Attached files
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| 8-K - 8-K - LANDS' END, INC. | a20170728earningsrelease.htm |
Exhibit 99.1
LANDS' END ANNOUNCES SECOND QUARTER FISCAL 2017 RESULTS
DODGEVILLE, Wis., August 31, 2017 (GLOBE NEWSWIRE) - Lands' End, Inc. (NASDAQ:LE) today announced financial results for the second quarter ended July 28, 2017.
Second Quarter Fiscal 2017 Highlights:
• | Net revenue for the second quarter was $302.2 million as compared to $292.0 million in the second quarter last year. Direct segment net revenue increased 5.5% to $259.9 million, as compared to the same period last year. Retail segment net revenue decreased 7.4% to $42.2 million, as compared to the same period last year, primarily due to fewer Lands' End Shops at Sears. Same store sales for the quarter increased 3.8%. |
• | Gross margin was 44.4% as compared to 46.6% in the second quarter last year. |
• | Net loss was $3.9 million, or $0.12 per diluted share, as compared to Net loss of $2.0 million, or $0.06 per diluted share, in the second quarter of fiscal 2016. |
• | Adjusted EBITDA(1) was $6.8 million compared to $7.3 million in the second quarter of fiscal 2016. |
Jerome S. Griffith, Chief Executive Officer, stated, "We are pleased with the continued progress that we made during the second quarter, as we once again drove positive results across a number of key metrics. Performance in our U.S. consumer business improved, with double digit increases in our U.S. eCommerce sales, growth in our customer files, and positive same store sales in our retail segment."
Mr. Griffith continued, "As we look ahead, we are focused on further enhancing our assortment, ensuring that we are delivering the comfort, fit, fashion, and function that our customers are looking for, all at a great value. In addition, we are working to better leverage and analyze our customer data to ensure that we are best engaging with our consumers through both our merchandise and marketing initiatives, as well as through a reimagined and enhanced omni-channel shopping experience. Finally, we are focused on enhancing our inventory management in order to better position us to deliver a constant flow of newness and more relevant product. Overall, we are pleased with the progress that we continue to make in the business, and believe that we remain well-positioned to drive growth over the long-term."
Balance Sheet and Cash Flow Highlights
Cash and cash equivalents were $177.0 million on July 28, 2017, compared to $210.7 million on July 29, 2016. Net cash used in operations was $13.2 million for the 26 weeks ended July 28, 2017, compared to net cash provided by operations of $2.1 million for the same period last year.
Inventory was $370.5 million as of July 28, 2017, and $354.7 million as of July 29, 2016.
The Company had $164.6 million of availability under its asset-based senior secured credit facility and had $488.1 million of Long-term debt, net as of July 28, 2017.
Conference Call
The company will host a conference call on Thursday, August 31, 2017, at 8:30 a.m. ET to review its second quarter financial results and related matters. The call may be accessed through the Investor Relations section of the Company's website at http://investors.landsend.com.
About Lands' End, Inc.
Lands' End, Inc. (NASDAQ:LE) is a leading multi-channel retailer of casual clothing, accessories, footwear and home products. We offer products through catalogs, online at www.landsend.com and affiliated specialty and international websites, and through retail locations, primarily at Lands' End Shops at Sears® and standalone Lands' End Inlet® Stores. We are a classic American lifestyle brand with a passion for quality, legendary service and real value, and seek to deliver timeless style for women, men, kids and the home.
