Lands’ End Inc. (Nasdaq:LE) reported lower sales and swung to a loss for its fiscal third quarter ended October 28.
The outdoor lifestyle retailer and brand saw net revenue of $311.5 million, compared to $334.4 million in the third quarter last year. Direct segment net revenue decreased 5.5 percent to $272.1 million while retail segment net revenue decreased 15.6 percent to $39.3 million, primarily due to a 14.3-percent decline in same-store sales and fewer Lands’ End Shops at Sears.
Gross margin fell to 42.9 percent as compared to 48.6 percent in the third quarter last year. During the quarter, the company wrote down $4.4 million of prior-season inventory from the Company’s Canvas by Lands’ End brand, which had a 140 basis point negative impact on gross margin.
Net loss was $7.2 million, or 23 cents per diluted share, as compared to net income of $10.7 million, or 33 cents per diluted share, in the third quarter last year. Net loss for the third quarter of 2016 included the aforementioned $4.4 million inventory write-down, as well as $1.2 million in non-recurring personnel costs net of reversals, primarily related to the departure of the company’s former CEO, Federica Marchionni, in late September. The inventory write-down and the non-recurring personnel costs negatively impacted loss per share by 9 cents and 3 cents, respectively.
After Marchionni’s departure, Lands’ End named its executive vice presidents James Gooch and Joseph Boitano as co-interim CEOs.
“While we are disappointed in our third quarter sales and gross margin results, we aggressively managed our costs and ended the quarter with clean inventory levels,” Gooch said. “Following an in-depth review of our recent performance, we have developed and begun to implement a number of initiatives that we believe will enable us to better execute our business strategies and drive improved financial performance. We were pleased to see some of these initiatives begin to take hold in the second half of the quarter, and look forward to building upon this momentum during the holiday season and beyond.”
“We now have a more clearly defined and focused strategy in place, which we believe will enable us to better execute on our goal to deliver product that offers newness and innovation, as well as more readily address the lifestyle needs of the Lands’ End customer,” Boitano said. “Our first priority is to enhance our classic offering with a focus on key categories that reflect the Lands’ End brand heritage with great quality, fit and value. We have also refined our marketing strategy with enhancements to our catalog presentation and social media efforts. Taken together, we believe these initiatives will position us to better engage our customers, win back lapsed customers and attract new customers to Lands’ End.”
At the end of the quarter, Lands’ End reported cash and cash equivalents at $131.5 million with inventory declining 2.6 percent to $425.3 million. The company had $161.2 million of availability under its asset-based senior secured credit facility and had $491 million in long-term debt, net as of October 28, 2016.
Photo courtesy Lands’ End
