No flagships, no pop-ups, nothing fashion-forward or flashy.
Except for maybe that Airstream designed to look like a big Lands’ End duffel bag that traveled through the company’s home state of Wisconsin for months promoting the brand.
Lands’ End has been in turnaround mode for almost two years, seeking to reconnect with its 55-year-old heritage and customers, recoup volume lost from closing shops inside Sears, and clean up the mess left by previous managements. This year, 43 Lands’ End shops inside Sears would have closed, additional leases are expiring and the company will end the year with no more than 49 shops within Sears stores. Land’s End in 2002 was bought by Sears and spun off as a public company in 2014.
The company is working for the first time to develop a retail chain, and after partnering with Amazon in the U.S., talks are occurring with other third-party online distributors, such as Walmart.com. The company is also growing its uniform business, selling to AT&T, UPS, American and Delta Airlines, and to schools.
Now it seems the $1.4 billion Lands’ End is on track to meet its main turnaround objectives: to become a $2 billion company with earnings before interest, taxes, depreciation and amortization (EBITDA) in the high single digits and have 40 to 60 stores operating by 2022.
On Thursday, the company reported net income rose to $3.3 million in the third quarter ended Nov. 2, from $200,000 in the year-ago period. Adjusted EBITDA grew 22.1 percent to $15.7 million, and total revenues rose 4.9 percent to $341.6 million, with comparable same-store sales leaping 11.7 percent. Direct sales increased 8.1 percent to $313.8 million, and retail revenues decreased 21 percent to $27.8 million due to the reduction in Lands’ End shops at Sears.
“Our third-quarter results marked the sixth consecutive quarter of sales growth and the fifth consecutive quarter of adjusted EBITDA increases,” said Jerome Squire Griffith, president and chief executive officer since March 2017 after serving as ceo of Tumi Holdings and earlier holding executive positions at Esprit, Tommy Hilfiger, J. Peterman and Gap Inc.
At Lands’ End, it’s still a turnaround situation, agreed Griffith during an interview. “We’ve undergone several years of declining sales, declining profitability and one of the things the management group did two years ago was begin to grow our consumer base again.
“If you look back over the last few years, at the different managements, the brand has gone different ways,” Griffith said. “But one of the reasons we have been successful lately is the design staff has really embraced who our customer is. And they are giving customers the product they are looking for and expect from Lands’ End; 2017 was the first time the company had sales and profitability increases in five years. What is really important, not just for the Street, but for our customers too is that the company becomes more consistent in terms of image and product offering as well as financial results.”
“To fix a business, you’ve got to be a protector of the brand and articulate all the attributes and make sure nobody messes with that,” explained Mark Cohen, director of retail studies and adjunct professor at Columbia Business School. “Lands’ End always had a tremendous focus on very classic fashionability, quality and customer service. Jerome has been moving to repair the attributes that the company lost. The biggest impediment is that the principal shareholder is Eddie Lampert,” who owns over 60 percent of the business. “The issue may be benign at the moment, but it’s benign until it suits his purpose to get involved. The association between Sears and Lands’ End has been destructive and corrosive.”
“I will speak to him as I will speak to many of our shareholders after each quarter,” Griffith said of his interaction with Lampert. “We talk about the results and where we are going. Eddie is not involved in the day-to-day management. The company got spun off from Sears in 2014 and has been run as an independent company with a public board since then. He is not involved in management and is not on the board.”
Today, Griffith, along with Claudia Mazo, senior vice president of retail, and Jim Gooch, chief financial and chief operating officer, greet a guest at the company’s newest store, a 5,300-square-foot unit opened last month in the Outlets at Bergen Town Center in New Jersey, where’s there’s a hybrid tenant makeup with Whole Foods, Ulta, Century 21, Bloomingdale’s Outlet and Neiman’s Last Call Studio.
