Lands’ End, after reporting dismal results for the first quarter, expects a pickup in the second half of this year when the brand will be counting on pumped-up men’s and home offerings, elevated imagery and some new product offerings.
On Wednesday, the Dodgeville, Wisc.-based company reported a net loss of $5.8 million, or 18 cents a diluted share, for the quarter ended April 29, compared to net income of $1.7 million, or 5 cents a diluted share, in the year-ago period.
Adjusted earnings before interest, taxes, depreciation and amortization were $600,000 in the latest quarter compared to $13.1 million in the year-ago period.
Revenues fell to $273.4 million from $299.4 million, with the direct segment decreasing 8.4 percent and the retail segment falling 10.4 percent. Same-store sales were down 7.1 percent, partly due to pulling out of 10 Sears locations. Lands’ End now has shops in 225 Sears and continues to lower the count.
Lands’ End’s shares fell 5.7 percent, or 96 cents, to close at $15.81 on the Nasdaq Exchange Wednesday.
“As we look ahead, we expect to gain momentum with our core customers particularly in the second half of fiscal 2016 when our initiatives to enhance the product offering will be more broadly implemented,” Federica Marchionni, president and chief executive officer of Lands’ End, said Wednesday during a conference call, during which she outlined how the brand is battling back against the weak retail environment to reverse its declines.
Marchionni, a former Dolce & Gabbana executive, joined Lands’ End in February 2015 around the time that the retail industry started to drag. She’s attempting to modernize the brand and draw new customers without alienating the existing base, and has been rolling out new concepts and products, including a Fifth Avenue holiday pop-up store and reintroducing the Canvas label to attract a younger audience. She’s hinted at the possibility of wholesaling the line to different retailers and creating a limited number of permanent flagship stores, but would hold back on those until strategies gain traction.
“As part of our progress of the core business, we will begin to place additional emphasis on our men’s product and in the holiday, we will have a very strong gifting assortment featuring great home products which we believe will entice consumers to pick up something for everyone on their list including themselves, ” Marchionni said.
She acknowledged that during the quarter, the company continued to be impacted by the soft retail environment, including weak consumer traffic and aggressive promotional activities, in addition to unseasonable weather and other shifts in consumer spending away from apparel.
“While we have accomplished a great deal in transforming our business over the last several quarters, these headwinds continue to pressure our financial performance.We are focused on our core business, where we saw positive response to new patterns, including florals in new texture and colors. Great examples of this include our fine-gauge cardigans and updated neck details in the ponté dress .We also saw a strong response to our classic tote bag, which was presented in a nautical stripe and florals during the quarter,” she said.
Marchionni also cited a “positive response” to swim separates, men’s shirts, pants and shorts, and bed and bath products, and the uniform business, which is among the best-performing categories. She said that the initial response to the reintroduction of Canvas by Lands’ End, targeting a younger, more fashion-conscious audience, has been encouraging.
“Importantly, we believe that this new line creates a halo effect and enable us to test product and quality updates for the overall Lands’ End brand.
“We are also pleased with a successful test of our Lighthouse by Lands’ End brand at Sears, a new retail concept which features our nautical heritage at more affordable prices. We will continue to evaluate the performance of the test over the next quarter.”
With home goods, Marchionni said the company could capitalize on the positive trend to help offset weakness in much of women’s apparel.
The company has been re-examining its promotional strategy. “As you may recall, we have previously scaled back our promotion. While our goal is ultimately to become less promotional, we have to deal with the reality of the current environment and realize that we need to maintain some level of promotion to drive traffic and remain competitive,” the ceo said.
The company has been “working to leverage more on traditional holidays like Presidents’ Day, Mother’s Day and Memorial Day, as well as in certain unique events including our 31.4 percent off promotion for Pi Day and our buy-one-get-one 55 percent off on Cinco de Mayo to drive customers’ interest.”
On the marketing front, lapsed customers are being targeted with “enticing promotional offers and personalized content, both in our catalogs and via e-mail campaigns,” the ceo said. Through these target offers, we expected to capture both immediate orders, as well as incentivize customers to visit us again to make future purchases. We started these actions in May and we are encouraged by the early results.”
In e-commerce, the company recently debuted a new multibrand capable web site for desktop, mobile and tablet devices. The site features distinct customer experiences for both core and Canvas by Lands’ End lines.
While sales may be down, Lands’ End’s service levels seem to be holding up. The company this week received the 2016 StellaService Elite Award for exceptional customer service. StellaService is a company that measures the customer service performance of online businesses. Lands’ End was cited for excelling in phone, chat and e-mail, with a phone response time of less than 45 seconds. The award was given following an analysis of thousands of customer service data points collected by StellaService shopping analysts throughout 2015.