Apparel retailer Lands’ End Inc. (LE, Financial) reported strong fourth-quarter and full-year 2017 earnings before the opening bell on Thursday, sending shares higher.
The Dodgeville, Wisconsin-based company posted net income of $39.8 million, or $1.24 per share, compared with a net loss of $94.8 million, or $2.96 per share, in the prior-year quarter. Adjusted earnings of 38 cents per share missed Thomas Reuters’ estimates of 50 cents.
Quarterly revenue, however, grew 11.3% from the prior-year quarter to $510.6 million, beating expectations of $470.6 million.
The company said it also received a $21.9 million tax benefit from the U.S. Tax Cuts and Jobs Act.
For the year, Lands’ End recorded net income of $28.2 million, or 88 cents per share, posting a profit for the period. Revenue for the year came in at $1.41 billion, a 5.3% increase from 2016.
Following the announcement, shares, which closed at $16.85 on Wednesday, soared in morning trading.
Lands’ End recorded 5% growth in same-store sales for the quarter. While the company’s direct segment revenue increased 14.3% from the prior-year quarter, revenue from its retail business declined 8.7% as a result of fewer Lands’ End Shops at Sears (SHLD, Financial) stores.
While the company has had a long-standing relationship with Sears, it may not need the struggling retailer much longer.
According to Krista Fabregas, retail analyst at FitSmallBusiness.com, the fact the company was able to post an annual profit for the first time in two years, despite retail revenues being down, shows Lands’ End is not dependent on Sears for overall growth.
“In fact, it's making that abundantly clear with moves into the retail space with its own branded stores and plans to open 40 to 60 locations over five years,” she wrote in a research note. “So, it's set to offset retail losses and closures due to Sears' decline.”
She also pointed out that, in regard to digital channels, Lands’ End is ahead of the game as roughly 90% of its sales are generated from its e-commerce business. As a result, “the company’s self-directed retail expansion should bolster, not weigh down, its growth.”
CEO Jerome Griffith also lauded the company’s performance, noting it gained momentum in its merchandising, marketing and digital initiatives.
“During 2017, we stabilized the brand, grew our buyer file, reconnected with our core customer, improved our business processes, and drove growth across our four key categories,” he said. “As we look forward, we will continue to execute on our strategic plan and continue to focus on driving consistent performance across the business."
Among the company’s newer initiatives is a clothing line targeted toward millennial shoppers. The new line, called the Work. Life. Style. Collection, is aimed at young professionals who are entering the workforce.
According to Fabregas, the line is an extension of Lands’ End’s “understanding of work outfitting,” a reference to its partnerships with Delta (DAL, Financial) and the Weather Channel.
“It brings a simple, stylish, comfort-focused line to a new generation moving into the workforce,” she wrote. “Most importantly, it's an easy-care line that doesn't require dry cleaning or much ironing, which is a good fit for the no-fuss millennial lifestyle and should be well received.”
With a market cap of $632.32 million, Lands’ End was trading around $20.05 on Thursday morning, up nearly 19%. GuruFocus estimates the stock has fallen approximately 6% year to date.
Of the gurus invested in the retailer, Edward Lampert (Trades, Portfolio) has the largest position with 19.53% of outstanding shares. Mario Gabelli (Trades, Portfolio), Murray Stahl (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) are also shareholders.
Disclosure: No positions.