Forward-Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties, including statements about our initiatives, including enhancing our product assortment, addressing customer preferences for comfort, fit, fashion, function and value, use of customer data to engage in better marketing and an improved shopping experience, and enhancing inventory management to deliver newness and relevant product, and expectations of future growth over the long-term. All statements other than statements of historical fact, including without limitation, those with respect to the Company's goals, plans, expectations and strategies set forth herein are forward-looking statements. The following important factors and uncertainties, among others, could cause actual results to differ materially from those described in these forward-looking statements: our ability to offer merchandise and services that customers want to purchase; changes in customer preference from our branded merchandise; customers' use of our digital platform, including customer acceptance of our efforts to enhance our e-commerce websites; customer response to our marketing efforts across all types of media; our maintenance of a robust customer list; our dependence on information technology and a failure of information technology systems, including with respect to our e-commerce operations, or an inability to upgrade or adapt our systems; the success of our ERP implementation; fluctuations and increases in costs of raw materials; impairment of our relationships with our vendors; our failure to maintain the security of customer, employee or company information; our failure to compete effectively in the apparel industry; the performance of our “store within a store” business; if Sears Holdings Corporation sells or disposes of its retail stores, including pursuant to the recapture rights granted to Seritage Growth Properties, and other parties or if its retail business does not attract customers or does not adequately provide services to the Lands’ End Shops at Sears; legal, regulatory, economic and political risks associated with international trade and those markets in which we conduct business and source our merchandise; our failure to protect or preserve the image of our brands and our intellectual property rights; increases in postage, paper and printing costs; failure by third parties who provide us with services in connection with certain aspects of our business to perform their obligations; our failure to timely and effectively obtain shipments of products from our vendors and deliver merchandise to our customers; reliance on promotions and markdowns to encourage customer purchases; our failure to efficiently manage inventory levels; unseasonal or severe weather conditions; the seasonal nature of our business; the adverse effect on our reputation if our independent vendors do not use ethical business practices or comply with applicable laws and regulations; assessments for additional state taxes; incurrence of charges due to impairment of goodwill, other intangible assets and long-lived assets; the impact on our business of adverse worldwide economic and market conditions, including economic factors that negatively impact consumer spending on discretionary items; the impact of increased costs due to a decrease in our purchasing power following our separation from Sears Holdings (“Separation”) and other losses of benefits associated with being a subsidiary of Sears Holdings; the failure of Sears Holdings or its subsidiaries to perform under various transaction agreements or our failure to have necessary systems and services in place when certain of the transaction agreements expire; our agreements related to the Separation and certain agreements related to our continuing relationship with Sears Holdings were negotiated while we were a subsidiary of Sears Holdings and we may have received better terms from an unaffiliated third party; potential indemnification liabilities to Sears Holdings pursuant to the separation and distribution agreement; the ability of our principal shareholders to exert substantial influence over us; adverse effects of the Separation on our business; potential liabilities under fraudulent conveyance and transfer laws and legal capital requirements; and other risks, uncertainties and factors discussed in the "Risk Factors" section of our Annual Report on Form 10-K for the fiscal year ended January 27, 2017. We intend the forward-looking statements to speak only as of the time made and do not undertake to update or revise them as more information becomes available, except as required by law.
CONTACTS:
Lands' End, Inc.
James Gooch
Chief Operating Officer and Chief Financial Officer
(608) 935-9341
Investor Relations:
ICR, Inc.
Jean Fontana
(646) 277-1214
Jean.Fontana@icrinc.com
-Financial Tables Follow-
LANDS’ END, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except share data) | July 28, 2017 | July 29, 2016 | January 27, 2017* | |||||||||
ASSETS | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 176,955 | $ | 210,736 | $ | 213,108 | ||||||
Restricted cash | 3,300 | 3,300 | 3,300 | |||||||||
Accounts receivable, net | 24,632 | 29,287 | 39,284 | |||||||||
Inventories, net | 370,470 | 354,739 | 325,314 | |||||||||
Prepaid expenses and other current assets | 36,216 | 31,781 | 26,394 | |||||||||
Total current assets | 611,573 | 629,843 | 607,400 | |||||||||
Property and equipment, net | 126,825 | 112,682 | 122,836 | |||||||||
Goodwill | 110,000 | 110,000 | 110,000 | |||||||||
Intangible asset, net | 257,000 | 430,000 | 257,000 | |||||||||
Other assets | 17,007 | 15,913 | 17,155 | |||||||||
TOTAL ASSETS | $ | 1,122,405 | $ | 1,298,438 | $ | 1,114,391 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Current liabilities | ||||||||||||
Accounts payable | $ | 181,685 | $ | 174,940 | $ | 162,408 | ||||||
Other current liabilities | 85,415 | 82,212 | 86,446 | |||||||||
Total current liabilities | 267,100 | 257,152 | 248,854 | |||||||||
Long-term debt, net | 488,146 | 491,941 | 490,043 | |||||||||
Long-term deferred tax liabilities | 91,015 | 155,451 | 90,467 | |||||||||
Other liabilities | 14,144 | 16,539 | 13,615 | |||||||||
TOTAL LIABILITIES | 860,405 | 921,083 | 842,979 | |||||||||
Commitments and contingencies | ||||||||||||
STOCKHOLDERS’ EQUITY | ||||||||||||
Common stock, par value $0.01- authorized: 480,000,000 shares; issued and outstanding: 32,087,532, 32,029,359 and 32,029,359, respectively | 320 | 320 | 320 | |||||||||
Additional paid-in capital | 345,139 | 345,598 | 343,971 | |||||||||
Retained (deficit) earnings | (72,172 | ) | 41,590 | (60,453 | ) | |||||||
Accumulated other comprehensive loss | (11,287 | ) | (10,153 | ) | (12,426 | ) | ||||||
Total stockholders’ equity | 262,000 | 377,355 | 271,412 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,122,405 | $ | 1,298,438 | $ | 1,114,391 | ||||||
*Derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended January 27, 2017.
