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Lands’ End Announces First Quarter 2024 Results

DODGEVILLE, Wis, June 05, 2024 (GLOBE NEWSWIRE) — Lands’ End, Inc. (NASDAQ: LE) today announced financial results for the first quarter ended May 3, 2024.

Andrew McLean, Chief Executive Officer, stated, “Our performance in the first quarter continued the considerable momentum we generated in 2023 and resulted in an increase in our Gross Merchandise Value, an increase in gross profit dollars and significant gross margin expansion. Our value creation strategy, centered around Lands’ End being the innovative, asset-light solutions-based brand that’s ready for life’s every journey, is yielding the operational and financial results we’re targeting and positioning us well to further build the brand and grow our loyal customer base.”

First Quarter Financial Highlights

First Quarter Business Highlights:

Balance Sheet and Cash Flow Highlights

Cash and cash equivalents were $27.4 million as of May 3, 2024, compared to $7.3 million as of April 28, 2023.

Inventories, net, was $288.6 million as of May 3, 2024, and $376.1 million as of April 28, 2023. The 23% decrease in inventory was driven by the actions the Company has taken to improve inventory efficiency by reducing inventory purchases and capitalizing on speed-to-market initiatives.

Net cash used in operating activities was $25.8 million for the first quarter of fiscal 2024, compared to $10.8 million for the first quarter of fiscal 2023. The $15.0 million increase in cash used in operating activities was primarily due to an increase in Net loss and changes in working capital.

As of May 3, 2024, the Company had $40.0 million of borrowings outstanding and $133.8 million of availability under its ABL Facility, compared to $100.0 million of borrowings and $136.1 million of availability as of April 28, 2023. Additionally, as of May 3, 2024, the Company had $256.8 million of term loan debt outstanding compared to $240.6 million outstanding as of April 28, 2023.

During the first quarter of fiscal 2024, the Company repurchased $1.0 million of the Company’s common stock under its share repurchase program announced on March 15, 2024. As of May 3, 2024, additional purchases of up to $24.0 million could be made under the program through March 31, 2026.

Outlook

Bernie McCracken, Chief Financial Officer, stated, “The Company’s continued focus on expanding profitability, including by better managing inventories, which were down 23% year-over-year, is continuing to generate favorable results which outperformed our guidance and setting a strong foundation for future growth. When excluding the impact of the conclusion of the Delta Air Lines contract in Q1 2023, the Company generated increases at the top and bottom line in the first quarter, with a 60+% improvement in Adjusted EBITDA.”

For the second quarter of fiscal 2024 the Company expects:

For fiscal 2024 the Company now expects:

Conference Call

The Company will host a conference call on Wednesday, June 5, 2024, at 8:30 a.m. ET to review its first 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 of its value creation strategy and the intended results of that strategy; the Company’s achievement of financial results that it is targeting; the Company’s belief that it is positioned well to further build the brand and grow its customer base; the Company’s focus on expanding profitability, including through better inventory management, and the expected impact of such focus on the Company’s results and serving to set a strong foundation for future growth; the Company’s outlook and expectations as to Net revenue, Gross Merchandise Value, Net income/loss, earnings/loss per share, Adjusted net income/loss, Adjusted earnings/loss per share and Adjusted EBITDA for the second 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 McCracken
Chief Financial Officer
(608) 935-4100

Investor Relations:
ICR, Inc.
Tom Filandro
(646) 277-1235
Tom.Filandro@icrinc.com

-Financial Tables Follow-

LANDS’ END, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
                   
(in thousands, except per share data)   May 3, 2024     April 28, 2023     February 2,
2024*
 
ASSETS                  
Current assets                  
Cash and cash equivalents   $ 27,350     $ 7,332     $ 25,314  
Restricted cash     2,489       2,149       1,976  
Accounts receivable, net     34,664       38,759       35,295  
Inventories, net     288,629       376,062       301,724  
Prepaid expenses and other current assets     51,889       45,743       45,951  
Total current assets     405,021       470,045       410,260  
Property and equipment, net     113,286       126,397       118,033  
Operating lease right-of-use asset     22,286       31,878       23,438  
Goodwill           106,700        
Intangible asset     257,000       257,000       257,000  
Other assets     2,514       3,174       2,748  
TOTAL ASSETS   $ 800,107     $ 995,194     $ 811,479  
LIABILITIES AND STOCKHOLDERS’ EQUITY                  
Current liabilities                  
Current portion of long-term debt   $ 13,000     $ 13,750     $ 13,000  
Accounts payable     108,287       110,097       131,922  
Lease liability – current     5,628       5,533       6,024  
Accrued expenses and other current liabilities     92,181       88,216       108,972  
Total current liabilities     219,096       217,596       259,918  
Long-term borrowings under ABL Facility     40,000       100,000        
Long-term debt, net     233,087       220,786       236,170  
Lease liability – long-term     21,873       32,335       22,952  
Deferred tax liabilities     48,620       45,863       48,020  
Other liabilities     2,830       3,330       2,826  
TOTAL LIABILITIES     565,506       619,910       569,886  
Commitments and contingencies                  
STOCKHOLDERS’ EQUITY                  
Common stock, par value $0.01 authorized: 480,000 shares;
issued and outstanding: 31,407, 32,460 and 31,433, respectively
    314       325       315  
Additional paid-in capital     356,871       362,285       356,764  
(Accumulated deficit) Retained earnings     (106,002 )     29,615       (99,417 )
Accumulated other comprehensive loss     (16,582 )     (16,941 )     (16,069 )
TOTAL STOCKHOLDERS’ EQUITY     234,601       375,284       241,593  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 800,107     $ 995,194     $ 811,479  
                         

* Derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2024.

LANDS’ END, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
 
       
    13 Weeks Ended  
(in thousands, except per share data)   May 3,
2024
    April 28,
2023
 
Net revenue   $ 285,471     $ 309,558  
Cost of sales (exclusive of depreciation and amortization)     146,491       171,621  
Gross profit     138,980       137,937  
             
Selling and administrative     127,401       118,514  
Depreciation and amortization     9,005       9,301  
Other operating expense, net     341       202  
Operating income     2,233       9,920  
Interest expense     10,336       12,283  
Other (income), net     (88 )     (187 )
Loss before income taxes     (8,015 )     (2,176 )
Income tax benefit     (1,573 )     (524 )
NET LOSS   $ (6,442 )   $ (1,652 )
NET LOSS PER COMMON SHARE            
Basic:   $ (0.20 )   $ (0.05 )
Diluted:   $ (0.20 )   $ (0.05 )
             
Basic weighted average common shares outstanding     31,439       32,443  
Diluted weighted average common shares outstanding     31,439       32,443  
                 

Definitions, Reconciliations and Uses of Non-GAAP Financial Measures

In addition to our Net income (loss) determined in accordance with GAAP, for purposes of evaluating operating performance, we report the following non-GAAP measures: Adjusted net income (loss) and Adjusted EBITDA. Adjusted net income (loss) is also expressed on a diluted per share basis.

We believe presenting non-GAAP financial measures provides useful information to investors, allowing them to assess how the business performed excluding the effects of significant non-recurring or non-operational amounts. We believe the use of the non-GAAP financial measures facilitates comparing the results being reported against past and future results by eliminating amounts that we believe are not comparable between periods and assists investors in evaluating the effectiveness of our operations and underlying business trends in a manner that is consistent with management’s own methods for evaluating business performance.

Our management uses Adjusted net income (loss) and Adjusted EBITDA to evaluate the operating performance of our business for comparable periods and to discuss our business with our Board of Directors, institutional investors and other market participants. Adjusted EBITDA is also used as the basis for a performance measure used in executive incentive compensation.

The methods we use to calculate our non-GAAP financial measures may differ significantly from methods other companies use to compute similar measures. As a result, any non-GAAP financial measures presented herein may not be comparable to similar measures provided by other companies. Adjusted net income (loss) and Adjusted EBITDA should not be used by investors or other third parties as the sole basis for formulating investment decisions as these measures may exclude a number of important cash and non-cash recurring items.

Adjusted net income (loss) is defined as net income (loss) excluding significant non-recurring or non-operational items as set forth below. Adjusted net income (loss) is also presented on a diluted per share basis. While Adjusted net income (loss) is a non-GAAP measurement, management believes that it is an important indicator of operating performance and useful to investors.

The following table sets forth, for the periods indicated, a reconciliation of Net loss to Adjusted net loss and Adjusted diluted net loss per share:

       
Unaudited   13 Weeks Ended  
(in thousands, except per share amounts)   May 3, 2024     April 28, 2023  
Net loss   $ (6,442 )   $ (1,652 )
Corporate restructuring     342        
Lands’ End Japan closure           76  
Tax effects on adjustments (1)     (87 )     (19 )
ADJUSTED NET LOSS   $ (6,187 )   $ (1,595 )
ADJUSTED DILUTED NET LOSS PER SHARE   $ (0.20 )   $ (0.05 )
             
Diluted weighted average common shares outstanding     31,439       32,443  
                 

 (1)   The tax impact of adjustments is calculated at the applicable U.S. and non-U.S. Federal and State statutory rates.

While Adjusted EBITDA is a non-GAAP measurement, management believes that it is an important indicator of operating performance, and is useful to investors, because EBITDA excludes the effects of financings, investing activities and tax structure by eliminating the effects of interest, depreciation and income tax.

