Lands’ End, boosted by swimwear sales and an emphasis on comfort, beat second-quarter top- and bottom-line expectations and raised its outlook for the year.
“Many things are working. Demand remains high and we had a very good showing last quarter,” Jerome Griffith, chief executive officer, told WWD, just after the company reported net income in the second quarter ended July 30 rose to $16.2 million, from $4.4 million in the year-ago period.
Revenues rose 23.1 percent to $384.1 million, from $312.1 million in the year-ago quarter, and 28.8 percent from the $298.3 million in the second quarter of fiscal 2019. “It was a record second quarter,” Griffith said, noting that the brand was founded in 1963.
The company exceeded expectations based on second-quarter guidance raised three weeks ago. Earnings before interest, taxes, amortization and depreciation, or EBITDA, of $41 million beat the expected $37 million, and revenues of $384 million beat guidance of $383 million.
The gains came amid headwinds due to COVID-19, supply chain bottlenecks and the labor shortage. “We had to make a lot of adjustments due to supply chain issues, but it seems the consumer demand is still out there and I think it will continue through the back part of the year,” Griffith said.
The Dodgeville, Wisc.-based Lands’ End, and the rest of the industry, are working to mitigate COVID-19-related factory shutdowns overseas, particularly in Vietnam, and delays getting containers to ports and products to warehouses. Shipping and raw material costs are on the rise.
Despite the headwinds, “We have maintained our guidance for the back part of the year and our outlook on earnings for the year overall have been raised,” Griffith said. Wall Street might have expected more, as Lands’ End’s stock price closed down 9 percent, or $3.13, to $31.10 on Nasdaq Thursday.
The nation’s labor shortage is another issue. Asked if Lands’ End has enough manpower in its three southern Wisconsin facilities handling fulfillment and customer orders to manage the holiday demand, Griffith said: “It’s going to be tight. Having said that, it’s tight every year. There’s a finite labor pool, but the stimulus rolls to a halt next week, checks stop coming in, and people will want to return to work. We have been able to manage relatively well throughout the back-to-school period.”
Last quarter, “Swimwear was an absolute runaway success,” Griffith said, noting that boardshorts, casual dresses and tankinis, all part of the swim category at Lands’ End, sold well. Sleepwear, knitwear and wovens across men’s and women’s were also outstanding.
With Lands’ End’s denim business, “It’s early days but it’s a push for us this fall. We will see how it performs,” said Griffith. Other retailers have cited denim as a standout this year.
Lands’ End’s “Let’s Get Comfy” campaign, launch in spring 2020, “continues to resound with the customer. It’s very important to them,” Griffith said. The campaign is on its website, in the catalogues and in social media “wherever our brand is touching consumers,” said Griffith. “We are driving home the message.”
Also fueling some sales was Lands’ End partnership with Kohl’s. Lands’ End operates only a handful of stores, but the brick-and-mortar presence has ballooned with the rollout to 300 Kohl’s stores and kohls.com. Griffith said discussions are happening on possibly bringing Lands’ End to additional Kohl’s doors next year.
Lands’ End’s sweet spot is with Gen Xers and Baby Boomers. As Griffith said, both groups are shopping online now more than pre-COVID-19. “It’s a total addressable market that has grown substantially in the last year and is something that’s going to continue.”
For fiscal 2021 the company now expects:
• Net revenue between $1.67 billion and $1.71 billion.
• Net income between $45.5 million and $51 million, and diluted earnings per share to be between $1.35 and $1.51.
• Adjusted EBITDA in the range of $136 million to $143 million.
Global e-commerce sales in the last quarter rose 33 percent from the 2019 quarter, and this quarter, “The back-to-school business and the school uniform business are pretty much back to 2019 levels as well,” said Griffith.