Lands’ End, Inc. saw fiscal fourth quarter revenues decline 2.8 percent to $514.9 million for the three-month period ended February 2, compared to $529.6 million in the fourth quarter of fiscal 2022.

Global e-commerce net revenue was $404.9 million, a decrease of 2.3 percent from $414.5 million in the fourth quarter of fiscal 2022. Fourth quarter of fiscal 2022 included Lands’ End Japan net revenue of $7.2 million. Lands’ End Japan closed at the end of fiscal 2022. Excluding Lands’ End Japan in the fourth quarter of fiscal 2022, Global e-commerce net revenue decreased 0.6 percent.

U.S. e-commerce net revenue increased 0.1 percent year-over-year, said to be largely driven by a concerted effort to reduce promotional activity and improved inventory management compared to the prior year resulting in higher margins with lower clearance inventory sales.

Compared to fourth quarter of fiscal 2022, which included the results of Lands’ End Japan, International e-commerce net revenue decreased 20.2 percent.

Compared to fourth quarter of fiscal 2022, Europe e-commerce net revenue decreased 6.2 percent, which was the company said was primarily driven by assortment editing with a focus on key categories, reduced clearance inventory sales and continued macroeconomic challenges.

Outfitters net revenue was $53.7 million for fourth quarter of fiscal 2023, a decrease of 11.3 percent from $60.5 million during the fourth quarter of fiscal 2022. The company said the decrease was primarily driven by the conclusion of the Delta Air Lines contract in the first quarter of fiscal 2023. Excluding the $5.1 million decrease in year-over-year revenue from the Delta Air Lines business, net revenue for the Outfitters business decreased 3.2 percent, said to be mainly due to the timing of school uniform shipments compared to prior year.

Third Party net revenue was $40.5 million, an increase of 3.3 percent from $39.2 million in the fourth quarter of fiscal 2022, primarily attributed to the continued growth of online sales through existing marketplaces.

Gross profit was $195.4 million in the fourth quarter, an increase of 13.5 percent from $172.1 million during the fourth quarter of fiscal 2022.

  • Gross margin increased approximately 550 basis points to 38.0 percent of net revenue, compared to 32.5 percent in fourth quarter of fiscal 2022. The gross margin improvement was said to be predominantly driven by new products across the brand, strength in transitional outerwear and adjacent product categories, reduction in sales of clearance inventory and improvements in supply chain costs in the fourth quarter of fiscal 2023 compared to the prior year.

Selling and administrative expenses increased $22.2 million to $172.5 million, or 33.5 percent of net revenue, compared to $150.3 million, or 28.4 percent of net revenue in fourth quarter of fiscal 2022. The approximately 510 basis points increase was driven by higher incentive related personnel costs, digital marketing spend and external third party services to support strategic growth initiatives.

Net loss was $8.6 million, or a loss of 27 cents per diluted share, in the fourth quarter, compared to a net loss of $3.3 million, or 10 cents per diluted share, in the fourth quarter of fiscal 2022.

  • Adjusted net income was $8.0 million, or 25 cents per diluted share, in the quarter, compared to an Adjusted net loss of $1.4 million, or a loss of 4 cents per diluted share, in the fourth quarter of fiscal 2022.

Adjusted EBITDA was $31.7 million in the fourth quarter of fiscal 2023, compared to $24.2 million in the fourth quarter of fiscal 2022.

Full Year Results
For the fiscal year, net revenue decreased 5.3 percent to $1.47 million compared to $1.56 billion in fiscal 2022.

Global e-commerce net revenue was $1.0 billion, a decrease of 7.1 percent from $1.1 billion in fiscal 2022. Fiscal 2022 included Lands’ End Japan net revenue of $32.7 million. Excluding Lands’ End Japan in fiscal 2022, Global e-commerce net revenue decreased 4.3 percent.

U.S. e-commerce net revenue decreased 2.7 percent and Europe e-commerce decreased by 15.7 percent, both primarily driven by promotional productivity in key product solutions and adjacent product categories with improved inventory management resulting in higher margins with lower clearance inventory sales.

Outfitters net revenue was $269.9 million for fiscal 2023, an increase of 1.5 percent from $265.9 million in fiscal 2022. The results include inventory sales to Delta Air Lines at the conclusion of their five-year contract in the first quarter of fiscal 2023.

Third Party net revenue was $111.8 million, a decrease of 6.0 percent from $119.0 million in fiscal 2022, said to be largely driven by a decline in demand with one wholesale partner partially offset by growth in online sales through other existing marketplaces.

Gross profit was $625.5 million, an increase of $31.7 million, or 5.3 percent, from $593.8 million during fiscal 2022.

  • Gross margin increased approximately 430 basis points to 42.5 percent of total net revenue in fiscal 2023, compared to 38.2 percent of total net revenue in fiscal 2022. The basis-point improvement in gross margin was said to be predominantly driven by leveraging the strength in product solutions and newness across the channels, reduction in clearance inventory and improvements in supply chain costs for Fiscal 2023 compared to the prior year.

