In another sign consumers are curtailing their discretionary spending, Lands’ End on Thursday posted top- and bottom-line declines during the second quarter and reduced its forecast for the year.
The classic, all-American brand reported that it widened its net loss to $8 million, or 25 cents per diluted share in the quarter ended July 28, from a net loss of $2.2 million, or 7 cents per diluted share, in the year-ago period.
Adjusted earnings before interest, taxes, depreciation and amortization were $15.8 million in both the second quarter of fiscal 2023 and the second quarter of fiscal 2022.
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Net revenue decreased 7.9 percent to $323.3 million last quarter compared to $351.2 million in the second quarter of fiscal 2022.
Other retailers have also been experiencing consumers holding back on discretionary spending, among them Macy’s, which earlier this month reported a second-quarter 8 percent sales drop, and Target, which reported a second-quarter revenue decline of 4.9 percent. Both companies are cautious on the outlook for consumer spending for this year. However, Walmart saw a 5.7 percent jump in revenue largely due to its successful grocery business.
Nevertheless, Andrew McLean, Lands’ End’s chief executive officer, highlighted some progress and certain positive operating metrics. “Our strong second quarter was characterized by a return to operating disciplines with a solutions focus on the customer,” he said in a statement. “That resulted in a significant 220 basis point year-over-year improvement in gross margin, a 30 percent year-over-year reduction in our inventory position and adjusted EBITDA in line with the prior year and guidance.
“Significantly, our cash provided by operations turned positive with a favorable $172 million improvement over the prior year,” McLean added. “Newness, customer acceptance and results all benefit from our more disciplined inventory management approach, which is continuing into the second half of 2023. Going forward, our brand is focused on exceeding customer expectations, prioritizing profitable demand and creating long-term shareholder value.”
For the entire year, the company now expects net revenue between $1.5 billion and $1.55 billion, and a net loss of $4.5 million and a net profit of $1 million. On a diluted share basis, there could be somewhere between a net loss of 14 cents to a profit of 3 cents.
Earlier this year, the company forecast net revenue for 2023 to come in at between $1.56 billion and $1.62 billion, and the bottom line to be between a net loss of $4.5 million and a profit of $2.5 million, or a diluted loss in earnings per share of $0.13 to a profit per share of $0.08.
In other results for the second quarter, cash and cash equivalents were $26.6 million, up from $23.5 million in the year-ago quarter.
Inventories were down 30.4 percent to $396.1 million last quarter compared to $569.2 million in the year-ago period. “The decrease in inventory was driven by the actions the company has taken to leverage normalized supply chain lead times to receive spring and summer inventory closer to the selling season,” the company indicated.
Global e-commerce net revenue was $218.7 million, a decrease of 8.7 percent from $239.7 million in the second quarter of fiscal 2022. Second quarter of fiscal 2022 included Lands’ End Japan net revenue of $7.6 million. Lands’ End Japan closed at the end of fiscal 2022. Excluding Lands’ End Japan in the second quarter of fiscal 2022, global e-commerce net revenue decreased 5.8 percent.
For the third quarter of fiscal 2023, the company expects net revenue between $340 million and $355 million; a net loss of between $6.5 million and $4 million, and diluted loss per share to be between $0.20 and $0.13. Adjusted EBITDA is seen in the range of $13 million to $16 million.
