GlobeNewswire Inc | Dec 2, 2021 06:45AM EST

December 02, 2021

Net Revenue grew 4.4% compared to the same period last yearNet Income of $7.4 million, compared to a Net Income of $7.2 million in the same period last yearAdjusted EBITDA of $29.8 million at the high-end of outlookCyber Week Sales Increased High Single Digits over 2020

DODGEVILLE, Wis., Dec. 02, 2021 (GLOBE NEWSWIRE) -- Lands End, Inc. (NASDAQ: LE) today announced financial results for the third quarter ended October 29, 2021 and sales results for Cyber Week, and provided fourth quarter and an updated full year outlook.

Jerome Griffith, Chief Executive Officer, stated, Our third quarter performance reflects the long-term strength and resiliency of our digitally led business model, as we navigated the dynamic global supply chain challenges while still delivering on our Adjusted EBITDA expectations. We achieved 4% topline growth in the third quarter, contributing to our 22% growth year-to-date. Our topline expansion drove Adjusted EBITDA at the high end of our outlook and growth of 129% year-to-date. For Cyber Week, which just concluded, our sales increased high single digits as a result of strong demand online and in store and our improved in-stock positions. We believe that the strong operating platform we have established combined with the ongoing progress across our four strategic growth pillars, including product, digital, uni-channel distribution and infrastructure, position us to drive growth over the next several years. We look forward to providing an update on our long-term goals in mid-January.

Fiscal Third Quarter Financial Highlights:

-- For the third quarter, net revenue was $375.8 million, an increase of 4.4% from $360.0 million in the third quarter of fiscal 2020 and an increase of 10.5% from $340.0 million in the third quarter of fiscal 2019. Global eCommerce net revenue was $261.2 million, a decrease of 6.0% from $277.8 million in the third quarter of fiscal 2020 as a result of inventory constraints driven by supply chain challenges and an increase of 9.3% from $238.9 million in the third quarter of fiscal 2019. Compared to the third quarter of last year, U.S. eCommerce decreased 3.5% and International eCommerce decreased 15.7%. Compared to the third quarter of fiscal 2019, U.S. eCommerce increased 6.0% and International eCommerce increased 27.6%.Outfitters net revenue was $86.1 million, an increase of 38.9% from $62.0 million in the third quarter of fiscal 2020 and an increase of 3.4% compared to the third quarter of fiscal 2019. Compared to the third quarter last year, the increase was driven by stronger demand within the Companys travel-related national accounts and school uniform customers.Third Party net revenue, which includes sales on third-party marketplaces and U.S. wholesale revenues, was $19.3 million in the third quarter compared to $12.0 million in the third quarter last year. The $7.3 million increase was primarily attributable to growth in our Kohls partnership, including an expansion to 300 locations during the quarter, compared to 150 retail locations in third quarter 2020.

-- Gross margin was 44.4%, decreasing approximately 100 basis points compared to 45.4% in the third quarter of fiscal 2020. The Gross margin decrease was driven by increased shipping costs. -- Selling and administrative expenses increased $2.5 million to $137.4 million or 36.6% of net revenue, compared to $134.9 million or 37.5% of net revenue, in the third quarter of last year. The approximately 90 basis point decrease was the result of leverage on higher sales and continued expense controls slightly offset by continued investment in digital marketing. Selling and administrative expenses as a percentage of net revenue declined approximately 300 basis points compared with the third quarter of 2019. -- Net income was $7.4 million or $0.22 per diluted share, as compared to net income of $7.2 million or $0.22 per diluted share in the third quarter of fiscal 2020. -- Adjusted EBITDA was $29.8 million in the third quarter of fiscal 2021, an increase of $1.2 million compared to $28.6 million in the third quarter of fiscal 2020.

Fiscal Third Quarter Business Highlights:

-- Year to Date total Global eCommerce new customer growth was 11% and total customer growth was 7%. -- Recovery in Outfitters business exceeded expectations led by travel-related national accounts and school uniform customers. -- Expanded product assortment offered in an additional 150 Kohls retail locations, for a total of 300 locations.

