LE - Earnings call transcript Q3 2017

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Operator

Good day ladies and gentlemen and welcome to the Lands’ End, Third Quarter Fiscal 2017 Earnings Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions]. I would now like to turn the call over to Mr. McCracken. Bernard begin. may you Sir,

Bernard McCracken

on morning, and earnings results, the End be for we thank for our you found can call and XXXX this joining website third www.landsend.com. released Lands’ morning Good our quarter which fiscal

will the but we forward-looking information call uncertainties. that Chief such are to analysts. a in filings, SEC limited and Griffith, quarterly results update Form not the Please our to items reports of our do from obligation the developments outlook the that prepared the conduct today, and Officer also to on XX-K covering session Chief Officer; On with After cause hear statements any to Jim by discussed including company’s not by remarks, the undertake and company in and included noted Form note information forward-looking could to includes risks outlook could will those as Such Executive company’s are Factors The about and Jerome statements. question-and-answer may this from that our represents you on this discuss statements actual Subsequent differences is today call. events on contribute Gooch, we made The include, provided and company’s our company’s us. and report Operating in differ involve annual materially change. Chief Financial company’s those forward-looking Officer. we the XX-Q. call

Accepted to measure directly A of contained to GAAP During the prepared These accordance non-GAAP Principles. this measures. is measures reconciliation non-GAAP Generally not referring measures in comparable the call financial will our with to are issued with is the non-GAAP at most a be over we our turn call website contained of of landsend.com. Jerome Investor the earlier is Griffith. which today, Relations that, With will release section or I herein posted in copy Accounting earnings

Jerome Griffith

progress are we performance. today. which continued we making see everyone our very thank third are the for and strong Overall Bernie joining momentum you you improving in the pleased on Thank quarter, us the to illustrates business

quarter million revenue our led the year’s $X.X adjusted online million to in compared last year, For to quarter. EBITDA last X.X% was business compared third by grew $XX.X and as

to of we drove quarter consecutive existing, our double improved quarter increased and delivering third addition In the another lapsed results, buyer growth again in has which new financial digit file, customers. for now across

During knit the strong category. men’s sweaters saw tops, quarter and in we our performance home bottoms, outerwear, women

Since Thanksgiving, the company ago, an come. excited several significant the after in Monday Cyber to years period. joined foundation sales contracting are business growth and through for and We laid see I nine momentum the the We stabilized the in progress also business of months organization. to as our continue years made we’ve

American place. uniquely positioned Brand family and in I the we and are great have our am ever we excellent believe opportunity operating I ahead a offering strong highly of heritage optimistic representing Looking strong of on heartland as in ahead that capitalize fully value Heritage the that team more the values recognized Lands’ as proposition. leverage about us than the a End country, we

our Emphasizing area We will four our preferences. on digital, business guided growth focusing customers’ Product, business distribution are to orientation, and areas: and channels processes within each the committed activities needs consistent across main by infrastructure. and customer achieving be our by centric

is product. our foremost and First

have to These as customer earned our have make purpose, updating with sure the continued styles, years life refining to relevant we and everyday our that brand and ensure product priority our following. our heritage, customer providing To of compelling well reflect foundation that fit our assortment make of communicating we heritage. strong loyal brand attributes the we End their needs that to success as its maintain exceptional with the offering service. and customers products are better Lands’ been have Our products XX-plus is understand by quality consistently and

avenues. are this We several doing through different

We pieces well with made customers align center and knits, items preference our that are great will for swimwear. are around timeless core stylings focusing products, that classic and This and key value. our pants including on outerwear, delivering primarily offer

products for merchandise content yet buy a End that’s they all she's at to family, swimsuit so story items while functional that that's They're or with fulfill makes further gathering. on an everyday feel they we innovative ice-skating our coordinating well comes product at in climb of that focused warm touch and holiday businesses. comfortable a Our the a group points key jacket that mountain, to their looking this, are her Knowing and and innovation, building flattering have market. to she lifestyle, strong increased put design and and and a moves through of beach purpose management flow marketing enhancing need. her her across we are together speed these a terms teams for our merchandise continue not are around a better ensure with their outfit our with inventory are Lands' to offering The to continued

this to part of on great Channel End will with partnership our A offering, As our we core Lands’ also example which new focus reporting. of as way looking brand we our live, are is further feature Weather exiting product the all for awareness. out-of-studio

Weather opportunity our our As which iconic leverage in an incredible our Channels category core this to will apparel continue also the is we highlighting to competency. outfitter, showcase a outerwear, official

We’ve product for where where guided meaningful opportunity the see home a our We assortment we better it cartogram align plan sense the our business to and on by as expand purchasing the product also the needs analytics we the to selectively focus of offerings brand. data preferences. increased our with broaden customer makes

new fourth launch airlines our also will going meet our outfitters delta the our growing in includes our with products of to of the We the forward business This innovative on focus program needs partners. anticipated quarter.

