It was another tough quarter for Lands’ End, which posted a net loss and decline in revenues for the period ended July 29.
Yet all was not bad, as the all-American brand made progress on the margin front, was less promotional and came out of the period with clean inventories. In addition, the specialty retailer has been elevating the marketing on recent launches including Canvas by Lands’ End and Lands’ End Sport to attract a broader audience and the catalogue circulation was increased to recapture former customers and get new ones.
“Our focus is on increasing product relevance and reinvigorating the assortment with greater design appeal and innovation in our traditional style. We also remain excited about the opportunity in our new Canvas by Lands’ End brand, which is targeting a more modern customer but still embodies the Lands’ End DNA,” Federica Marchionni, president and chief executive officer, said during a conference call Thursday, after the company released the results.
Marchionni disclosed that Lands’ End will start selling on Amazon beginning in December, including the Lands’ End Sport and Canvas by Lands’ End lines and some footwear. “This provides an additional channel for us to introduce consumers to our new brand and expanded categories,” she said.
In other news, the Dodgeville, Wisc.-based company is furthering its pop-up strategy by opening another one in Manhattan’s SoHo for holiday selling, in addition to the one recently opened in Southampton, N.Y. Last year, Lands’ End opened a pop-up on Fifth Avenue.
Online, “We recently launched additional segments dedicated to our Lands’ End Sport, school uniform, business outfitters and Lighthouse brands,” Marchionni said. “These efforts are designed to extend brand awareness for Lands’ End overall, and broaden our customer base. We can now leverage these differentiated sites to target consumers with a more personalized experience with content that’s relevant to their needs.”
“We remained focus on offering more preplanned and targeted promotions and maintaining clean inventory levels, and we made the strategic decision to be less promotional in July than last year,” said James Gooch, chief operating and financial officer. “In addition, we believe we were also less promotional than the overall retail industry. While this lower level of promotion impacted our sales performance, driving less markdown sales during July, it benefited our gross margin,” which rose 30 basis points last quarter to 46.6 percent.
Still, as Gooch said, “Our second-quarter results didn’t meet our expectations.”
There was a net loss of $2 million, or 6 cents a diluted share, in the second quarter, as compared to net income of $7.5 million, or 23 cents a share, in the year-ago quarter. Net revenue was $292 million in the quarter compared to $312.4 million in the second quarter last year. Direct segment net revenue decreased 6.9 percent to $246.4 million. Retail segment net revenue fell 4.3 percent to $45.5 million primarily driven by a 2.5 percent drop in same-store sales and fewer Lands’ End Shops at Sears.
Adjusted EBITDA was $7.3 million compared to $19.6 million in the second quarter of fiscal 2015.
“We recognize that it may take some time to build back our lapsed customers and attract new ones,” Marchionni said. “But we’re encouraged by our initial results as they illustrate the improvements we’ve made in how we communicate with our customers….Our customers who shop with us in the past are responding favorably to our enhanced products. Products remain our first priority as well as refining our marketing messaging.”
Lands’ End did best in May and June while in July sales were impacted by lower level of promotional activities. Marchionni said.
Lands’ End on Thursday revealed a partnership with the Prostate Cancer Foundation (PCF) as part of a fundraising initiative to support Prostate Cancer Awareness Month. From Thursday until Oct. 15, the brand will donate 10 percent of net proceeds from the purchase of select items including men’s Oxford shirts, dress pants, polos and more, to support research, raise awareness about the disease and promote early detection.