Balance Sheet and Cash Flow Highlights

Net cash used in operations was $6.4 million for the 39 weeks ended October 29, 2021, compared to Net cash used in operations of $26.1 million for the 39 weeks ended October 30, 2020.

Inventories, net, were $479.8 million as of October 29, 2021, and $499.8 million as of October 30, 2020.

As of October 29, 2021, the Company had $70.0 million of borrowings and $183.6 million of availability under its asset-based senior secured credit facility. Additionally, as of October 29, 2021, the Company had $261.3 million of Term Loan Facility debt.

Outlook

Jim Gooch, President and Chief Financial Officer, stated, We delivered encouraging results in the third quarter, given the challenging environment. We have taken numerous actions to expedite receipts, and despite supply chain delays, which negatively impacted our in-stock position and sales early in the fourth quarter, we recovered our in-stock position to historical levels heading into Cyber Week. With these actions, we believe our inventory is positioned well for the remainder of this year and as we head into 2022. Consumer demand for our brand remains strong, and we are confident in the long-term health of our business and the growth opportunities that lie ahead. We look forward to sharing more details on our path forward when we announce our updated long-term targets.

For the fourth quarter of fiscal 2021 the Company now expects:

-- Net revenue to be between $560.0 million and $575.0 million, which is a 4% to 7% increase compared to the prior year. -- Net income to be between $9.0 million and $12.0 million, and diluted earnings per share to be between $0.27 and $0.36. -- Adjusted EBITDA in the range of $31.0 million to $35.0 million. Fourth quarter guidance assumes an incremental $15 million in expense for added supply chain costs expected during the quarter, based on the Companys current visibility into higher shipping costs, shipping delays and port congestion.

For fiscal 2021 the Company now expects:

-- Net revenue to be between $1.640 billion and $1.655 billion. -- Net income to be between $35.0 million and $38.0 million, and diluted earnings per share to be between $1.04 and $1.13. -- Adjusted EBITDA in the range of $124.5 million to $128.5 million. -- Capital Expenditures of approximately $26.0 million.

For purposes of this release, Cyber Week is defined as Wednesday, November 24th, through Tuesday, November 30th.

Conference Call

The Company will host a conference call on Thursday, December 2, 2021, at 8:30 a.m. ET to review its third quarter financial results and related matters. The call may be accessed through the Investor Relations section of the Companys website at http://investors.landsend.comor by dialing (866) 753-5836.

About Lands End, Inc.