LANDS’ END, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
13 Weeks Ended | 26 weeks ended | |||||||||||||||
(in thousands, except per share data) | July 28, 2017 | July 29, 2016 | July 28, 2017 | July 29, 2016 | ||||||||||||
Net revenue | $ | 302,190 | $ | 292,010 | $ | 570,555 | $ | 565,443 | ||||||||
Cost of sales (excluding depreciation and amortization) | 168,025 | 155,858 | 313,748 | 299,621 | ||||||||||||
Gross profit | 134,165 | 136,152 | 256,807 | 265,822 | ||||||||||||
Selling and administrative | 127,336 | 128,892 | 248,682 | 257,926 | ||||||||||||
Depreciation and amortization | 6,175 | 4,488 | 12,683 | 8,624 | ||||||||||||
Other operating expense, net | 480 | 60 | 1,988 | 46 | ||||||||||||
Operating income (loss) | 174 | 2,712 | (6,546 | ) | (774 | ) | ||||||||||
Interest expense | 6,167 | 6,174 | 12,292 | 12,344 | ||||||||||||
Other income, net | (494 | ) | (528 | ) | (1,236 | ) | (981 | ) | ||||||||
Loss before income taxes | (5,499 | ) | (2,934 | ) | (17,602 | ) | (12,137 | ) | ||||||||
Income tax benefit | (1,619 | ) | (954 | ) | (5,883 | ) | (4,398 | ) | ||||||||
NET LOSS | $ | (3,880 | ) | $ | (1,980 | ) | $ | (11,719 | ) | $ | (7,739 | ) | ||||
NET LOSS PER COMMON SHARE | ||||||||||||||||
Basic: | $ | (0.12 | ) | $ | (0.06 | ) | $ | (0.37 | ) | $ | (0.24 | ) | ||||
Diluted: | $ | (0.12 | ) | $ | (0.06 | ) | $ | (0.37 | ) | $ | (0.24 | ) | ||||
Basic weighted average common shares outstanding | 32,079 | 32,024 | 32,054 | 32,013 | ||||||||||||
Diluted weighted average common shares outstanding | 32,079 | 32,024 | 32,054 | 32,013 | ||||||||||||
Use and Definition of Non-GAAP Financial Measures
(1)Adjusted EBITDA - In addition to our Net income, for purposes of evaluating operating performance, we use an Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”), which is adjusted to exclude certain significant items as set forth below.
Our management uses Adjusted EBITDA to evaluate the operating performance of our business, as well as for executive compensation metrics, for comparable periods. Adjusted EBITDA should not be used by investors or other third parties as the sole basis for formulating investment decisions as it excludes a number of important cash and non-cash recurring items.
While Adjusted EBITDA is a non-GAAP measurement, management believes that it is an important indicator of operating performance, and is useful to investors, because:
• | EBITDA excludes the effects of financings, investing activities and tax structure by eliminating the effects of interest, depreciation and income tax costs or benefits. |
• | Other significant items, while periodically affecting our results, may vary significantly from period to period and have a disproportionate effect in a given period, which affects comparability of results. We have adjusted our results for these items to make our statements more comparable and therefore more useful to investors as the items are not representative of our ongoing operations. |
◦ | Transfer of corporate functions - severance associated with a transition of certain corporate activities from our New York office to our Dodgeville headquarters. |
◦ | Gain or loss on the sale of property and equipment - management considers the gains or losses on disposal of assets to result from investing decisions rather than ongoing operations. |
Reconciliation of Non-GAAP Financial Information to GAAP
(Unaudited)
13 Weeks Ended | 26 weeks ended | |||||||||||||||||||||||||||
July 28, 2017 | July 29, 2016 | July 28, 2017 | July 29, 2016 | |||||||||||||||||||||||||
(in thousands) | $’s | % of Net revenue | $’s | % of Net revenue | $’s | % of Net revenue | $’s | % of Net revenue | ||||||||||||||||||||
NET LOSS | $ | (3,880 | ) | (1.3 | )% | $ | (1,980 | ) | (0.7 | )% | $ | (11,719 | ) | (2.1 | )% | $ | (7,739 | ) | (1.4 | )% | ||||||||
Income tax benefit | (1,619 | ) | (0.5 | )% | (954 | ) | (0.3 | )% | (5,883 | ) | (1.0 | )% | (4,398 | ) | (0.8 | )% | ||||||||||||
