Lands' End Q1 Results: Net Loss Narrower Than Expected, Revenue Down 8.5%

Lands' End reported a Q1 net loss of $8.3 million, beating expectations. The company's net revenue decreased by 8.5% to $261.2 million. Despite the decline, investors pushed the stock price up 13% to $8.94. Lands' End is exploring strategic alternatives, including a sale, merger, or similar transaction to maximize shareholder value. The company expects net revenue to be between $1.33 billion and $1.45 billion for fiscal 2025.

Lands' End, Inc. (LE) reported its first-quarter (Q1) financial results for fiscal 2025, with a net loss of $8.3 million, which beat market expectations. The company's net revenue decreased by 8.5% to $261.2 million, compared to the same period last year. Despite the revenue decline, investors pushed the stock price up by 13% to $8.94. Lands' End is exploring strategic alternatives, including a sale, merger, or similar transaction, to maximize shareholder value. The company expects net revenue to be between $1.33 billion and $1.45 billion for fiscal 2025.

The company's Gross Merchandise Value (GMV) decreased slightly, primarily due to the transition of kids and footwear inventory to licensees. However, the gross margin improved to 50.8%, reflecting a 210 basis point increase from the prior year. Lands' End continues to focus on its customer-centric strategy, emphasizing creative engagement and expanding brand licensing. The company also reduced inventory for the eighth consecutive quarter.

Lands' End's CEO, Andrew J. McLean, highlighted the company's ongoing execution of a customer-centric strategy, with a focus on "creative engagement, viral moments centered around the reimagining of our iconic totes, expansion of our brand through licensing, and, of course, fresh solutions-based product." He reported improvements in supply chain resiliency and noted the continued performance at the top and bottom of the profit and loss (P&L) statement. McLean attributed the record gross margin rate, just shy of 51%, to disciplined promotional activity and supply chain changes. The CEO emphasized the company's agility in mitigating tariff impacts by accelerating production in the Western Hemisphere.

Licensing revenues increased by over 60% year-over-year, and new agreements were negotiated for travel accessories, men's underwear, base layers, and women's intimates. New licenses for hosiery and cold weather accessories were executed in Q2. McLean characterized licensing as "a significant vehicle for growth of the Lands' End brand." The B2B Outfitters business met revenue and profit objectives, with a partnership launched with Delta Air Lines and $13 million in new school uniform business driven by competitor exits.

The company reported "significant growth across our Amazon, Macy's and Nordstrom's marketplaces," crediting proprietary AI tools for marketplace optimization. CFO Bernard Louis McCracken stated, "For the first quarter, total revenue performance came in at $261 million, a decrease of 9% compared to last year. When excluding the impact of transitioning the kids and footwear inventory to licensees in the first quarter 2024, total revenue decreased by 4% year-over-year."

The company's annual guidance remains unchanged, with net revenue expected to be between $1.33 billion to $1.45 billion, and GMV forecasted for mid- to high single-digit growth. Adjusted net income guidance is $15 million to $27 million and adjusted diluted earnings per share is projected at $0.48 to $0.86. Adjusted EBITDA guidance is $95 million to $107 million. McCracken stated, "For the full year, our guidance includes the impact of tariffs at 30% for China and approximately 10% for the rest of the world. We are implementing mitigation measures to effectively manage the tariff headwinds at these levels." No quarterly guidance was provided due to near-term tariff uncertainty.

References:
[1] https://seekingalpha.com/news/4455924-lands-end-outlines-1_33b-1_45b-revenue-target-while-expanding-licensing-and-market-reach
[2] https://www.nasdaq.com/articles/lands-end-inc-reports-first-quarter-financial-results-highlighting-continued-gmv-growth