Lands End, Inc. (NASDAQ:LE) is a leading uni-channel retailer of casual clothing, accessories, footwear and home products. Operating out of Americas heartland, we believe our vision and values make a strong connection with our core customers. We offer products online at www.landsend.com, on third party online marketplaces and through our own Company Operated stores, as well as third-party retail locations. 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 regarding the Companys assessment of the long-term strength and resiliency of its business model; the Companys assessment of its strategy, business and prospects for future growth; the Companys plan to update its long-term goals and outlook in January 2022; the Companys assessment of the strength of customer demand for its brand, confidence in the long-term health of its business and growth opportunities; the Companys belief that its inventory is well positioned for the rest of the year and as it heads into 2022; and the Companys outlook and expectations as to net revenue, net income, earnings per share and Adjusted EBITDA for the fourth quarter of fiscal 2021 and for the full year of fiscal 2021, the estimate of the incremental expense of supply chain costs in the fourth quarter of fiscal 2021, and capital expenditures for fiscal 2021. The following important factors and uncertainties, among others, could cause actual results to differ materially from those described in these forward-looking statements: the impact of COVID-19 on operations, customer demand and the Companys supply chain, as well as its consolidated results of operation, financial position and cash flows; further disruption in the Companys supply chain, including with respect to its distribution centers, third-party manufacturing partners and logistics partners, caused by limits in freight capacity, port congestion, other logistics constraints, and closure of certain manufacturing facilities and production lines due to COVID-19 and other global economic conditions; the Company may be unsuccessful in implementing its strategic initiatives, or its initiatives may not have their desired impact on its business; the Companys ability to offer merchandise and services that customers want to purchase; changes in customer preference from the Companys branded merchandise; the Companys results may be materially impacted if tariffs on imports to the United States increase and it is unable to offset the increased costs from current or future tariffs through pricing negotiations with its vendor base, moving production out of countries impacted by the tariffs, passing through a portion of the cost increases to the customer, or other savings opportunities; customers use of the Companys digital platform, including customer acceptance of its efforts to enhance its eCommerce websites, including the Outfitters website; customer response to the Companys marketing efforts across all types of media; the Companys maintenance of a robust customer list; the Companys retail store strategy may be unsuccessful; the Companys relationship with Kohls may not develop as planned or have its desired impact; the Companys dependence on information technology and a failure of information technology systems, including with respect to its eCommerce operations, or an inability to upgrade or adapt its systems; fluctuations and increases in costs of raw materials as well as fluctuations in other production and distribution-related costs; impairment of the Companys relationships with its vendors; the Companys failure to maintain the security of customer, employee or company information; the Companys failure to compete effectively in the apparel industry; legal, regulatory, economic and political risks associated with international trade and those markets in which the Company conducts business and sources its merchandise; the Companys failure to protect or preserve the image of its brands and its intellectual property rights; increases in postage, paper and printing costs; failure by third parties who provide the Company with services in connection with certain aspects of its business to perform their obligations; the Companys failure to timely and effectively obtain shipments of products from its vendors and deliver merchandise to its customers; reliance on promotions and markdowns to encourage customer purchases; the Companys failure to efficiently manage inventory levels; unseasonal or severe weather conditions; the adverse effect on the Companys reputation if its 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 the Companys business of adverse worldwide economic and market conditions, including economic factors that negatively impact consumer spending on discretionary items; potential indemnification liabilities to Sears Holdings pursuant to the separation and distribution agreement in connection with the Companys separation from Sears Holdings; the ability of the Companys principal shareholders to exert substantial influence over the Company; 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 the Companys Annual Report on Form 10-K for the fiscal year ended January 29, 2021. The Company intends the forward-looking statements to speak only as of the time made and does not undertake to update or revise them as more information becomes available, except as required by law.

CONTACTS

Lands End, Inc.James GoochPresident and Chief Financial Officer(608) 935-9341

Investor Relations:ICR, Inc.Jean Fontana(646) 277-1214Jean.Fontana@icrinc.com

-Financial Tables Follow-

LANDS END, INC.Condensed Consolidated Balance Sheets(Unaudited)

(in thousands, except per share October29, October 30, January 29, data) 2021 2020 2021*ASSETS Current assets Cash and cash equivalents $ 37,926 $ 56,137 $ 33,933 Restricted cash 1,983 2,135 1,861 Accounts receivable, net 44,078 34,238 37,574 Inventories, net 479,793 499,759 382,106 Prepaid expenses and other 41,418 52,731 40,356 current assetsTotal current assets 605,198 645,000 495,830 Property and equipment, net 133,572 149,342 145,288 Operating lease right-of-use 32,782 36,699 35,475 assetGoodwill 106,700 106,700 106,700 Intangible asset, net 257,000 257,000 257,000 Other assets 4,512 5,413 5,215 TOTAL ASSETS $ 1,139,764 $ 1,200,154 $ 1,045,508 LIABILITIES AND STOCKHOLDERS? EQUITYCurrent liabilities Current portion of long-term $ 13,750 $ 13,750 13,750 debtAccounts payable 184,569 174,061 134,007 Lease liability - current 5,609 5,359 5,183 Other current liabilities 142,828 147,903 161,982 Total current liabilities 346,756 341,073 314,922 Long-term borrowings on ABL 70,000 155,000 25,000 FacilityLong-term debt, net 237,245 248,700 245,632 Lease liability - long-term 34,092 39,169 37,811 Deferred tax liabilities 47,325 65,800 47,346 Other liabilities 5,834 5,487 5,094 TOTAL LIABILITIES 741,252 855,229 675,805 Commitments and contingencies STOCKHOLDERS? EQUITY Common stock, par value $0.01authorized: 480,000 shares; 330 326 326 issued and outstanding: 32,983,32,608 and 32,614, respectivelyAdditional paid-in capital 372,313 366,959 369,372 Retained earnings (accumulated 37,485 (8,701 ) 11,226 deficit)Accumulated other comprehensive (11,616 ) (13,659 ) (11,221 )(loss)TOTAL STOCKHOLDERS' EQUITY 398,512 344,925 369,703 TOTAL LIABILITIES AND $ 1,139,764 $ 1,200,154 $ 1,045,508 STOCKHOLDERS? EQUITY

*Derived from the audited consolidated financial statements included in the Companys Annual Report on Form 10-K for the fiscal year ended January 29, 2021.

