Lands’ End, Inc. is reporting that third quarter Gross Merchandise Value (GMV) increased in the low-double digits compared to the third quarter of 2023. GMV is defined as total order value of all Lands’ End branded merchandise sold to customers through business-to-consumer and business-to-business channels, as well as the retail value of the merchandise sold through third party distribution channels.

“Throughout the third quarter, we sustained momentum from our deliberate efforts to drive higher quality sales, resulting in growth in both gross margin and gross profit dollars,” stated company CEO Andrew McLean. “Our sharp focus on innovation and creating solutions for life’s every journey is supporting the continued evolution of our strategy and brand. In addition to serving our loyal existing customers, our new customer acquisition increased 20 percent year-over-year, and is up mid-teens year-to-date. As we look to the holiday season, the Black Friday through Cyber Monday weekend met our expectations and was characterized by strong customer engagement with balanced performance across our channels.”

Third quarter net revenue decreased to $318.6 million for the period ended November 1, compared to $324.7 million in the third quarter of fiscal 2023. Excluding the impact of transitioning kids and footwear products to licensing arrangements, net revenue increased in the low-single digits year-over-year.

Global e-commerce net revenue was $211.1 million, a decrease of $5.3 million from $216.4 million in the third quarter of fiscal 2023.

U.S. e-commerce net revenue was $186.1 million for the quarter, a decrease of 2.2 percent from $190.2 million in the third quarter of fiscal 2023. The decrease in U.S. e-commerce was said to be primarily driven by the transition of kids and footwear products from a direct to a license model, lower promotional activity and improved inventory management resulting in increased gross profit from higher gross margins. Excluding the impact of transitioning kids and footwear products to licensing arrangements, U.S. e-commerce net revenue increased by low-double digits year-over-year.

International e-commerce net revenue decreased 4.6 percent year-over-year for the third quarter, said to be primarily driven by lower promotional activity and a decrease in markdown and clearance sales in third quarter of fiscal 2024.

Outfitters net revenue was $73.4 million, a decrease of 1.2 percent from $74.3 million in the third quarter of fiscal 2023. The business uniform channel increased year-over-year primarily due to the strength in national accounts. The school uniform channel decreased primarily due to the timing of customer orders earlier in the back-to-school season as compared to the prior year.

Third Party net revenue was $25.5 million, an increase of $1.5 million or 6.3 percent from $24.0 million in the third quarter of fiscal 2023. The increase was primarily due to revenue generated from licensing arrangements.

Gross profit was $161.1 million, an increase of $8.5 million or 5.6 percent from $152.6 million in the third quarter of fiscal 2023. Gross margin increased approximately 360 basis points to 50.6 percent, compared to 47.0 percent in third quarter of fiscal 2023. The gross margin improvement was primarily driven by lower promotional activity, leveraging the strength in product solutions and newness across the channels and improved supply chain costs.

Selling and administrative expenses increased $5.6 million to $140.9 million or 44.2 percent of net revenue, compared to $135.3 million or 41.7 percent of net revenue in third quarter of fiscal 2023. The approximately 250 basis points increase was driven by higher digital marketing spend focused on new customer acquisition.

Net loss was $0.6 million, or a 2 cents loss per diluted share compared to net loss of $112.4 million, or a $3.52 loss per diluted share in the third quarter of fiscal 2023. Third quarter of fiscal 2023 net loss includes a non-cash goodwill impairment charge of $106.7 million due to the then decline in the company’s stock price and market capitalization.

Adjusted net income was $1.8 million, or 6 cents per diluted share, compared to an Adjusted net loss of $3.6 million or a loss of 11 cents per diluted share in the third quarter of fiscal 2023.

Adjusted EBITDA was $20.3 million in the third quarter of fiscal 2024 compared to $17.3 million in the third quarter of fiscal 2023.

Balance Sheet and Cash Flow Highlights
Cash and cash equivalents were $30.4 million as of November 1, 2024, compared to $36.8 million as of October 27, 2023.

Inventories, net, was $335.9 million as of November 1, 2024, and $422.2 million as of October 27, 2023. The 20 percent decrease in inventory was reportedly driven by actions the company has taken to improve inventory efficiency by reducing inventory purchases and capitalizing on speed-to-market initiatives.

Net cash used in operating activities was $12.2 million for the 39 weeks ended November 1, 2024, compared to cash provided by operating activities of $36.7 million for the 39 weeks ended October 27, 2023. The increase in cash used by operating activities was driven by the year-over-year changes in working capital, primarily the reduction of inventories in year-to-date 2023.

As of November 1, 2024, the company had $60.0 million of borrowings outstanding and $90.3 million of availability under its ABL Facility, compared to $110.0 million of borrowings and $156.1 million of availability as of October 27, 2023. Additionally, as of November 1, 2024, the company had $250.3 million of term loan debt outstanding compared to $233.8 million outstanding as of October 27, 2023.

During the third quarter of fiscal 2024, the company repurchased $4.0 million of the company’s common stock under its share repurchase program announced on March 15, 2024. As of November 1, 2024, additional purchases of up to $16.2 million could be made under the program through March 31, 2026.

Outlook
Company CFO Bernie McCracken, stated, “In the third quarter, we delivered low-double digit growth in GMV, which exceeded our guidance range, and Adjusted EBITDA growth of 17 percent year-over-year, which was within our guidance range. We also achieved improvements in gross margin and gross profit, primarily driven by lower promotional activity, strength in product solutions, newness across the channels and improved supply chain costs. By improving profit margins across our business units, we have been able to reinvest in the business, including our marketing efforts focused on new customer acquisition.”

For the fourth quarter of fiscal 2024 the company expects:

  • Net revenue to be between $440.0 million and $480.0 million;
  • Gross Merchandise Value expected to deliver low-to-mid single digits percentage growth;
  • Net income to be between $18.0 million and $21.0 million and diluted earnings per share to be between 58 cents and 67 cents;
  • Adjusted net income to be between $16.0 million and $19.0 million and Adjusted diluted earnings per share to be between 51 cents and 61 cents; and
  • Adjusted EBITDA in the range of $43.0 million to $47.0 million.

For fiscal 2024 the company now expects:

  • Net revenue to be between $1.36 billion and $1.40 billion;
  • Gross Merchandise Value expected to deliver low-to-mid single digits percentage growth;
  • Net income to be between $6.0 million and $9.0 million and diluted earnings per share to be between 19 cents and 29 cents;
  • Adjusted net income to be between $11.0 million and $14.0 million and Adjusted diluted earnings per share to be between 35 cents and 45 cents;
  • Adjusted EBITDA in the range of $92.0 million to $96.0 million; and
  • Capital expenditures of approximately $35.0 million.

Image courtesy Lands’ End, Inc.