Lands' End's Q3 2026: Contradictions Emerge on Inventory Management, Gross Margins, and International Expansion Strategies

Date of Call: December 9, 2025

Financials Results

• Revenue: $318M, essentially flat year-over-year
• EPS: $0.21 per share (adjusted), adjusted net income $7M
• Gross Margin: Nearly 52%, approximately 120 basis points improvement vs Q3 2024

Guidance:

• Q4: Net revenue $460M–$490M; GMV mid- to high-single-digit growth; adjusted net income $22M–$26M; adjusted diluted EPS $0.71–$0.84; adjusted EBITDA $49M–$54M.
• Full year: Net revenue $1.33B–$1.36B; GMV low-single-digit growth; adjusted net income $21M–$25M; adjusted diluted EPS $0.68–$0.81; adjusted EBITDA $99M–$104M; capex ≈ $28M.
• Guidance incorporates current tariff rates and mitigation measures in place for remainder of 2025.

Business Commentary:

* Revenue and GMV Trends: - Lands' End reported $318 million in total revenue for Q3, which was essentially flat year-over-year, while GMV increased at a low single-digit pace. - The growth in GMV was driven by low single-digit gains in the North American business, while the company's European business saw a 20% year-over-year decrease.

• Gross Margin Expansion:
• The company achieved a record gross margin rate of nearly 52%, with an approximate 120 basis point improvement from the previous year.

• This improvement was supported by disciplined execution by the supply chain team, managing tariff headwinds effectively, and key category strength.

• Increased Customer Engagement and New Customers:

• Lands' End added more than 150,000 new customers in November, reaching over 0.5 million Instagram followers.

• This increase is attributed to strategic brand-building efforts, such as customization and personalization, and reaching a younger, more diverse customer base.

• Strong Performance in B2B and Third-Party Marketplaces:

• Sales from Lands' End Outfitters increased by approximately 7%, with the school uniform channel growing over 20%.
• Third-party marketplace sales rose by 34% year-over-year, driven by strong performance in Amazon and Macy's, up roughly 40% each.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted a "return to EPS profitability and 28% growth in our adjusted EBITDA, coupled with record gross margin" and described "compelling results" with record gross margins, new large B2B wins (Delta) and strong marketplace growth—supporting a positive outlook.

Q&A:

• Question from Dana Telsey (Telsey Advisory Group LLC): And nice to hear the update on the business. As you think about on the revenue side of business, the puts and takes of any of the different areas relative to your expectations, what did you see in promotional levels? And here going through Black Friday, any particular surprises? And then just the continued strength of the gross margin is impressive. How do you think of the puts and takes on gross margin? And any framework for what could be different in '26?
  Response: Promotions remained disciplined (no unexpected escalation through Black Friday), supporting ~120 bps YoY gross-margin expansion; management expects the improved gross-margin structure to persist while continuing tariff mitigation and careful promotional timing into 2026.

• Question from Eric Beder (Small Cap Consumer Research, LLC): Let me add my congratulations. We had a lot of -- so a lot of effort put into the licensing business. Could you give us kind of an update of where we are in terms of what we're going to see in 2026 in terms of licensing? What has been anniversaried? And kind of where does it become more accretive in apples-to-apples in terms of running through here?
  Response: Licensing is scaling: shoes and kids are annualized, several smaller licenses will begin contributing in Q4 and more in 2026, and management expects licensing to be increasingly accretive to revenue and margins next year.

• Question from Eric Beder (Small Cap Consumer Research, LLC): On the international front, you've had these great collaborations, Harris Tweed and Lulu Guinness. And when you look at it, a, what does that imply for the U.S.? And also, we've talked this conversation about how 15% as a percentage of the international business that comes to the U.S. in terms of product, how should we be thinking about that opportunity going forward. And as kind of the profile of the international completes, you have potential to do things like that maybe here.
  Response: European collaborations are intended to create a halo and brand cache in Europe that can be brought to the U.S.; management sees these partnerships as brand-building tools that support global expansion and higher brand valuation.

• Question from Eric Beder (Small Cap Consumer Research, LLC): Last question on inventories. So inventories went up for the first time in a while. How should we be thinking about inventories going forward?
  Response: Inventory was only up ~3% despite tariffs due to tighter inventory management; management expects inventory growth to trend at low-single-digit levels going forward.

• Question from Steven Silver (Argus Research Company): Curious as to your thoughts in terms of how long it takes for that surface to go beyond for deeper penetration to where it really starts driving an inflection point in GMV expansion? (re: Amazon/marketplace)
  Response: Amazon and other marketplace channels require channel-specific investment and time to scale; Lands' End says it has completed heavy lifting and sees substantial upside (e.g., #1 badges) but timing to a material GMV inflection is uncertain.