Selling and administrative expenses increased $22.8 million to $550.2 million or 37.4 percent of net revenue, compared to $527.4 million or 33.9 percent of net revenue in fiscal 2022. The 350 basis-point increase was driven by deleveraging from lower revenues and higher incentive related personnel costs, partially offset by lower digital marketing spend and continued cost controls.

Net loss was $130.7 million, or $4.09 loss per diluted share, in fiscal 2023, compared to a net loss of $12.5 million, or a 38 cents loss per diluted share in fiscal 2022. Net loss in fiscal 2023 includes a non-cash $106.7 million impairment of goodwill due to the decline in the company’s stock price and market capitalization and additional significant events.

  • Adjusted net loss was $4.8 million, or 15 cents loss per diluted share, in 2023, compared to Adjusted net loss of $7.7 million, or 23 cents loss per diluted share, in fiscal 2022.

Adjusted EBITDA was $84.3 million in fiscal 2023, compared to $70.5 million in fiscal 2022.

Andrew McLean, Chief Executive Officer, stated, “I am proud of the Lands’ End team’s focus and execution throughout fiscal 2023 as we pursued our solutions-based strategy to introduce newness across the product assortment, generated higher quality sales, significantly enhanced our inventory position and improved our profitability. As a result of these efforts, in the fourth quarter we increased gross profit by 13.5 percent, improved gross margin by 550 basis points and reduced inventory 29 percent compared to last year.”

McLean continued, “We ended the fiscal year with a strengthened balance sheet, supported by our recent term loan refinancing, positioning us to continue investing in the strategic growth and evolution of our iconic brand. We have entered fiscal 2024 with strong momentum and I am confident that we will build on our progress and drive meaningful value creation for Lands’ End’s shareholders and other stakeholders over the long term.”

Balance Sheet and Cash Flow
Cash and cash equivalents were $25.3 million as of February 2, 2024, compared to $39.6 million as of January 27, 2023.

Inventories, net, was $301.7 million as of February 2, 2024, and $425.5 million as of January 27, 2023. The 29.1 percent decrease in inventory was said to be driven by the actions the company has taken to improve inventory efficiency by reducing inventory purchases and capitalizing on speed-to-market initiatives.

Net cash provided by operations was $130.6 million for the 53 weeks ended February 2, 2024, compared to Net cash used in operations of $36.4 million for the 52 weeks ended January 27, 2023. The $167.0 million increase in cash provided by operating activities was primarily due to the year-over-year improvement in inventory flow and productivity.

As of February 2, 2024, the company had no borrowings outstanding and $167.2 million of availability under its ABL Facility, compared to $100.0 million of borrowings and $163.8 million of availability as of January 27, 2023. Additionally, as of February 2, 2024, the company had $260.0 million of term loan debt outstanding compared to $244.1 million outstanding as of January 27, 2023.

During the fourth quarter of fiscal 2023, the company repurchased $2.1 million of the company’s common stock under its previously announced share repurchase program that expired on February 2, 2024. On March 15, 2024, the company announced that its Board of Directors has authorized the repurchase of up to $25 million of the company’s common stock through March 31, 2026.

Outlook
Company CFO Bernie McCracken stated, “We expect to continue to prioritize high-quality sales and improved cash flows, which we believe will enable Lands’ End to drive continued gross profit and margin expansion. When comparing today’s outlook to the prior year period, keep in mind that the first quarter of fiscal 2023 included the inventory sales from the conclusion of the Delta Air Lines contract, positively impacting revenue by over $25 million and generating approximately $12 million in Adjusted EBITDA.”

For the first quarter of fiscal 2024 Lands’ End expects:

  • Net revenue between $255.0 million and $285.0 million.
  • Gross Merchandise Value, the amount paid by customers for Lands’ End-branded product in all channels, expected to deliver low- to mid-single-digit percentage growth.
  • Net loss to be between $10.0 million and $8.0 million and diluted loss per share to be between 32 cents and 25 cents per share.
  • Adjusted net loss between $9.5 million and $7.5 million and Adjusted diluted loss per share between 30 cents and 24 cents per share.
  • Adjusted EBITDA in the range of $9.0 million to $11.0 million.

For fiscal 2024, Lands’ End expects:

  • Net revenue between $1.33 billion and $1.45 billion.
  • Gross Merchandise Value, the amount paid by customers for Lands’ End-branded product in all channels, expected to deliver low- to mid-single-digit percentage growth.
  • Net income between $1.0 million and $10.0 million and diluted earnings per share between 3 cents and 32 cents.
  • Adjusted net income between $3.0 million and $12.0 million and Adjusted diluted earnings per share between 10 cents and 38 cents.
  • Adjusted EBITDA in the range of $84 million to $96 million.
  • Capital expenditures of approximately $30.0 million.

Image courtesy Lands’ End