Lands’ End, citing supply chain challenges and increased shipping costs, reported flattish profits for the third quarter and lowered its bottom-line guidance for the year.
Net income for third quarter ended Oct. 29 was $7.4 million or $0.22 a diluted share, compared to $7.2 million, or $0.22, in the year-ago quarter.
Adjusted earnings before interest, taxes, depreciation and amortization were $29.8 million in the quarter, an increase of $1.2 million compared to $28.6 million in the year-ago quarter. The results were at the high end of the company’s guidance despite higher shipping costs encountered last quarter.
Third-quarter revenues reached $375.8 million, an increase of 4.4 percent from $360 million in the third quarter of 2020 and an increase of 10.5 percent from $340 million in the third quarter of 2019.
The company’s shares on the Nasdaq by the end of trading Thursday closed at $19.76, down 9.9 percent, or $2.18.
The company cited some early fourth-quarter sales softness but added that inventory levels are currently in good shape.
In a conference call with analysts and investors, chief executive officer Jerome Griffin said the company is continuing with its successful “Let’s Get Comfy” campaign, and doesn’t see any let up in the casualization and comfort trend that accelerated through the pandemic.
He also said Lands’ End’s partnership with Kohl’s has expanded to 300 stores from 150 in the 2020 third quarter, and that it can further grow, though he didn’t say by how many doors. Lands’ End also sells on kohls.com.
Griffith said the Lands’ End marketplace remains in “early stages of growth” but will be expanded, as third-party brand relationships get evaluated. Details on the marketplace, the Kohl’s partnership, and other initiatives will be discussed during the company’s update on long-term goals in mid-January.
In a statement, Griffith said Lands’ End’s third-quarter performance “reflects the long-term strength and resiliency of our digitally led business model, as we navigated the dynamic global supply chain challenges while still delivering on our adjusted EBITDA expectations.
“We achieved 4 percent topline growth in the third quarter, contributing to our 22 percent growth year-to-date,” Griffith added. “Our topline expansion drove adjusted EBITDA at the high end of our outlook and growth of 129 percent year-to-date.
Though sales in early November were soft, Griffith said that for Cyber Week — Nov. 23 to 29 — sales increased high-single digits as a result of “strong demand online and in-store and our improved in-stock positions. We believe that the strong operating platform we have established combined with the ongoing progress across our four strategic growth pillars, including product, digital, uni-channel distribution and infrastructure, position us to drive growth over the next several years.”
Jim Gooch, president and chief financial officer, stated: “We delivered encouraging results in the third quarter, given the challenging environment. We have taken numerous actions to expedite receipts, and despite supply chain delays, which negatively impacted our in-stock position and sales early in the fourth quarter, we recovered our in-stock position to historical levels heading into Cyber Week. With these actions, we believe our inventory is positioned well for the remainder of this year and as we head into 2022. Consumer demand for our brand remains strong, and we are confident in the long-term health of our business and the growth opportunities that lie ahead. We look forward to sharing more details on our path forward when we announce our updated long-term targets.”
For fiscal 2021, the company now expects net revenue to be between $1.64 billion and $1.66 billion, compared to previous expectations of $1.67 billion to $1.71 billion.
Net income is projected to be between $35 million and $38 million, compared to between $45.5 million and $51 million previously forecast, and diluted earnings per share are seen between $1.04 and $1.13, compared to $1.35 and $1.51 previously forecast.
For the fourth quarter, the company expects net revenue to be between $560 million and $575 million, which is a 4 to 7 increase compared to the 2020 period.
Net income is seen between $9 million and $12 million, and diluted earnings per share to be between $0.27 and $0.36. Adjusted EBITDA is seen in the range of $31 million to $35 million.
Fourth-quarter guidance assumes an incremental $15 million in expense during the quarter based on higher shipping costs, shipping delays and port congestion.
Adjusted EBITDA is now seen in the range of $124.5 million to $128.5 million, compared to the previous estimate of $136 million and $143 million.
In other third-quarter results, Lands’ End reported global e-commerce revenues of $261.2 million, a decrease of 6 percent from $277.8 million in the third quarter of fiscal 2020 due to inventory constraints driven by supply chain challenges and an increase of 9.3 percent from $238.9 million in the third quarter of fiscal 2019.
Compared to the third quarter of last year, U.S. e-commerce decreased 3.5 percent and international e-commerce decreased 15.7 percent. Compared to the third quarter of fiscal 2019, U.S. e-commerce increased 6 percent and international e-commerce increased 27.6 percent.
Outfitters net revenue was $86.1 million, an increase of 38.9 percent from $62 million in the third quarter of fiscal 2020 and an increase of 3.4 percent compared to the third quarter of fiscal 2019. Compared to the third quarter last year, the 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 $19.3 million in the third quarter compared to $12 million in the third quarter last year. The $7.3 million increase was primarily attributable to growth via Kohl’s.