent in the second quarter. Net revenue in U.S. e-commerce decreased 14.4 percent and international e-commerce decreased 23.9 percent “both driven by delayed receipts of key products due to global supply chain and continued macroeconomic challenges,” the company indicated in its report.

Outfitters’ net revenue increased 7.7 percent, due to stronger demand within school uniform households and national accounts, the company said.

Revenues from third parties increased 42.9 percent, primarily due to growth in Kohl’s online marketplace and other marketplaces.

Inventory levels are up 28 percent to last year. “Most of that is product in transit,” Griffith told WWD. “Transit times are taking ten weeks longer, sometimes more, than they were pre-pandemic.”

But holiday goods should be arriving faster as “the demand for shipping space is going to go down pretty significantly,” Griffith said.

While markdowns have been picking up industry-wide, Griffith noted there’s a “silver lining” in the warm weather continuing, helping to sell spring and summer goods. With the heat, “Buy now, wear now becomes a lot more practical,” Griffith said. “People don’t start spending on sweaters and outerwear.”

He also said pack-a-ways significantly help mitigate excess inventories. “About 38 percent of our business is basics. We can just carry it over,” till next year. Griffith also said having bought the merchandise last year, Lands’ End saves some money but not having to purchase certain goods at higher costs this year, for selling next year.

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