Lands' End's Q2 2025 Earnings Call: Contradictions in Inventory, Customer Strategy, Tariffs, Licensing, and European Turnaround

The above is the analysis of the conflicting points in this earnings call

Date of Call: September 09, 2025

Financials Results

• Revenue: $294M, down 7% YOY
• EPS: Adjusted EPS of -$0.06 per diluted share (adjusted net loss); no prior-year comparison provided
• Gross Margin: 49%, up ~90 bps YOY

Guidance:

• Q3 net revenue expected at $320–$350M; GMV growth mid- to high-single digits; adjusted net income $3–$7M; adjusted EPS $0.10–$0.22; adjusted EBITDA $24–$28M.
• FY25 net revenue expected at $1.33–$1.40B; GMV growth low- to mid-single digits; adjusted net income $19–$27M; adjusted EPS $0.62–$0.88; adjusted EBITDA $98–$107M; capex ≈$25M.
• Guidance includes current tariff impacts; mitigation measures in place for remainder of FY25.

Business Commentary:

* Growth in Licensing and Marketplaces: - Lands' End's licensing business revenue grew by 19% year-over-year in the second quarter, reflecting the continued momentum of its licensing program. - This growth was fueled by increased brand visibility from existing licensees, expanding reach and impact. - The third-party marketplace business grew approximately 14% with year-over-year growth across marketplaces, driven by performance in Macy's and Amazon. - The focus on leveraging these channels to enhance brand equity and reach new customers, particularly through the successful launch of the Lands' End Essentials line, contributed significantly to the increase in marketplaces' sales.

• B2B Business Expansion:
• The B2B business experienced significant growth with a focus on building scale and contract duration with enterprise customers, marking the highest growth in contract duration since 2014.
• Lands' End's strategy of deepening relationships in sectors like travel and banking, and successfully extending enterprise contracts, drove this expansion.

• The team's efforts in maintaining quality and customer service, as well as leveraging Lands' End's brand strength and market-leading capabilities, resulted in notable growth in both top and bottom-line performance.

• Swim and Outerwear Performance:

• Despite a slow start to the swim season, sales built momentum throughout the summer, with both swim and outerwear being top 5 items over Labor Day weekend.
• The company's strategy of weatherproofing its assortment to meet customer demands for seasonal items resonated with consumers, contributing to strong sales in these categories.

• The focus on offering high-quality, full-price selling products enabled Lands' End to manage discounting effectively across different channels.

• Navigation of Tariffs and Sourcing Strategy:

• Lands' End successfully mitigated initial tariff headwinds, maintaining gross margin rates above the previous year during the quarter.
• The company's updated sourcing strategy, leveraging a balanced network and strategic repositioning of fabric and manufacturing, allowed it to navigate tariffs effectively.
• By sharing tariff burdens with vendors and narrowing the vendor base, Lands' End minimized the impact of tariffs on its business, with only a small increase passed to customers.

Sentiment Analysis:

• Revenue was $294M, down 7% YOY; adjusted EBITDA $14M, down 18% YOY. Gross margin improved to 49% (+90 bps). Management cited “best” Labor Day sales and margin in a decade and guided Q3 revenue to $320–$350M with mid- to high-single-digit GMV growth. Tariff headwinds are being mitigated via sourcing/vendor sharing with modest price pass-through.

Q&A:

• Question from Dana Telsey (Telsey Advisory Group LLC): What’s driving the acceleration by category, how are promotions and tariffs impacting pricing, and how is the new Lands’ End Essentials line performing and positioned on margin/price?
  Response: Momentum is broad-based; Essentials on Amazon is an entry-price flywheel driving new customers to the brand site; promotions are targeted by channel; tariff costs are shared with vendors and offset via sourcing changes, with only modest price pass-through to customers.

• Question from Eric Beder (Small Cap Consumer Research, LLC): How should we think about the flow of licensing in the back half and potential category expansion via licensing?
  Response: Licensing is accelerating (up ~36% YTD); back-half benefits from existing licensees ramping and holiday; new licensees build into next year; coordinating licensees for joint sell-in to retailers expands opportunities.

• Question from Eric Beder (Small Cap Consumer Research, LLC): Outerwear strategy this year after last year’s shift to lighter wear-now product?
  Response: Deepen existing franchises (e.g., Squall) with new innovation and improved PDPs; early customer reviews are strong; focus on refining rather than adding many new franchises.

• Question from Eric Beder (Small Cap Consumer Research, LLC): How is the 35–50 customer responding to catalogs/events, and are they increasing multi-category purchases?
  Response: 35–50 new-to-file customers buy across categories with larger baskets; catalogs are segmented/personalized (different versions for resolver vs. revolver) and used again for prospecting; less reliance on transactional performance marketing.

• Question from Steven Silver (Argus Research Company): What is the state of the Outfitters pipeline and how many prospects are in advanced stages?
  Response: School uniforms targeted for growth with OEKO-TEX advantage; small B2B journey revamped; enterprise pipeline strong (e.g., Delta win, broader airline interest); exploring healthcare as an adjacent category.

• Question from Steven Silver (Argus Research Company): Timeline and approach for improving Europe to contribute positively?
  Response: Applying distributed commerce in Europe with marketplaces (Next, Debenhams, Amazon) showing strong starts; U.K. has turned the corner; focusing on German resolver via catalog; designer collaborations planned to elevate brand and drive contribution.