Updated June 5 at 4:39 p.m. EDT
All-American brand Lands’ End posted a first-quarter loss but beat expectations on sales and profitability.
The Dodgeville, Wisc.-based specialty retailer’s net loss for the first quarter ending May 3 was $6.4 million, or $0.20 per diluted share, compared to a net loss of $1.7 million or $0.05 per share, in the first quarter of fiscal 2023. However, margin gains and the impact of its Delta Air Lines uniform business which ended last year were cited.
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Adjusted EBITDA, or earnings before interest, depreciation and amortization, was $11.6 million in the first quarter compared to $19.5 million in the same quarter last year. Excluding the $12.6 million from the conclusion of the Delta Air Lines business in the first quarter of 2023, adjusted EBITDA increased by 68.1 percent.
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Net revenue decreased 7.8 percent to $285.5 million, from $309.6 million in the year-ago period. Excluding the conclusion of the Delta Air Lines contract, net revenue increased 1 percent.
The company slightly beat the high end of its sales guidance, which was for between $255 million and $285 million. Gross merchandise value fell in line with guidance, and adjusted EBITDA exceeded the high end of guidance, which was for $9 million to $11 million. Executives also noted that this year Lands’ End marks its 10th anniversary as a public company.
“Our performance in the first quarter continued the considerable momentum we generated in 2023 and resulted in an increase in our gross merchandise value, an increase in gross profit dollars and significant gross margin expansion,” chief executive officer Andrew McLean said in a statement Wednesday.
Despite some progress on certain fronts, investors weren’t very impressed. On Wednesday, after the results were posted and the quarterly conference call with executives ended, Lands’ End stock price closed down 5.8 percent to $13.09 on the Nasdaq exchange.
Gross merchandise value is total order value of all 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. Last quarter, Lands’ End’s GMV increased low-single digits compared to the year-ago quarter. Gross profit was $139 million, an increase of $1.1 million from $137.9 million in the year-ago period. Excluding the $12.7 million from ending the Delta business, gross profit increased $13.8 million, or 11 percent, compared to the prior year.
Gross margin increased 410 basis points to 48.7 percent, from 44.6 percent in the first quarter of 2023. That gain, the company indicated, “was primarily driven by leveraging the strength in product solutions and newness across the channels, lower promotional activity, reduction in clearance inventory and improvements in supply chain costs.”
Among the bestselling products and categories that McLean singled out during his conference call with retail analysts, were sweaters, knit tops, raincoats, wide-leg denim, chinos and technical products such as packable jackets and tummy flattening styles.
Going forward, he said, “Beauty and wellness are big areas to lean into. We see a great opportunity to take it forward, to expand our licensing program.” He also said that shoes, through a licensing agreement, will ramp up in the second quarter.
Other opportunities for growth, as cited by McLean, revolve around the brand’s redesigned website introduced at the end of the first quarter, continued product innovation, continued efforts to reduce promotions and sell more at full price, and social media. McLean said social media has become “a key part of marketing” and that Lands’ End doubled the demand from social media, year-over-year.
The CEO also said he will later disclose another marketplace where Lands’ End products can be listed. Lands’ End already lists on amazon.com, target.com and walmart.com.
Bernie McCracken, Lands’ End’s chief financial officer, said in his statement: “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. 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 improvement in adjusted EBITDA.”
The executives cited other positive statistics, noting that the first quarter represented the fifth consecutive quarter improvement in inventory levels, with a year-over-year 23 percent reduction through better flow and productivity. Also, customer acquisition increased high-single digits globally in the first quarter.
For the second quarter of fiscal 2024, the company raised the low end of its guidance and now expects net revenue between $290 million and $320 million.
The net loss is seen between $8.5 million and $6 million and diluted loss per share to be between 27 cents and 19 cents. Adjusted EBITDA is seen in the range of $14 million to $17 million.
For all of 2024 the company expects net revenue to be between $1.36 billion and $1.45 billion, and net income between $2.5 million and $10 million, with diluted earnings per share between 8 cents and 32 cents.
“We didn’t see the consumer back off,” McLean told analysts. Consumers, at least from his perspective, are “in relatively good shape.”