Lands' End Announces Second Quarter Fiscal 2020 Results

Lands' End, Inc. (NASDAQ: LE) today announced financial results for the second quarter ended July 31, 2020.

Second Quarter Fiscal Highlights:

• For the second quarter, net revenue increased 4.6% to $312.1 million, compared to $298.3 million in the second quarter last year.
  ○ Global eCommerce net revenue increased 23.6% for the second quarter, driven by US eCommerce increasing 26.2% and International eCommerce growing 9.4% as compared to the prior period.
  ○ Outfitters net revenue declined 42.8% due to the negative impact of the COVID-19 pandemic.

• Gross margin increased approximately 10 basis points to 43.4% as compared to 43.3% in the second quarter last year. The increase was due to disciplined promotional strategies and continued use of analytics, partially offset by the liquidation of seasonal inventory as retail stores reopened.

• Selling and administrative expenses decreased $10.8 million to $111.5 million or 35.7% of net revenue, compared to $122.3 million or 41.0% of net revenue, in second quarter last year. The approximately 530 basis point decrease was driven by strong control of operating expenses and structural costs.

• Net income was $4.4 million or $0.13 per diluted share, as compared to net loss of $3.0 million or $0.09 loss per diluted share in the second quarter of fiscal 2019.

• Adjusted EBITDA⁽¹⁾ increased 250.8% to $23.9 million compared to $6.8 million in the second quarter of fiscal 2020.

Jerome Griffith, Chief Executive Officer and President, stated, “We are very pleased to have delivered a strong second quarter leveraging the strong momentum in our global eCommerce business. Our performance reflects the execution of our strategies related to product innovation, our global eCommerce platform, data-driven marketing and commitment to optimizing our business processes and infrastructure. We will continue to build on our offering of high-quality value-oriented product assortments with growth strategies that expand our customer reach. Longer term, we remain confident in our positioning within the new landscape given our dynamic eCommerce foundation, limited bricks and mortar exposure, key item basics business that offers an attractive value proposition and lean operating structure.”

Balance Sheet and Cash Flow Highlights

Cash and cash equivalents were $62.6 million as of July 31, 2020, compared to $82.6 million as of August 2, 2019.

Net cash provided by operations was $8.0 million for the 26 weeks ended July 31, 2020, compared to $17.0 million for the 26 weeks ended August 2, 2019.

Inventories, net, was $441.5 million as of July 31, 2020, and $405.8 million as of August 2, 2019. The change is due to an increase in Outfitters inventory to support the American Airlines business.

The Company had no ABL Facility borrowings and $188.0 million of availability under its asset-based senior secured credit facility at July 31, 2020. The Company had Other short-term debt of $382.8 million at July 31, 2020 representing amounts owed under the Term Loan Facility.

Outlook

Jim Gooch, Chief Operating Officer and Chief Financial Officer, stated, “While our business continues to be impacted by the pandemic, our strong second quarter results exemplify the resiliency of our business model. We continue to prioritize maintaining financial flexibility through this challenged period. Regarding our term loan, which matures in April 2021, we have received non-binding term sheets from multiple investors for transactions which would allow the Company to refinance the Term Loan Facility debt, and are in active discussions and negotiations regarding a refinancing. Our debt structure is expected to be comprised of our ABL line, which has been upsized to $275 million, effective when we close a refinancing, and approximately $275 million of additional debt secured by our non-ABL assets. We are targeting to conclude a transaction by the end of the third fiscal quarter.” 

Based on the stabilization and improved visibility in the business, the Company is now providing its outlook for the remainder of the year. The following outlook does not incorporate a potential second wave of COVID-19 or additional government-mandated closures.

For the third quarter of fiscal 2020 the Company expects:

• Net revenue to decline low single digits to flat as compared to the same period last year assuming:
  ○ Low double digit growth year over year in its global eCommerce business.
  ○ Revenue decline in its Outfitters business due to decreased demand from business customer in both its national and small and medium sized accounts as well as a slower recovery of the school uniform business as schools delay reopenings.
• Gross margin to be flat as compared to the prior year.
• SG&A expense as a percent of revenue to be in line with prior year.

For the fourth quarter of fiscal 2020 the Company expects:

• Net revenue to decline low single digits as compared to the same period last year assuming:
  ○ Low double digit growth year over year in its global eCommerce business.
  ○ Revenue decline in its Outfitters business due to the anniversary of the American Airlines launch from the fourth quarter 2019, as well as decreased demand from business customers in both its national and small and medium sized accounts.
• Gross margin to be pressured, driven by shipping surcharges implemented by carriers during the holiday period.
• SG&A expense as a percent of revenue to be in line with prior year.

Conference Call

The Company will host a conference call on Wednesday, September 2, 2020, 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 or by dialing (866) 753-5836.

About Lands' End, Inc.

Lands' End, Inc. (NASDAQ:LE) is a leading uni-channel retailer of casual clothing, accessories, footwear and home products. We offer products online at www.landsend.com, on third party online marketplaces and through retail locations. We are a classic American lifestyle brand with a passion for quality, legendary service and real value, and seek to deliver timeless style for women, men, kids and the home.