LANDS END, INC.Condensed Consolidated Statements of Operations(Unaudited)

13 Weeks Ended 39 Weeks Ended (in thousands, October29, October October29, Octoberexcept per 2021 30, 2021 30, share data) 2020 2020Net revenue $ 375,843 $ 359,982 $ 1,081,249 $ 889,073 Cost of sales(excludingdepreciation 209,028 196,527 588,908 496,041 andamortization)Gross profit 166,815 163,455 492,341 393,032 Selling and 137,408 134,890 399,579 352,164 administrativeDepreciationand 9,788 9,627 29,483 27,791 amortizationOtheroperating 140 255 583 7,913 expense, netOperating 19,479 18,683 62,696 5,164 incomeInterest 8,334 9,005 26,231 19,232 expenseOther (income) (171 ) (250 ) (461 ) 910 expense, netIncome (loss)before income 11,316 9,928 36,926 (14,978 )taxesIncome taxexpense 3,917 2,752 10,667 (5,887 )(benefit)NET INCOME $ 7,399 $ 7,176 $ 26,259 $ (9,091 )(LOSS)NET INCOME(LOSS) PER COMMON SHAREBasic: $ 0.22 $ 0.22 $ 0.80 $ (0.28 )Diluted: $ 0.22 $ 0.22 $ 0.78 $ (0.28 ) Basic weightedaverage common 32,981 32,605 32,910 32,551 sharesoutstandingDilutedweightedaverage common 33,698 33,248 33,708 32,551 sharesoutstanding

Use and Definition of Non-GAAP Financial Measures

Adjusted EBITDA - In addition to our Net income (loss) determined in accordance with GAAP, for purposes of evaluating operating performance, the Company uses an Adjusted EBITDA metric. Adjusted EBITDA is computed as Net income (loss) appearing on the Condensed Consolidated Statements of Operations net of Income tax expense/(benefit), Interest expense, Depreciation and amortization and certain significant items as set forth below. Our management uses Adjusted EBITDA to evaluate the operating performance of our business for comparable periods, as well as the basis for an executive compensation metric. The methods used by the Company to calculate its non-GAAP financial measures may differ significantly from methods used by other companies to compute similar measures. As a result, any non-GAAP financial measures presented herein may not be comparable to similar measures provided by other companies. Adjusted EBITDA should not be used by investors or other third parties as the sole basis for formulating investment decisions as it excludes several 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 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. -- 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.For the 13 weeks and 39 weeks ended October 30, 2020 we excluded the impact of corporate restructuring which includes severance for the reduction in corporate positions in the Second Quarter 2020.For the 39 weeks ended October 30, 2020 we excluded the impact of non-cash write-down of goodwill and certain long-lived assets.For the 13 weeks and 39 weeks ended October 29, 2021 and October 30, 2020 we excluded amortization of transaction related costs associated with Third Party channel.For the 13 and 39 weeks ended October 29, 2021 and October 30, 2020 we excluded the impacts of loss on property and equipment as management considers the gains or losses on asset valuation to result from investing decisions rather than ongoing operations.

