OREANDA-NEWS. 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.

-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