Lands’ End, Inc. said that its performance in the first quarter continued the “considerable momentum” generated in 2023 and resulted in an increase in Gross Merchandise Value, an increase in gross profit dollars and significant gross margin expansion.

“Our value creation strategy, centered around Lands’ End being the innovative, asset-light solutions-based brand that’s ready for life’s every journey, is yielding the operational and financial results we’re targeting and positioning us well to further build the brand and grow our loyal customer base,” said company CEO Andrew McLean in a media release.

First Quarter Revenue Highlights

  • Gross Merchandise Value (GMV) is the total order value of all merchandise sold to customers through business-to-consumer and business-to-business channels, including the retail value of the merchandise sold through third-party distribution channels. In the first quarter of 2024, GMV increased by low single digits compared to the first quarter of 2023.
  • Net revenue decreased 7.8 percent for the first quarter to $285.5 million compared to $309.6 million in the first quarter of fiscal 2023. Excluding the $26.9 million in revenue from the conclusion of the Delta Air Lines business in the first quarter of fiscal 2023, Net revenue increased 1.0 percent.
  • Global eCommerce Net revenue was $195.5 million, a decrease of 3.7 percent from $203.1 million in the first quarter of fiscal 2023.
    • Compared to the first quarter of fiscal 2023, U.S. eCommerce Net revenue decreased by 4.0 percent, primarily driven by reduced promotional activity and improved inventory management compared to the prior year, resulting in increased gross profit from higher gross margins.
    • Compared to first quarter of fiscal 2023, International eCommerce Net revenue decreased 1.7 percent, primarily driven by the reduced promotional activity and improved inventory management compared to the prior year resulting in increased gross profit from higher gross margins.
  • Outfitters Net revenue was $42.7 million for the first quarter of fiscal 2024, a decrease of $31.3 million or 42.3 percent from $74.0 million during the first quarter of fiscal 2023. The decrease was primarily driven by concluding the Delta Air Lines contract in the first quarter of fiscal 2023. Excluding the $26.9 million decrease in year-over-year revenue from the Delta Air Lines business, Net revenue for the Outfitters business decreased 9.3 percent.
  • Third-Party Net revenue was $37.5 million, an increase of $14.5 million or 62.9 percent from $23.0 million in the first quarter of fiscal 2023. The increase was primarily due to revenue generated from licensing arrangements, including $10.5 million of Lands’ End-produced inventory sold to a licensee in connection with the transition of the Kid’s business. Online marketplaces saw increased gross profit from improved gross margin primarily driven by the expansion of the company’s strategy to focus on high-quality sales.

Income Statement

  • Gross profit was $139.0 million, an increase of $1.1 million or 0.8 percent from $137.9 million during the first quarter of fiscal 2023. Excluding the $12.7 million from the conclusion of the Delta Air Lines business in the first quarter of fiscal 2023, Gross profit increased $13.8 million or 11.0 percent compared to the prior year. Gross margin increased approximately 410 basis points to 48.7 percent, compared to 44.6 percent in the first quarter of fiscal 2023. The gross margin improvement was primarily driven by leveraging the strength of product solutions and newness across the channels, lower promotional activity, reduction in clearance inventory, and improvements in supply chain costs.
  • Selling and administrative expenses increased $8.9 million to $127.4 million or 44.6 percent of Net revenue, compared to $118.5 million or 38.3 percent of Net revenue in the first quarter of fiscal 2023. The approximately 630 basis points increase was driven by deleveraging from lower revenues and higher digital marketing spend focused on new customer acquisition.
  • Net loss was $6.4 million, or $0.20 loss per diluted share, compared to a Net loss of $1.7 million, or $0.05 loss per diluted share, in the first quarter of fiscal 2023.
  • The Adjusted Net Loss was $6.2 million, or 20 cents loss per diluted share, compared to an Adjusted Net Loss of $1.6 million, or 5 cents loss per diluted share, in the first quarter of fiscal 2023.
  • Adjusted EBITDA was $11.6 million in the first quarter of fiscal 2024 compared to $19.5 million in the first quarter of fiscal 2023. Excluding the $12.6 million from the conclusion of the Delta Air Lines business in the first quarter of fiscal 2023, Adjusted EBITDA increased by 68.1%.

First Quarter Business Highlights

  • Delivered a 410 basis point improvement in gross margin, driven by new products across the brand, strength in product solutions and newness across the channels, lower promotional activity, and improved inventory management;
  • Achieved the fifth consecutive quarter improvement in inventory with a year-over-year 23 percent reduction through improved flow and productivity; and
  • New customer acquisition increased high-single-digits globally in the first quarter of fiscal 2024.

Balance Sheet and Cash Flow Highlights
Cash and cash equivalents were $27.4 million as of May 3, 2024, compared to $7.3 million as of April 28, 2023.

Net inventories were $288.6 million as of May 3, 2024, and $376.1 million as of April 28, 2023. The 23 percent decrease was driven by the company’s actions to improve inventory efficiency by reducing inventory purchases and capitalizing on speed-to-market initiatives.

Net cash used in operating activities was $25.8 million for the first quarter of fiscal 2024, compared to $10.8 million for the first quarter of fiscal 2023. The $15.0 million increase in cash used in operating activities was primarily due to increased net loss and changes in working capital.

As of May 3, 2024, the company had $40.0 million of borrowings outstanding and $133.8 million of availability under its ABL Facility, compared to $100.0 million of borrowings and $136.1 million of availability as of April 28, 2023. Additionally, as of May 3, 2024, the company had $256.8 million of term loan debt outstanding compared to $240.6 million outstanding as of April 28, 2023.

During the first quarter of fiscal 2024, the company repurchased $1.0 million of its common stock under its share repurchase program announced on March 15, 2024. As of May 3, 2024, additional purchases of up to $24.0 million could be made under the program through March 31, 2026.

Outlook
Bernie McCracken, chief financial officer, stated, “The company’s continued focus on expanding profitability, including by better managing inventories which were down 23 percent year-over-year, is continuing to generate favorable results which outperformed our guidance and setting a strong foundation for future growth. When excluding the impact of the conclusion of the Delta Air Lines contract in Q1 2023, the company generated increases at the top and bottom line in the first quarter, with a 60-plus percent improvement in Adjusted EBITDA.”

For the second quarter of fiscal 2024 the Land’s End expects:

  • Net revenue to be between $290.0 million and $320.0 million;
  • Gross Merchandise Value to deliver mid- to high-single-digits percentage growth;
  • Net loss between $8.5 million and $6.0 million and diluted loss per share between $0.27 and $0.19;
  • Adjusted net loss to be between $4.5 million and $2.0 million and Adjusted diluted loss per share to be between $0.14 and $0.06; and
  • Adjusted EBITDA in the range of $14.0 million to $17.0 million.

For Fiscal 2024 Land’s End now expects:

  • Net revenue to be between $1.36 billion and $1.45 billion;
  • Gross Merchandise Value to deliver low- to mid-single digits percentage growth;
  • Net income between $2.5 million and $10.0 million and diluted earnings per share between $0.08 and $0.32;
  • Adjusted net income between $5.5 million and $13.0 million and Adjusted diluted earnings per share between $0.18 and 41 cents;
  • Adjusted EBITDA in the range of $88.0 million to $97.0 million; and
  • Capital expenditures of approximately $30.0 million.

Image courtesy Lands’ End