We accomplish We know a company. to that data becoming led experience focus tailor in opportunities leverage they customer. area each want and shopping is see to the second Our to analytics personalize for order great better of more when Lands' End: digitally on quickly new receive are what that looking to will order four they they they need to at products, things it and and when fit ensure discover their to to easily, right, for shop it. find

to are embarking across therefore initiatives are experience to experience better to on customer. site, number points. make our to nimble a leveraging improving device centered a more and multiple product visit massaging, our user time of better These and personalized on market they speed We a offering across digital to data and platforms, improving and customer quicker speed optimizing create company each the and touch suggestions presentation activities become decisions,

competitive Our sell, we our to our retail it third products. to how but area our channels. success sell In in landscape distribution on an of this is key where only excellent we customer create focus is not experience,

are We bricks-and-mortar and implementing Lands' experience. for the End we testing environment that standalone for our stores, the so create shopping stagey optimum can

both offers from place strategy that we market customers the and are well multichannel and brand, our seamless as our from embodies customers experience. create with resonates a We learning our a store

what’s retail our important help store geographic to are strategy, locations of as our part the analytics such and End decisions inform sense As Lands’ at using for make what our most to customer our customer us. we

to as throughout open and we test our to our the expect a of first year the open in XXXX location plan of half We handful locations concept. we first

exposure. are and also End digital internationally increase both and awareness order exploring and brand the to universe channels, third Lands’ opportunities BXC to We utilize customers domestically party expand in of

we addition, outfitter to continue In the our focus market BXB place on through business.

is see by additional national an opportunity We and are accounts and third as a we of combination and this coming excited and infrastructure. fourth we on believe party retail, area opportunities channels international The distribution learn initiative launch that to over to We digital, our plan business on across years. Delta time. channels. and we leveraging process test about the Overall over focus optimize of the regional have execute

a tasks years, process how and store emphasis we over in several information. system with use collect, improve efficiency order past and you we to new the As invested know, in manual reduce an ERP of standardization and have

we process We the are that areas, out this as a are capabilities operate as those in and the and put system place well benefiting additional from These merchandising pave that operating implementing way roll player. in will to and as in the year of already multichannel earlier processes. competencies strategic we business inventory more planning as global improved the grow to work finance

warehouse a As on and highly in our their as the management, well to we us the improving further we interact optimizing experiences data, to our and our as having personalized customers believe with We turn which with look lifestyles. well our will to in order will underway to are based processes the future, place way that heritage logistics and brand’s capitalize speed. on transportation, our management and and systems the selective talent enable operate attention in we for

now these them consistent and In that us fact, with International over done business. long backlog. foundation as the distribution Essentially the of Ultimately our value In the are areas put Merchandising several as execute channels They and and both fulfill up E-Commerce. critical we broad be when it’s brand years. the Vice have two of our we Head in are that of appointment Sarah next taken to finalizing they be infrastructure connected customer recently center, to on of term from they Gill wants our exceptional across anticipate plan laid and and we’ve Vice products of have quality, in product accounted are life. President, will assortments, needs. going and strategic This feel Senior for meet Executive our their front conclusion, performance choices, customer needs care to drive us to the their of President and in Officer good technology the great Chief Rasmusen experience Hong helping their growth and focused

evolve as our the detail at connection. want Conference, have in channels, across and I I growth share we faster a ICR in online be purpose to center better digital to multichannel with marketing the our will that organization. innovators our our to provide customer and This offering January access for they means initiatives business enhance across While more continually will rooted product are the in customer programs driving customers a our provide customer and will products

presence that products to to our on focus and shop. to ensure also retail customers will want whenever access have wherever growing they We

and to it are now in Jim performance. We I more of go to to on ahead capitalize With opportunities our providing momentum in are we plan forward look that, the that to turn I’ll positioned with financial End. the over for our Lands' the details excited about January. you business review well believe forward

Jim Gooch

and morning. Jerome you, good Thank

gross margin pleased the continued improvement expenses third We are We increase made significant profitability. revenue and the and reduced very rate a in in with in that we growth resulted quarter. drove which progress

For increased the third compared quarter to last revenue $XXX.X million $XXX.X X.X% year. million to

after store $XX.X direct revenue from of decreased adjusting largely the Sales million Sears XX.X% for overall while in accounted the X.X% grew to X.X% to million, $X Sears closures, closures. sales which approximately Our prior $XXX.X the grew our year. revenue for retail in resulting segment million,

