Lands' End's 2026Q2 Earnings Call: Contradictions in Tariff Management, European Strategy, and Licensing Growth Emerge

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

Date of Call: None provided

Financials Results

• Revenue: $294 million, down 7% YOY; GMV approximately flat YOY
• EPS: $-0.06 adjusted EPS (per diluted share)
• Gross Margin: 49%, up ~90 bps YOY

Guidance:

• Q3 net revenue expected at $320M–$350M
• Q3 GMV: mid to high single-digit growth
• Q3 adjusted net income: $3M–$7M; adjusted EPS: $0.10–$0.22
• Q3 adjusted EBITDA: $24M–$28M
• FY25 net revenue expected at $1.33B–$1.40B
• FY25 GMV: low to mid single-digit growth
• FY25 adjusted net income: $19M–$27M; adjusted EPS: $0.62–$0.88
• FY25 adjusted EBITDA: $98M–$107M
• Capex for FY25: ~ $25M
• Guidance assumes current tariff rates; mitigation actions in place for remainder of FY25

Business Commentary:

* Distributed Commerce Strategy and Revenue Growth: - Lands’ End reported $294 million in total revenue for Q2 2025, down 7% year-over-year, with GMV holding steady. - The decrease was largely due to a slow start in the swim season and supply chain challenges, partly offset by strong performance in third-party marketplaces and licensing. - The company is focusing on expanding its distributed commerce model, which includes marketplaces and licensing, to enhance reach and reduce risk from any single business unit.

• Licensing and Marketplace Growth:
• Revenue from the licensing business grew by 19% year-over-year, with notable performance in club stores and a strong introduction of footwear.
• Marketplaces, particularly Macy’s and Amazon, saw year-over-year growth, contributing to overall top-line results.

• This growth is attributed to strategic expansion in licensing and marketplaces, which are relatively low-cost and align with customer shopping preferences.

• Tariff Management and Cost Efficiency:

• Lands’ End effectively managed initial tariff headwinds, with gross margins improving by 90 basis points year-over-year, stabilizing at 49% in Q2.
• The company mitigated tariff impacts by leveraging a diversified sourcing network and sharing tariff burdens with vendors.

• Efficiency in sourcing and cost management is credited for maintaining profitability amid tariff challenges.

• European Market Recovery:

• Sales in Europe decreased by 15% year-over-year due to supply chain challenges and broader macroeconomic pressures.
• Despite the decline, the company is encouraged by early progress from expanding channels and plans to improve performance in the second half of the year.
• Recovery efforts include expanding distribution through new channels like Amazon, Debenhams, and Next, and enhancing brand presence through targeted collaborations.

Sentiment Analysis:

• Revenue declined 7% and Q2 posted an adjusted net loss, but gross margin expanded ~90 bps YOY and management cited 'a noticeable increase in momentum' with 'the best Labor Day weekend in the last decade.' Guidance implies profitability in Q3 and for the full year, and tariff headwinds are 'mitigated for the remainder of fiscal 2025.'

Q&A:

• Question from Dana Telsey (Telsey Advisory Group): What’s driving the top-line acceleration by category and channel, how are promotions/pricing trending, and how are tariffs impacting pricing and margins? Also, how does the Lands’ End Essentials launch fit in?
  Response: Momentum is coming from a distributed commerce model (notably Amazon Essentials) with channel-specific assortments and less discounting on the brand site; tariffs are largely mitigated via sourcing/vendor leverage with only small price pass-throughs.

• Question from Eric Beder (SCC Research): How should we think about the pace and category expansion of licensing in the back half, given earlier shifts?
  Response: Licensing is ramping—up 36% YTD—with existing licensees scaling, new licensees joining, holiday adding upside, and a ‘house of Lands’ End’ approach to key retailers increasing leverage.

• Question from Eric Beder (SCC Research): Strategy for outerwear this season after last year’s shift to lighter, wear-now products?
  Response: Deepen existing franchises (e.g., Squall) with new innovations and elevated PDPs; early customer reviews are strong and Labor Day sell-through was robust.

• Question from Eric Beder (SCC Research): How is the catalog/event-driven approach resonating with the 35–50 target vs. the legacy core customer?
  Response: New 35–50 cohorts are buying broader baskets; catalogs are now segmented and used offensively for acquisition/reactivation with tailored pricing cues by segment.

• Question from Steve Silver (Argus Research Company): What is the state of the Outfitters pipeline and the number of prospects in advanced stages?
  Response: Pipeline is healthy across school uniforms and enterprise accounts; recent Delta win boosts credibility, with focus on healthcare as an adjacent growth category.

• Question from Steve Silver (Argus Research Company): Timeline and approach to improving Europe and returning it to contribution?
  Response: Replicating the U.S. distributed commerce playbook (marketplaces + social), improving local sites, and using catalogs for the German ‘resolver’ customer; early results on Next/Debenhams/Amazon are ahead of expectations.