Lands’ End, impacted by inflation and supply chain issues like other retailers and brands, lowered its profit expectations for the year following a first quarter that saw a swing into the red for the all-American casual brand.
The net loss was $2.4 million, or $0.07 per diluted share, in the quarter ended April 29, compared to net income of $2.6 million, or $0.08 per diluted share, in the first quarter of fiscal 2021.
Adjusted earnings before interest, taxes, depreciation and amortization decreased to $13.8 million compared to $22.5 million in the first quarter of fiscal 2021.
Net revenue decreased 5.5 percent to $303.7 million compared to $321.3 million in the first quarter of fiscal 2021.
“In the first quarter, we had some highlights,” Lands’ End chief executive officer Jerome Griffith told WWD, when asked how he felt about the quarter. “We continued to successfully execute on our strategic initiatives. Our Outfitters business performed extremely well as did our third-party businesses, the largest of which is with Kohl’s.” Lands’ End also does significant business through Amazon, and last quarter launched on QVC. “We were told by QVC that Lands’ End was the most requested brand they did not have,” Griffith said.
He said the Outfitters division was up 33 percent and third-party business was up 83 percent last quarter.
“We still have supply chain issues. We were not getting goods in on time, with colors or styles, and that shortens the selling season,” Griffith said. “With food and fuel inflation curtailing buying habits, consumers shopping a year ago are not shopping now. There are fewer people shopping on the internet, but we still have strong demand from those who are shopping.”
Several major retailers this year have cited a shift in shopping behavior toward wear-to-work, occasionwear and dresses. Asked if that trend impacted Lands’ End, which leans to casual and comfy offerings, Griffin replied: “We don’t feel that we aren’t meeting the needs there. We experienced good demand chino pants, jeans and woven shirts,” and on the women’s side, stretchy tunics and leggings. People going back to work are still dressing for comfort, Griffin said.
“What is really affecting us partly is the supply chain and missing goods and inflation. The positive side is we managed our bottom line and came in within guidance on EBITDA.”
To help mitigate supply chain issues, Lands’ End has extended its delivery timetables, meaning there should be some upside with better deliveries during the second half of this year. Still, as Griffin said, he does not think “there will be any supply chain pressure release anytime soon.”
Land’s End prices went up in the low double digits for spring 2022, and will be up in the fall as well. “We’ve had a lot of raw material cost increases. You’ve seen that with all apparel retailers out there.” Yet for those shopping Lands’ End last quarter, “there was really no change in conversion,” Griffin said.
Inventories was $436.9 million as of April 29, 2022, and $394.3 million as of April 30, 2021. “We don’t feel like we are in a bad place,” Griffin said, noting the 1 percent hike. “We have more goods in transit because we have extended the shipping time period.…The health of the inventory is good.”
He said he doesn’t expect the business to be any more promotional in the back half, and that he expects the back-to-school season will be “pretty good,” and should get a lift from being in a much better stock position this year compared to last with backpacks. “We are already seeing families buying school uniforms early.”
Jim Gooch, president and chief financial officer, said in a statement, “We are pleased to have met our adjusted EBITDA expectations despite the ongoing industrywide supply chain challenges and macro headwinds. Our results demonstrate the ability of our team to successfully deliver in a challenging operating environment. As we look forward to the remainder of the year, we expect ongoing pressures including supply chain delays and consumer inflation to impact our business. Longer term, based on our proven business model and continued focus on the execution of our growth strategies, we remain confident in our growth targets.”
For fiscal 2022 the company now expects:
• Net income between $20 million and $29 million, and diluted earnings per share to be between $0.60 and $0.88, versus the previous forecast of $24 million and $35 million, and diluted eps between $0.71 and $1.04.
• Adjusted EBITDA in the range of $100 million to $112 million, versus the earlier forecast of $105 million to $120 million.
• Net revenue between $1.62 billion and $1.68 billion, versus the earlier forecast for revenues between $1.68 billion and $1.75 billion.
• Capital expenditures of approximately $37 million.
This full-year outlook assumes approximately $35 million of incremental transportation expenses due to the global supply chain challenges and gross margin improvement in the second half of the year, as higher supply chain costs are lapped.
In other first-quarter results, Lands’ End’s global e-commerce revenue decreased 15.7 percent. Net revenue in U.S. e-commerce decreased 14.1 percent and international e-commerce decreased 21.7 percent driven by delayed receipts of key products due to global supply chain and macroeconomic challenges.
Gross margin decreased approximately 350 basis points to 42.5 percent, compared to 46 percent in the year-ago quarter. Gross margin declined by an incremental $13.6 million of transportation costs, compared to the first quarter of fiscal 2021, due to global supply chain challenges.
Lands’ End also said that with Draper James, a brand founded by actress Reese Witherspoon, summer 2022 marks the fourth and final collection of their two-year partnership. “The latest line will pair Lands’ End’s classic silhouettes with Draper James’ iconic gingham and floral prints across women’s, men’s and children’s apparel and swimwear. In line with Lands’ End’s emphasis on celebrating every body, styles will be available in regular, petite, plus, big and tall, and extended children’s sizes. Budget will also remain a key point of differentiation for the new line, with the entire collection priced from $15.95 to 144.95.”
“With a focus on swim and apparel for the whole family, it’s truly a lifestyle collection to outfit you wherever you may go,” Witherspoon said in a statement. “With size inclusivity and comfort top of mind, the fit, fabrics and beautiful prints will be a staple in your wardrobe this season.”
“Whether lounging beachside or on the tennis court, this summer’s collaboration with Draper James is about marrying trending styles and prints with the ‘comfort’ that has become synonymous with Lands’ End in recent years,” said Chieh Tsai, executive vice president, chief product officer at Lands’ End.
Witherspoon, inspired by her Southern roots, named her collection after her grandparents.
FOR MORE ON LANDS END FROM WWD.COM, SEE:
Lands’ End Grows the Landscape for Luring Customers
Lands’ End Shows Top- and Bottom-line Gains Despite Headwinds