- Net Revenue: $317 million, at the top end of guidance range.
- Adjusted EBITDA: $17 million, a year-over-year increase of 8%.
- Gross Margin: 48%, an improvement of approximately 470 basis points from the second quarter of 2023.
- Gross Profit: Increased by 9% compared to last year.
- US eCommerce Sales: Decreased by 4% compared to the second quarter of 2023.
- European eCommerce Sales: Increased by 1% year-over-year.
- Third Party Business Revenue: Increased by over 23% year-over-year.
- SG&A Expenses: 43% of sales, an increase of approximately 440 basis points compared to 2023.
- Net Loss: $5.3 million, or $0.17 per share.
- Adjusted Net Loss: $0.7 million, or $0.02 per share.
- Inventory: $312 million, a 21% improvement from $396 million a year ago.
- Term Loan Balance: $254 million.
- ABL Borrowings: $20 million, $50 million lower than the second quarter last year.
- Share Repurchase: $4 million worth of shares repurchased, with $20 million remaining authorization.
- Q3 Net Revenue Guidance: $300 million to $340 million.
- Q3 Adjusted Net Income Guidance: $0 million to $3 million.
- Q3 Adjusted Diluted EPS Guidance: $0.00 to $0.10.
- Q3 Adjusted EBITDA Guidance: $19 million to $23 million.
- Full Year Net Revenue Guidance: $1.35 billion to $1.43 billion.
- Full Year Adjusted Net Income Guidance: $9 million to $15 million.
- Full Year Adjusted Diluted EPS Guidance: $0.29 to $0.48.
- Full Year Adjusted EBITDA Guidance: $90 million to $98 million.
- Capital Expenditures Guidance: Approximately $35 million.
Release Date: September 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lands' End Inc (LE, Financial) delivered net revenue of $317 million, at the top end of their guidance range.
- Adjusted EBITDA increased by 8% year-over-year, reaching $17 million.
- The company achieved a 21% year-over-year improvement in inventory position and a 15% increase in churn rate.
- Gross margin improved by approximately 470 basis points compared to the second quarter of 2023.
- New customers are, on average, 10 years younger, indicating successful targeting of a younger demographic.
Negative Points
- Total revenue performance decreased by 2% compared to last year.
- US eCommerce business saw a sales decrease of 4% compared to the second quarter of 2023.
- Sales from Lands' End Outfitters were down 7% from the second quarter of 2023.
- SG&A expenses increased by approximately 440 basis points compared to 2023, driven by higher digital marketing spend and other costs.
- The company reported a net loss of $5.3 million, or $0.17 per share, for the second quarter.
Q & A Highlights
Q: New customer file up mid-single digits is impressive. Anything that you're noticing about the demographics of that customer base versus your core, given what you've mentioned about younger customers, and then also what resonated throughout with the gross margin is lower promotions, what are you seeing in each of the channels with pricing and promotion? And can you just also talk about the cadence in the quarter and how the exit rate is into the third quarter? Thank you.
A: Good morning, Dana. The new customer file and the growth in our overall GMV and specifically the US eCommerce business were both mid-single digit positive. The customers we added were in our high growth category, on average 10 years younger. This trend has continued from Q2 into Q3. We drove the lowest promotion rates seen in the company in a number of years, and we see this as an avenue forward, continually updating our product and moving with speed.
Q: Inventory continues to remain very clean. Are you seeing any how you're planning inventories go forward? And what are you seeing in terms of freight charges or lead times and getting product and out any outlook for the holiday? Thank you.
A: We have a 470 basis points improvement in gross margin and expect to continue seeing these improvements through the back half of the year. Our transportation team has done a fantastic job of mitigating costs and delays. We expect our inventories to stay at historical lows, bringing product more frequently and closer to our shores.
Q: Congratulations on Nordstrom to the digital marketplace mix. You now have a pretty wide range of customers now in the digital marketplace, from Kohl's, Target, Nordstrom, Macy's. Are you actively looking for even further partners here on? Is there ability to maybe do that internationally?
A: We have a good spread across the merchandising pyramid with Nordstrom's being our best player. We are focusing on evolving our product architecture on these sites. Internationally, we see expansion opportunities in Europe, South America, and Canada over the next few quarters.
Q: You talked about the new patent being filed in the swim category. Does the company maintain a pipeline of patent-eligible products in development, and how does that track compared to a couple of years ago?
A: We had not been doing this a couple of years ago. Innovation is a critical part of our strategy, and we are building a pipeline of patent-eligible products. We aim to be known again for our innovation, focusing on building solutions for our customers.
Q: It sounds like you're having a lot of success in the club channel. Is that the biggest driver of the higher GMV guidance despite GAAP revenues moving a little bit lower?
A: Excluding shoes and kids from last year's numbers, our USD business was up 6%. Our Lands' End business is up in the quarter during the back-to-school season. Licensing business and clubs are significant drivers of our GMV growth, and we see a lot of potential in these areas.
Q: New customers coming in have been about 10 years younger than the average customer in your file. How should we think about that? Is this a conscious effort to attract younger customers and move the brand younger?
A: The customer has been aging in our file for the last few years. This is the first time the customer has stopped aging. If we can now start to back that up a little bit and build again for the long term, it bodes well for years of growth in this brand.
Q: Given the fact that a big part of the growth proposition for Lands' End is selling products with minimal discounting, how is that playing into the SG&A cost expansion in Q2 to acquire new customers?
A: We saw a 470 basis points improvement in gross margin, driven by higher average unit retail out the door. We are discounting less as a whole, driven by product solutions and newness. New customer acquisition is more in areas like social, and these customers are buying at a higher average unit retail.
Q: In terms of Outfitters, what inning or quarter are we in terms of getting it to where you like it to be and the potential for it?
A: We are seeing all the signs we want in that business. The addition of a large customer like Wells Fargo is significant. We have built a sales team and organizational support system to build on that with further large customers. The focus is on high-quality, durable, relevant, personalized, and customized products backed by outstanding customer service.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