• Question from Steven Silver (Argus Research Company): With the customer base skewing to the low side, combined with Lands' End, its history of innovation, curious as to whether there's anything category wise we should be looking for in terms of new patents heading into the 2026 season?
  Response: Company continues product innovation—particularly in outerwear (FeatherFree, water-resistant fleece)—and may pursue patents; focus remains on solution-driven franchises to drive differentiation.

Contradiction Point 1

Inventory Management and Growth Strategy

It involves differing perspectives on inventory management and growth strategy, which are critical for operational and financial planning.

What's your outlook for inventories? - Eric Beder (Small Cap Consumer Research, LLC)

2026Q3: Inventory increased only 3% due to efficient inventory management. A low single-digit increase is expected going forward. - Bernard McCracken(CFO)

What should the normalized inventory level be? - Dana Telsey (Telsey Advisory Group)

2024Q3: We are trying to get our inventory turns to the three and four range over the next several years and rather than focusing on the absolute level of inventory turns, it's really focusing on the freshness and consistency of our supply chain. - Andrew McLean(CEO)

Contradiction Point 2

Gross Margin Improvement and Discounting Strategy

It involves differing expectations for gross margin improvement and discounting strategy, which directly impacts financial projections and market positioning.

Can you discuss the impact of promotional levels on revenue and gross margin? - Dana Telsey (Telsey Advisory Group LLC)

2026Q3: The season started earlier than usual, driven by new consumers. The company saw success with autumn promotions, enhancing gross margins. - Andrew McLean(CEO)

What should the normalized inventory level be? What is the potential for gross margin improvement going forward? - Dana Telsey (Telsey Advisory Group)

2024Q3: The improved gross margin in the quarter was primarily driven by lower discount rates, particularly in the women's category. - Andrew McLean(CEO)

Contradiction Point 3

International Expansion and Collaboration Strategy

It involves the company's strategic direction for international expansion and collaborations, which are critical for long-term growth.

How do international collaborations affect the U.S. market and its opportunities? - Eric Beder (Small Cap Consumer Research, LLC)

2026Q3: Collaborations like Harris Tweed and Lulu Guinness are intended to build brand identity in Europe and could be extended to the U.S. Lands' End engages with influencers globally, aiming to create a premium brand image for long-term growth. - Andrew McLean(CEO)

Could you provide context on expectations for completing the European business turnaround and its future contribution to the overall business? - Steven Silver (Argus Research Company)

2025Q2: We're focusing on the distributed commerce model to meet customers where they are. Opening marketplaces like Amazon, Debenhams, and Next is expanding reach. In Europe, we're emphasizing the German resolver customer and expect to use the catalog to enhance engagement. Strong collabs are planned to attract customers and align with our U.S. success. We're committed to making Europe a significant contributor. - Andrew McLean(CEO)

Contradiction Point 4

International Expansion and Licensing Strategy

It involves differing perspectives on the strategic approach and timeline for international expansion and licensing, which could impact long-term growth expectations.

How do international collaborations impact the U.S. market and influence U.S. opportunities? - Eric Beder(Small Cap Consumer Research, LLC)

2026Q3: International expansion involves long-term brand building. Lands' End is leveraging collaborations and licenses to create global brand cachet. - Andrew McLean(CEO)

Are this year's licensing deals replacing existing categories, or are we entering a phase where new licensing categories will add to total revenue instead of replacing existing ones? - Eric Martin Beder(Small Cap Consumer Research, LLC)

2025Q1: We are looking at new licenses, we are looking at new geographies, and we are looking at new capabilities. We are just trying to be smarter about how we're doing it. - Bernard Louis McCracken(CFO)

Contradiction Point 5

Inventory Management and Tariff Impact

It involves differing views on inventory management and the impact of tariffs, which are both critical factors affecting operational efficiency and financial performance.

How should we think about future inventory trends? - Eric Beder(Small Cap Consumer Research, LLC)

2026Q3: Despite tariff headwinds, inventory increased only 3% due to efficient inventory management. A low single-digit increase is expected going forward. - Bernard McCracken(CFO)

Can you provide insight into the year's outlook and the timeline for your plans? Additionally, how are you addressing tariff impacts overall, particularly in terms of pricing and inventory management? - Dana Lauren Telsey(Telsey Group)

2025Q1: Based on the near-term uncertainty with tariff rates, the company has provided annual guidance based on the current tariff rates, which are 10% baseline and 30% for China, translating to an effective rate of about 12% for us in the back half. We have built mitigation efforts against these raised tariffs and feel strongly that we have the right mitigations to offset those for the year. - Bernard Louis McCracken(CFO)