“One of the most important things was making sure we played on our heritage, and build on what Lands’ End really stands for, so customers feel at home,” Mazo said, explaining the store design. “There are a lot of residential clues to create a warm and inviting environment,” like the archway, the faux fireplace, photos of the late founder Gary Comer, an 8-foot, by 3 1/2-foot statement table handmade at Lands’ End’s wood shop in its Dodgeville, Wis., headquarters, and catalogue covers from years ago. There’s a recent one with an employee-owned Holstein cow named Plum. It reflects Lands’ End dairy land roots.
Color permeates from a carefully curated selection of primarily core products: down outerwear, flannel shirts, turtlenecks, sleepwear, denim jeans and chinos. “It’s basically a key item store, with about 20 percent of the collection on display,” Griffith said. “One of our bestsellers in men’s is going to be the no-iron chino.” Coats are already big sellers, and this year the company invested big in transitional outerwear, specifically women’s fleece and sherpa fleece. Heavier down and squall outerwear are also selling. “Being based in Wisconsin, we know how to do cold weather. Our coats go down to 50 below,” the ceo said.
After a walk-through of the store, Griffith sat for an interview covering Lands’ End’s fashion parameters, the state of the business, the new store strategy and other growth maneuvers. Below, are excerpts from the conversation.
WWD: This year, Lands’ End started selling on Amazon. How else can you grow the distribution?
Jerome Squire Griffith: So we are selling product on our own web site. We are selling product in our stores. We are selling product on third party web sites. Up until this year we hadn’t been doing that. We started with Amazon because that’s the biggest and the best. It’s working quite well for us and we are finding we are getting a lot of new customers and a lot of people who never shopped or heard of Lands’ End. There are three or four other sites that we should be on and we are working on that. We’re talking to Walmart. Our customers shop at Walmart. Our customers shop at Amazon. Our customers shop at Target. We are talking to all of them.
WWD: With Lands’ End closing its shops in Sears, would you consider establishing shop-in-shops at other department stores?
J.G.: I’m staying away from that. We find the message very difficult to control. You can’t control the product that is there. You can’t control what it looks like, but you can online.
WWD: What kinds of locations are you looking for to roll out your stores? Would you consider a Manhattan flagship?
J.G.: No. Our customers live in the suburbs and shop in the suburbs. When you say this is a flagship, it almost says this isn’t going to make money and this is not our intent. Stores like this one [in Bergen] are a convenience for the customers. We know where our customers live because we ship products to their homes. We know where we should be opening stores. Our customers like convenience in the shopping experience as much as they like comfort in their clothing. We don’t see regional malls as a big play for us. We see centers where there’s an outdoor entrance for the store and a parking lot where you can park right outside. We’re looking at open-air centers. More neighborhood-oriented sites. We have not done anything on a street.
WWD: How would you characterize the pace of Lands’ End store expansion?
J.G.: It’s pretty robust. I have worked at many companies where people are like, “Why don’t you double or triple the amount of stores you can open,” and I am like, “You are really going to screw it up and get in front of your quality. You have to hire salespeople. They have to understand the brand. They have to be ambassadors to the customer.” It is tough to hire people but we haven’t had any problems hiring for stores…Customers who shop in brick-and-mortar and shop online buy two or more times the product. It’s more convenient for them. I call it “uni-channel,” which means it doesn’t matter which channel you shop. You have the same customer experience. That’s where we want to get to.
WWD: How are you merchandising the stores?
J.G.: We don’t carry the full range in any of the stores. Quite honestly, we can’t fit it in. Stores range from 5,000 to 6,500 square feet. We put in the key items, things that people would know us for and are more apt to purchase.
WWD: A few years ago, Lands’ End opened a big pop-up on Fifth Avenue and another in SoHo. Why not more of them?
J.G.: The pop-up shops in general for us did not work out because of a few things. I don’t think the company was ready to do retail properly. I don’t think the systems or processes were in place to manage a retail store, and I believe that we also didn’t look at where our consumer lives and what they are looking for. I said to the board, “We are not going to do pop-up stores but we will come up with a concept and open the concept in the places where our customers live” and this seems to be working for us. We didn’t have a lot of retail skill set, but we’ve been building a lot of that muscle. Retail can be very complementary to what we do. But pop-up is not on the agenda. I’ve got an Airstream. At an apple picking festival in Wisconsin we did $10,000 in three days with the Airstream — all on three or four different products.