Other income, net | (494 | ) | (0.2 | )% | (528 | ) | (0.2 | )% | (1,236 | ) | (0.2 | )% | (981 | ) | (0.2 | )% | ||||||||||||
Interest expense | 6,167 | 2.0 | % | 6,174 | 2.1 | % | 12,292 | 2.2 | % | 12,344 | 2.2 | % | ||||||||||||||||
Operating income (loss) | 174 | 0.1 | % | 2,712 | 0.9 | % | (6,546 | ) | (1.1 | )% | (774 | ) | (0.1 | )% | ||||||||||||||
Depreciation and amortization | 6,175 | 2.0 | % | 4,488 | 1.5 | % | 12,683 | 2.2 | % | 8,624 | 1.5 | % | ||||||||||||||||
Transfer of corporate functions | 480 | 0.2 | % | — | — | % | 1,926 | 0.3 | % | — | — | % | ||||||||||||||||
Loss on disposal of property and equipment | — | — | % | 60 | — | % | 62 | — | % | 46 | — | % | ||||||||||||||||
Adjusted EBITDA(1) | $ | 6,829 | 2.3 | % | $ | 7,260 | 2.5 | % | $ | 8,125 | 1.4 | % | $ | 7,896 | 1.4 | % | ||||||||||||
LANDS’ END, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
26 Weeks Ended | ||||||||
(in thousands) | July 28, 2017 | July 29, 2016 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss | $ | (11,719 | ) | $ | (7,739 | ) | ||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||
Depreciation and amortization | 12,683 | 8,624 | ||||||
Amortization of debt issuance costs | 856 | 856 | ||||||
Loss on disposal of property and equipment | 62 | 46 | ||||||
Stock-based compensation | 1,800 | 1,752 | ||||||
Deferred income taxes | (88 | ) | (1,387 | ) | ||||
Change in operating assets and liabilities: | ||||||||
Inventories | (43,493 | ) | (25,983 | ) | ||||
Accounts payable | 22,434 | 34,472 | ||||||
Other operating assets | 5,603 | (4,015 | ) | |||||
Other operating liabilities | (1,333 | ) | (4,552 | ) | ||||
Net cash (used in) provided by operating activities | (13,195 | ) | 2,074 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Proceeds from sale of property and equipment | — | 44 | ||||||
Purchases of property and equipment | (20,223 | ) | (18,017 | ) | ||||
Net cash used in investing activities | (20,223 | ) | (17,973 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Payments on term loan facility | (2,575 | ) | (2,575 | ) | ||||
Payments of employee withholding taxes on share-based compensation | (629 | ) | (396 | ) | ||||
Net cash used in financing activities | (3,204 | ) | (2,971 | ) | ||||
Effects of exchange rate changes on cash | 469 | 1,238 | ||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (36,153 | ) | (17,632 | ) | ||||
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | 213,108 | 228,368 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 176,955 | $ | 210,736 | ||||
SUPPLEMENTAL CASH FLOW DATA | ||||||||
Unpaid liability to acquire property and equipment | $ | 4,438 | $ | 2,297 | ||||
Income taxes paid, net of refunds | $ | 3,082 | $ | 3,067 | ||||
Interest paid | $ | 11,257 | $ | 11,291 | ||||
Financial information by segment is presented in the following tables for the 13 Weeks Ended and 26 Weeks Ended July 28, 2017, and July 29, 2016.
13 Weeks Ended | 26 weeks ended | |||||||||||||||
(in thousands) | July 28, 2017 | July 29, 2016 | July 28, 2017 | July 29, 2016 | ||||||||||||
Net revenue: | ||||||||||||||||
Direct | $ | 259,938 | $ | 246,395 | $ | 488,228 | $ | 478,580 | ||||||||
Retail | 42,166 | 45,521 | 82,213 | 86,737 | ||||||||||||
Corporate / other | 86 | 94 | 114 | 126 | ||||||||||||
Total net revenue | $ | 302,190 | $ | 292,010 | $ | 570,555 | $ | 565,443 | ||||||||
13 Weeks Ended | 26 weeks ended | |||||||||||||||
(in thousands) | July 28, 2017 | July 29, 2016 | July 28, 2017 | July 29, 2016 | ||||||||||||
Adjusted EBITDA(1): | ||||||||||||||||
Direct | $ | 13,080 | $ | 14,780 | $ | 24,918 | $ | 27,612 | ||||||||
Retail | 1,773 | 450 | (1,402 | ) | (3,480 | ) | ||||||||||
Corporate / other | (8,024 | ) | (7,970 | ) | (15,391 | ) | (16,236 | ) | ||||||||
Total Adjusted EBITDA(1) | $ | 6,829 | $ | 7,260 | $ | 8,125 | $ | 7,896 | ||||||||