Specialty retailer Lands’ End Inc. (LE, Financial) posted disheartening first-quarter 2017 earnings on June 6, reporting a $7.8 million loss, worse than the $5.8 million loss it reported in the comparable quarter of 2016.
The company posted a per-share loss of 24 cents, just shy of the estimates of 22 cents. Revenue for the quarter came in at $268.4 million, missing the estimates of $270 million.
The direct segment’s revenue declined 1.7% to $228.3 million from the same period last year while the retail segment’s revenue fell 2.8% to $40 million. This loss was attributed to fewer Lands’ End Shops at Sears. For the quarter, same-store sales increased 2.1%.
The bar chart below illustrates the gradual decline in the company’s revenue since January 2012.
The company’s problems can be attributed in part to being owned by Sears Holdings Corp. (SHLD, Financial), which has been plagued by declining sales for years, between 2002 and 2014. Lands’ End still has ties with the company as it offers merchandise in some Sears stores.
The company has also had several significant management changes over the years. After Federica Marchionni stepped down from the role of CEO in September 2016 after only 18 months, Lands’ End announced Jerome Griffith had been selected to replace her in December. With an extensive track record of spearheading growth and expansion, Griffith has worked for Tumi Holdings Inc. (TUMI, Financial), Gap Holdings Inc. (GPS, Financial), Tommy Hilfiger Corp. and Esprit Holdings Ltd. (HKSE:00330, Financial). He began at the company in early March.
At the company’s shareholders meeting in May, Griffith said he hoped to return Lands’ End to its roots, with an update. The company has already axed its “Canvas” line, which was implemented by Marchionni and featured slimmer-fitting, more stylish and more expensive clothing to attract younger consumers.
In an interview with the La Crosse Tribune, Griffith said he attributes the company’s issues to frequent management changes, shifts in direction and not embracing the customer base. He elaborated in the earnings report on his plans to better embrace customers through several initiatives.
“These include developing a brand-appropriate product assortment that represents the Lands' End brand and is relevant to our customer,” Griffith said. “In addition, we are in the process of aligning our marketing strategies to better connect with and engage consumers as well as further leverage our strong e-commerce platform and enhance our omni-channel capabilities to create a seamless shopping experience for our customers across channels.”
Headquartered in Dodgeville, Wisconsin, Lands’ End has a market cap of $502.8 million. Its shares fell 6% after the announcement to $15.65 with a price-book (P/B) ratio of 1.9 and a price-sales (P/S) ratio of 0.4.
The Peter Lynch chart below suggests the stock is trading below its fair value.
Sears Chairman and CEO Edward Lampert (Trades, Portfolio) is the company’s largest shareholder among the gurus with 19.2% of outstanding shares, representing 19.9% of his total assets managed. Other gurus who own the stock include Fairholme’s Bruce Berkowitz (Trades, Portfolio), Mario Gabelli (Trades, Portfolio) and Murray Stahl (Trades, Portfolio).
Disclosure: I do not own any of the stocks mentioned in the article.