The following table sets forth, for the periods indicated, selected income statement data, both in dollars and as a percentage of Net revenue and a reconciliation of Net loss to Adjusted EBITDA:

 
Unaudited   13 Weeks Ended  
(in thousands)   May 3, 2024     April 28, 2023  
Net loss   $ (6,442 )     (2.3 )%   $ (1,652 )     (0.5 )%
Income tax benefit     (1,573 )     (0.6 )%     (524 )     (0.2 )%
Other (income), net     (88 )     (0.0 )%     (187 )     (0.1 )%
Interest expense     10,336       3.6 %     12,283       4.0 %
Operating income     2,233       0.8 %     9,920       3.2 %
Depreciation and amortization     9,005       3.2 %     9,301       3.0 %
Corporate restructuring     342       0.1 %           %
Lands’ End Japan closure           %     76       0.0 %
(Gain) loss on disposal of property and equipment     (1 )     (0.0 )%     123       0.0 %
Other           %     94       0.0 %
Adjusted EBITDA   $ 11,579       4.1 %   $ 19,514       6.3 %
                                 
Second Quarter Fiscal 2024 Guidance Adjusted EBITDA 13 Weeks Ended  
(in millions) August 2, 2024  
Net loss $ (8.5 ) $ (6.0 )
Depreciation, interest, other income, taxes and other significant items   22.5     23.0  
Adjusted EBITDA $ 14.0   $ 17.0  
Second Quarter Fiscal 2024 Guidance Adjusted Net Loss and Adjusted Diluted Loss per Share 13 Weeks Ended  
(in millions) August 2, 2024  
Net loss $ (8.5 ) $ (6.0 )
Restructuring and other significant items   4.0     4.0  
Adjusted net loss $ (4.5 ) $ (2.0 )
           
Adjusted diluted loss per share $ (0.14 ) $ (0.06 )
Fiscal 2024 Guidance Adjusted EBITDA 52 Weeks Ended  
(in millions) January 31, 2025  
Net income $ 2.5   $ 10.0  
Depreciation, interest, other income, taxes and other significant items   85.5     87.0  
Adjusted EBITDA $ 88.0   $ 97.0  
Fiscal 2024 Guidance Adjusted Net Income and Adjusted Diluted Earnings per Share 52 Weeks Ended  
(in millions) January 31, 2025  
Net income $ 2.5   $ 10.0  
Restructuring and other significant items   3.0     3.0  
Adjusted net income $ 5.5   $ 13.0  
           
Adjusted diluted earnings per share $ 0.18   $ 0.41  
               
LANDS’ END, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
       
    13 Weeks Ended  
(in thousands)   May 3, 2024     April 28, 2023  
CASH FLOWS FROM OPERATING ACTIVITIES            
Net loss   $ (6,442 )   $ (1,652 )
Adjustments to reconcile net loss to net cash used in operating activities:            
Depreciation and amortization     9,005       9,301  
Amortization of debt issuance costs     667       815  
(Gain)/loss on disposal of property and equipment     (1 )     123  
Stock-based compensation     1,226       1,083  
Deferred income taxes     398       (112 )
Other     (199 )     (193 )
Change in operating assets and liabilities:            
Accounts receivable, net     553       6,244  
Inventories, net     12,762       49,604  
Accounts payable     (21,257 )     (57,050 )
Other operating assets     (5,989 )     (335 )
Other operating liabilities     (16,538 )     (18,583 )
Net cash used in operating activities     (25,815 )     (10,755 )
CASH FLOWS FROM INVESTING ACTIVITIES            
Sales of property and equipment     5        
Purchases of property and equipment     (6,736 )     (12,384 )
Net cash used in investing activities     (6,731 )     (12,384 )
CASH FLOWS FROM FINANCING ACTIVITIES            
Proceeds from borrowings under ABL Facility     49,000       83,000  
Payments of borrowings under ABL Facility     (9,000 )     (83,000 )
Payments on term loan     (3,250 )     (3,438 )
Payments of debt issuance costs     (528 )      
Payments for taxes related to net share settlement of equity awards     (249 )     (1,199 )
Purchases and retirement of common stock     (1,014 )     (3,781 )
Net cash provided by (used in) financing activities     34,959       (8,418 )
Effects of exchange rate changes on cash, cash equivalents and restricted cash     136       (353 )
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND
RESTRICTED CASH
    2,549       (31,910 )
CASH, CASH EQUIVALENTS AND RESTRICTED CASH,
BEGINNING OF PERIOD
    27,290       41,391  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD   $ 29,839     $ 9,481  
SUPPLEMENTAL CASH FLOW DATA            
Unpaid liability to acquire property and equipment   $ 1,480     $ 5,738  
Income taxes paid   $ 340     $ 1,315  
Interest paid   $ 10,983     $ 13,164  
Operating lease right-of-use-assets obtained in exchange for lease liabilities   $     $ 2,539  


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