Lands’ End, impacted by macro headwinds and higher shipping costs, reported a drop in fourth-quarter net income but for the year overall tripled its profitability off a double-digit revenue gain.
For the quarter ended Jan. 28, the all-American, classically styled retailer reported net income of $7.1 million, or $0.21 a diluted share, compared to income of $19.9 million, or $0.60 a share, in the fourth quarter of fiscal 2020.
Adjusted earnings before interest, taxes, depreciation and amortization decreased to $27.3 million compared to $46.1 million in the fourth quarter of fiscal 2020.
Net revenue increased 3.2 percent to $555.4 million, compared to $538.4 million in the year-ago period.
For the year, however, net income came to $33.4 million, or $0.99 a share, a big gain from the $10.8 million, or $0.33 a share, seen in fiscal 2020.
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Adjusted EBITDA grew by 39 percent to $120.9 million compared to $87 million in fiscal 2020.
Net revenue last year at the Dodgeville, Wisc.-based retailer increased 14.7 percent to $1.64 billion, compared to $1.43 billion in the prior year, and was the highest it’s been since 2011.
Investors apparently liked the report, pushing Lands’ End stock up 13.5 percent, or $2.13, to $17.87 by the close of trading Wednesday on NASDAQ.
For 2023, “The business is going to be more back-half weighted,” Jerome Griffith, chief executive officer of Lands’ End, told WWD. “We’re up against record first and second quarters last year and there’s also inflation, we’re lapping the government stimulus and there’s a war going on. But there’s more opportunity in the back half.”
Griffith said supply chains issues in the fourth quarter “haven’t subsided so much but we are in a better overall stock position this year.”
He also said the company is seeing no let up in the high rates being charged by shipping companies, and significant shipping delays continue, though there’s some incremental, slow improvement.
Asked about consumer demand, Griffith said, “It’s choppy” and in large part due to the rising costs of energy and food.
Still, several categories at Lands’ End performed well last quarter, including knitwear, sleepwear, active, loungewear, knit bottoms, cashmere and swimwear, which he said has been selling year-round. Home was another “outstanding” area, particularly the bath and bed categories. Lands’ End’s “Let’s Get Comfy” marketing theme continues to be viable, Griffith said, and still resonating with consumers.
Asked which categories were soft last quarter, Griffith cited outerwear, but he emphasized “the really big issue” was not being sufficiently in stock in the fourth quarter.
Lands’ End has a number of growth strategies in the works, including a collaboration with celebrity Blake Shelton on men’s and women’s styles which will be introduced in the third quarter of this year. “We think that’s going to have legs for more than a season,” Griffith said. “He’s our guy.”
Lands’ End works with Reese Witherspoon on offering the actress’ Draper James collection but as far as collaborating with celebrities, “We are in early days,” Griffith said.
In other growth moves:
- At the end of March, Lands’ End will begin selling on QVC.
- Swim shops are planned for inside Kohl’s stores located in warm climates. The Lands’ End collection already sells at Kohl’s stores and on kohls.com.
- Personalization initiatives in the company’s uniform business will increase.
“Looking ahead, we remain confident in our long-term opportunity as we leverage the strength of our digital-first approach, brand and growing total addressable market,” Griffith said in a statement.
During the fourth quarter, global e-commerce net revenue reached $441.5 million, a decrease of 4.4 percent from $461.9 million in the year-ago fourth quarter as a result of shipping delays caused by supply chain challenges.
Compared to the fourth quarter of last year, U.S. e-commerce decreased 2.2 percent and international e-commerce decreased 14.6 percent.
Outfitters net revenue was $61.8 million, an increase of 43.6 percent from $43.0 million in the fourth quarter of fiscal 2020. This increase was driven by stronger demand within the company’s travel-related national accounts and school uniform customers.
Third-party net revenue, which includes sales on third-party marketplaces and U.S. wholesale revenues, was $36.3 million in the fourth quarter compared to $21.3 million in the fourth quarter last year. The $15 million increase was primarily attributable to growth at Kohl’s, including an expansion to 300 locations during the third quarter 2021, compared to 150 retail locations in the fourth quarter 2020. Lands’ End also sells on kohls.com.
Gross margin decreased about 360 basis points to 35.9 percent as compared to 39.5 percent in the fourth quarter last year. Gross margin declined due to increased shipping costs driven by global supply chain challenges.
For the year, global e-commerce net revenue increased 5.3 percent for the fiscal year, driven by U.S. e-commerce increasing 6.8 percent partially offset by international e-commerce decreasing 0.8 percent.
Outfitters net revenue increased 45.9 percent, driven by stronger demand within the company’s travel-related national accounts and school uniform customers.
Third-party net revenue increased 116.6 percent with the launch of the Kohl’s business in the third quarter of fiscal 2020 and the expansion from 150 to 300 locations in the third quarter of 2021.
Jim Gooch, president and chief financial officer, stated, “We are very pleased with the performance we delivered in 2021, despite the supply chain challenges in the back half of the year. For fiscal 2022, we expect year-over-year sales growth to be higher in the back half of the year, as we lap strong demand from the first half of 2021 and inventory constraints we experienced in the back half of 2021. While we navigate the macro headwinds through the remainder of fiscal 2022, we remain confident in our business model and ability to meet our long-term targets.”
For the first quarter of fiscal 2022, Lands’ End expects:
- Net revenue to be between $320 million and $335 million.
- Net loss to be between $4 million and $2 million and diluted loss per share to be between $0.12 and $0.06.
- Adjusted EBITDA in the range of $12 million to $15 million. The first-quarter outlook assumes about $15 million of incremental shipping expenses due to the global supply chain challenges.
For all of 2022 the company expects:
- Net revenue between $1.68 billion and $1.75 billion.
- Net income between $24 million and $35 million, and diluted earnings per share between $0.71 and $1.04.
- Adjusted EBITDA between $105 million and $120 million.
- Capital expenditures of about $37 million. The year’s outlook assumes about $40 million of incremental shipping expenses due to the global supply chain challenges.