Release Date: June 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lands' End Inc (LE, Financial) achieved significant gross margin expansion, driven by a more targeted approach to promotions and improved inventory management.
- The company saw a 23% year-over-year reduction in inventory, enhancing operational efficiency.
- Lands' End Inc (LE) experienced a high single-digit increase in new customer acquisition year-over-year.
- The European business showed exceptional gross margin expansion of over 1,000 basis points year-over-year.
- The company's licensing strategy, including a successful foray into the Costco channel, added asset-light recurring revenue streams.
Negative Points
- Total revenue for the first quarter decreased by 8% compared to the previous year.
- Sales from Lands' End outfitters were down 42% from the first quarter of 2023, reflecting the impact from Delta.
- The US e-commerce business saw a sales decrease of 4% compared to the first quarter of 2023.
- SG&A expenses increased by approximately 630 basis points compared to 2023, primarily due to deleverage from lower revenues and investment in digital marketing.
- The company reported a net loss of $6.4 million or $0.2 per share for the first quarter.
Q & A Highlights
Q: As you think about your core customer, the resolver, the evolver, what are you seeing in terms of differentiation in price point, category sell-through, and full-price sell-through? Also, how is the sell-through of newer items versus core and classic?
A: We see a difference between the resolver and the revolver. The resolver is our long-term customer, often buying single categories and replacing worn-out items. However, they are starting to buy more fashion and full-priced products. The revolver, on the other hand, buys broadly across categories and at full price. We saw strong performance in swim, bottoms, and women's tops, and improvements in men's business. The health of the consumer appears strong, with increased customer acquisition and higher margins.
Q: How are you thinking about marketing spend for the year to acquire new customers? Any updates on the Costco business and third-party channels?
A: We are careful with our marketing spend, ensuring it generates enough incremental gross margin. We increased marketing, resulting in higher new-to-file customers and significant impressions over Memorial Day weekend. We are happy with the Costco business and plan to keep it small but impactful. We will also be launching on a new marketplace in Q2 and expanding our licensing strategy into new channels and geographies.
Q: Can you provide an update on the licensing business, particularly the shoe business and kids' products?
A: We are happy with our licensing strategy, which contributed positively in Q1. The shoe business started towards the end of the quarter and will ramp up in Q2, with significant benefits expected in the back half of the year. The kids' products will also see newness in the back half of the year. We are pleased with the product elevation and the opportunity for amplification in future years.
Q: Can you elaborate on the strong international results and the strategy of having localized products for each region?
A: We gave our international teams the opportunity to test and learn, localizing about 20% of the assortment. This approach allows us to cater to local trends and customer preferences. We see potential for expansion in Europe, particularly in France and Austria, and are considering markets like Eastern Europe, Spain, the Middle East, Japan, and Latin America.
Q: How are high-end technical items impacting gross margin, and is there more opportunity to introduce such items in other categories?
A: About a third of our items have some form of solution, appealing to full-price paying customers and driving higher gross margins. We continuously flow newness, with significant upside from new items in Q1. We also focus on trends and lifestyle needs, with items like high-rise wide-leg pants and Drifter sweaters performing well. The gross margin improvement is driven by higher AURs and lower product costs.
Q: Is Lands' End doing anything unique with technology, innovation, and social media campaigns, or are you just executing better than competitors?
A: Our vision is to be the innovative solutions brand for life's every journey. We differentiate ourselves with patented merchandise and a focus on customer lifestyle. We leverage data and psychographics to build assortments and enhance customer experience. We aim to use technology thoughtfully to create value for our customers and ourselves.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