WWD: How far can Lands’ End go on the fashion spectrum? Past managements have pushed the envelope.
J.G.: I don’t believe that we are a trend-setting company. We are a company that focuses on family, home life, comfort and on casual. We offer products that meet purposes in people’s lives. Outerwear is a great example. We come from a place where winters are cold and we rate our clothing by the temperatures it can keep you warm in. We have customers that are active and they like fabrics that have stretch in them or fabrics that make them feel warm and comfortable. We have customers that are very family-oriented. Look at the sleepwear. We have that for the whole family…You won’t see us following runway trends, that’s not the first thing, but we do look at fabric innovation, we look at new prints and new plaids. We do a lot of bright colors and prints. The tankini is a key item. The board short is a key item. Slender one-piece suits do very well. We sell a lot of coverups. We have a very large swimwear business which is pretty focused on function. UPF sun protection is very important to our customer. We sell a lot of rash guards and swim tees. But the designers look at great things from 20 or 30 years ago to be inspired to do what is going to come out as new. We have items like this duffel bag from years ago that are very classic. We have a great squall coat. We have rugby shirts in bright colors, and when the Airstream drives around they set up our Heritage Collection because people are excited and say, “Oh, I remember that from back in the day. And people buy.”
WWD: Does the typical Lands’ End customer prefer to blend in?
J.G.: I wouldn’t say they want to blend in. It’s a customer that wants to feel comfortable and wants to feel good about themselves.
WWD: Are you thinking about injecting greater style to the collection?
J.G.: We have a pretty large amount of what we call newness — new styles that come in each season. Our consumer leads a certain lifestyle and it’s important to have continuity in the offering and that’s what I mean about being consistent. Am I finding things here that I would expect to find? I expect to find outerwear, flannels. Does it look the same as last year? No. It’s been updated with something that might be appropriate for the item. Flannel tunics is an example. We saw that last year the tunic was one of the most searched terms on our web site. Flannel was one of our largest-selling fabrics so we did a flannel tunic this year and lo and behold, it’s doing extremely well.
WWD: Before joining Lands’ End you ran Tumi, the luxury luggage brand. How did you feel making the switch to Lands’ End?
J.G.: I wasn’t sure about Wisconsin, but my wife and I love it there. I wasn’t sure we would be able to pull off a good retail strategy and it seems to be working quite well and our online business continues to expand, as does our Outfitters business. What’s great is that it’s almost like you’re free. When the company gets out of Sears, it’s like you have a white sheet. What do you want to do? How do you want to grow the company and there are so many areas: your own web site, third-party web sites, your own stores, internationally. We have an Outfitters business. A school uniform business. There are so many ways to grow the company. We have jumped into it with both feet and our results have been pretty good. We distribute in Germany, Switzerland, France, the U.K. We have a Japanese business and we are thinking “how does our business relate in China?”
WWD: When you first got to Lands’ End, what did you see and what did you do?
J.G.: The reasons I came to the company were pretty clear. First, it’s an Internet company. It wasn’t being run as an Internet company. Number two, it’s still a good brand name. Three, it has an international element to it. The brand translates outside America. Number four, there is just so much opportunity to grow the brand…It took me about a month to put together a growth plan, but it was pretty simple. Get the product right for the consumer, and that means a lot of stuff, such as are you designing for your customers’ lifestyles and how fast can you get things to market? Secondly, it should be a digitally driven company. We set up a data science department, and lo and behold we are starting to analyze our data and beginning to personalize our messaging. So there is a percentage of people out there who buy everything full price. They don’t need to be messaged about markdowns. There is a percentage of people who only buy things at a discount. They don’t need to be messaged clearance. Whenever we have a potential location we use our data analytics department to say “analyze this.” We actually have heat maps for our current customers that can tell where our best-spending customers live and we try to put stores in their areas.