Reconciliation of Non-GAAP Financial Information to GAAP(Unaudited)

13 Weeks Ended October29, 2021 October 30, 2020 % of % of(in thousands) $?s Net $?s Net revenue revenueNet income $ 7,399 2.0 % $ 7,176 2.0 %Income tax expense 3,917 1.0 % 2,752 0.8 %Other (income), net (171 ) (0.0 ) (250 ) (0.1 ) % %Interest expense 8,334 2.2 % 9,005 2.5 %Operating income 19,479 5.2 % 18,683 5.2 %Depreciation and amortization 9,788 2.6 % 9,627 2.7 %Corporate restructuring ? ? % 16 0.0 %Other 344 0.1 % 132 0.0 %Loss on disposal of property 140 0.0 % 107 0.0 %and equipmentAdjusted EBITDA $ 29,751 7.9 % $ 28,565 7.9 %

39 Weeks Ended October29, 2021 October 30, 2020 % of % of(in thousands) $?s Net $?s Net revenue revenueNet income (loss) $ 26,259 2.5 % $ (9,091 ) (1.0 ) %Income tax expense (benefit) 10,667 0.9 % (5,887 ) (0.7 ) %Other (income) expense, net (461 ) (0.0 ) 910 0.1 % %Interest expense 26,231 2.4 % 19,232 2.2 %Operating income 62,696 5.8 % 5,164 0.6 %Depreciation and amortization 29,483 2.7 % 27,791 3.1 %Corporate restructuring ? ? % 2,941 0.3 %Goodwill and long-lived asset ? ? % 3,844 0.4 %impairmentOther 844 0.1 % 132 0.0 %Loss on disposal of property 583 0.1 % 994 0.1 %and equipmentAdjusted EBITDA $ 93,606 8.7 % $ 40,866 4.6 %

Fourth Quarter Fiscal 2021 Guidance 13 Weeks Ended (in millions) January 28, 2022 Net income $ 9.0 ? $ 12.0 Depreciation, interest, other income, taxes and other 22.0 ? 23.0 adjustmentsAdjusted EBITDA $ 31.0 ? $ 35.0

Fiscal 2021 Guidance 52 Weeks Ended (in millions) January 28, 2022 Net income $ 35.0 ? $ 38.0 Depreciation, interest, other income, taxes and other 89.5 ? 90.5 adjustmentsAdjusted EBITDA $ 124.5 ? $ 128.5

LANDS END, INC.Condensed Consolidated Statements of Cash Flows(Unaudited)

39 Weeks Ended (in thousands) October29, October 2021 30, 2020CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 26,259 $ (9,091 )Adjustments to reconcile net income (loss) to net cash used in operating activities:Depreciation and amortization 29,483 27,791 Amortization of debt issuance costs 2,358 2,291 Loss on disposal of property and equipment 583 994 Stock-based compensation 8,043 6,743 Deferred income taxes 80 7,979 Goodwill impairment ? 3,300 Other (1,097 ) 326 Change in operating assets and liabilities: Accounts receivable, net (7,219 ) 17,289 Inventories, net (98,391 ) (123,811 )Accounts payable 51,152 20,104 Other operating assets 95 (16,151 )Other operating liabilities (17,700 ) 36,172 Net cash used in operating activities (6,354 ) (26,064 )CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (18,739 ) (25,638 )Net cash used in investing activities (18,739 ) (25,638 )CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings under ABL Facility 140,000 230,000 Payments of borrowings under ABL Facility (95,000 ) (75,000 )Proceeds from issuance of long term debt, net ? 266,750 Principal payments on long-term debt, net (10,313 ) (385,388 )Payments for taxes related to net share (5,098 ) (438 )settlement of equity awardsPayment of debt-issuance costs (1,161 ) (5,080 )Net cash provided by financing activities 28,428 30,844 Effects of exchange rate changes on cash, cash 780 (167 )equivalents and restricted cashNET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTSAND 4,115 (21,025 )RESTRICTED CASHCASH, CASH EQUIVALENTS AND RESTRICTED CASH, 35,794 79,297 BEGINNING OF PERIODCASH, CASH EQUIVALENTS AND RESTRICTED CASH, END $ 39,909 $ 58,272 OF PERIODSUPPLEMENTAL CASH FLOW DATA Unpaid liability to acquire property and $ 2,836 $ 2,620 equipmentIncome taxes paid, net of refunds $ 23,570 $ 257 Interest paid $ 23,972 $ 11,334 Lease liabilities arising from obtaining $ 1,161 $ 3,525 operating lease right-of-use assets