Lands’ End Turns Profitable in Q2

Lands’ End, seeing healthy e-commerce gains and robust sales of “comfy” clothes, reported net income of $4.4 million or $0.13 per diluted share, in the second quarter, compared to a net loss of $3 million, or $0.09 a share, in the year-ago quarter.

Adjusted earnings before interest, taxes, depreciation and amortization in the quarter ended July 31 increased 250.8 percent to $23.9 million, compared to $6.8 million in the second quarter of last year.

Net revenue increased 4.6 percent to $312.1 million, compared to $298.3 million in the second quarter of last year.

“We have made a fair amount of technology investments, on our web site, to manage ourselves better and to attain more insights on customers and it all seems to be coming together because of the change in shopping patterns,” Jerome Griffith, president and chief executive officer of Lands’ End told WWD on Wednesday. “Customers are online a lot more.”

“Ninety-six percent of our business is done with clicks,” Griffith added, with the rest of the company’s volume attained through the brand’s limited brick-and-mortar presence. Lands’ End has 14 stores.

But that’s about to grow, through a partnership with Kohl’s announced earlier this year. It officially launches Sept. 20, in 150 stores where Lands’ End will have an average of 600 square feet of space in 150 Kohl’s stores, initially, and possibly more later on if the customer response is strong. “In the Kohl’s stores, we’ll have a selection of seasonal items, really our best-selling items,” in both men’s and women’s sections of Kohl’s.

Already, the retailers have been testing Lands’ End products on kohls.com and the plan is to have the entire Lands’ End assortment on the web site.

“We’re super excited. The demographic of Kohl’s customers overlap real well with Lands’ End.”

Lands’ End entered the spring season with a new marketing campaign, “Let’s Get Comfy,” which was developed before the COVID-19 outbreak and has played well into the current consumer mind-set due to the pandemic.

After seeing demand drop in the first weeks of the health crisis, “As people got used to the idea that they will be at home for the long haul, the demand started to increase by summertime,” though the company did have to “scramble” to get some goods due to interruptions in the supply chain due to the pandemic. Currently, inventories are in pretty good shape,” Griffith added.

Recent bestsellers have been board shorts, miniskirts, tankinis, tug-less tanks, swim, women’s knit tops and knit bottoms, sleepwear, sheets and towels.

Lands' End Turns Profitable in Q2 — A comfy Lands’ End look for holiday 2020.

By the upcoming holiday season, Lands’ End expects to be offering about 25 third-party brands, among them Danskin and Rockport. “They’re mostly in businesses concentrated in home, footwear and seasonal items for holiday. If this goes well, we will expand the umber of third-party brands we sell,” Griffith said. The strategy to sell third-party brands began with a test during holiday 2019 with decorative pillows and is designed to sell products that complement and don’t duplicate the Lands’ End assortment.

Global e-commerce net revenue increased 23.6 percent in the second quarter, driven by U.S. e-commerce increasing 26.2 percent and international e-commerce growing 9.4 percent as compared to the prior period.

The Outfitters division saw net revenue decline 42.8 percent due to the negative impact of the COVID-19 pandemic.

Gross margin increased approximately 10 basis points to 43.4 percent as compared to 43.3 percent in the second quarter last year. The increase was due to “disciplined” promotional strategies and continued use of analytics, partially offset by the liquidation of seasonal inventory as retail stores reopened.

“We are very pleased to have delivered a strong second quarter leveraging the strong momentum in our global e-commerce business,” Griffith said in a statement issued earlier Wednesday. “Our performance reflects the execution of our strategies related to product innovation, our global e-commerce platform, data-driven marketing and commitment to optimizing our business processes and infrastructure. We will continue to build on our offering of high-quality value-oriented product assortments with growth strategies that expand our customer reach.

“Longer term, we remain confident in our positioning within the new landscape given our dynamic e-commerce foundation, limited bricks-and-mortar exposure, key item basics business that offers an attractive value proposition and lean operating structure.”

Cash and cash equivalents were $62.6 million at the end of last quarter, compared to $82.6 million as of Aug. 2, 2019.

The company anticipates revenues in the third quarter to be flat or down in the low-single digits due to reduced demand from business customers and a slow recovery in its school uniform business.

For the fourth quarter, the company expects net revenue to decline in the low-single digits due to declines in demand from its business customers.