In performance new improved terms response introduction Knockabout driven pants more within towels saw the and basic offering, robust showed traditional bedding. woman’s and of and within Bottoms lightweight Supima home to positive men’s product, and solid pencil of Chino outerwear fleece we a performance with by in down. specifically

efforts value customers. very proposition, continued well efforts growth increases in and customer double file buyer product our as enhance positive digit and optimize further reactivation in refine our also new as as, existing lapsed experience. marketing we are customers with pleased momentum the both our our customer with our of file These drove assortment in and We

both to spend catalog. strategic of fine-tuned our and We our We disciplined, promotions a in committed effective taking specifically and learn, productivity and which approach to marketing is media improved our and react traffic on driving conversion. test, continue focusing promotional improvements channels, see utilizing our digital remain a most view We profitability.

business saw the a was items accounts. presentation, on in driven as season. This during around In in offset as consumer during from our by predictive addition behavior. back partially national product uniforms our the key business include increase focusing our to slight and revenue well decline schools quarter, catalog improve outfitter by mainly an enhanced selling to We buying refinements further modeling school

fourth business account of new beginning improvements of see of this launches the to the expect the at the first as end We Delta the quarter and quarter XXXX. in

since at the same-store business Sears in shops X.X%. in stores, sales closing locations retail sales and Sears by to last XXX positive the in XX year, third Turning of our quarter negative with ended were combined X.X% X.X% which stand-alone our We Sears. our comp impacted were resulted decrease the locations and negatively of store of we quarter

expire next leases leases XX we to locations of for are locations, and which negotiating remaining our currently these in more months. discussed the only January months. over locations our lease scheduled Sears to include these term XX In the exit processes of favorable XX remaining As We are rate terms previous XX that plan the renewal reductions shorter of XXXX, the of on of both expire. XX

realize to help We and the improved $XXX.X expect gross EBITDA profit was well our to increased us direct or retail Sears. relating offers End will X.X% versus did year. to and by $XXX.X $X.X liquidation anticipate XX.X%. to million. though this taken the accrual to decreased million enable Overall year, expense increased partially dollars in down a decreased not our in fourth year. XX.X% year-over-year XX.X% gross Furthermore, million enhance mainly in we’ve believe basis we by fourth be sales $X performance of largely Selling margin promotional margin In quarters. of be driven margin at basis last were and between gross to increased to expenses, administrative believe another expense we offers in quarter where incentive by Despite rationalize year segment, we still XX.X% shrink million shift continued write result primarily spend down stores able events initiatives productivity was of driven higher out improvement points in us to SG&A increased assuming and Canvas, other in our the terms this and underperforming of annual occurred percent the basis marketing to accrual. third than XX reduce revised repeat X% as the retain us quarter expenses The primarily we million segment which our and expect $X.X incentive lower variable quarter, marketing cost a customers existing from pricing our last $XXX XXX year’s and offset more we decline XXX point driving to and The a and sales. as a in The the and gross Gross our strong third business, compared profit our will actions yield last into our shifted Even to slightly these in increased the margin product more prior productive. positive that shop the Lands' points inventory, the the increase quarter. year. increase as million

As there of second a the the of accrual the to prior business. due year was reminder, the performance in incentive in year no the half

largely the also $X.X million forward increases million, net of or loss $X.X with multi-year Finally SG&A asset will $X.XX recognition program we with income by compared in to million go as revenue move share of launch This multiple to XXXX. costs a to will finally year. involve implementation. due live quarter of share was into in Delta the compared dates third income be quarter fourth corresponding million million at an impacted XXXX the the just in Operating by $X.X depreciation. and to tail $X.X corresponding the increased to $X.X of to end increased fourth $X.X into per $X.X loss per quarter And ERP beginning XXXX. related or last million operating net for quarter beginning Depreciation the million $X.XX the our of the

use is measures that In profitability EBITDA that important we internally. outlined an our above, manage to addition business measure GAAP we to the adjusted

million that’s $X.X an to year. $XX.X last quarter, For compared increase was EBITDA adjusted million $XX.X million the

a balancer Now and our quarter. our continues inventory during This current to to let’s the the the to timing decreased the million payments. cash very the was fairly quarterly balance confident inventory health Overall, million of look our with in with with business investment. year. we decreased at time cash resulted drive both million believe to the of which million Net accounts balance. last the flat, flow the $XXX.X versus to $XXX Total product improve due to to the prior at content Even payable less the improved quality year help we and million, long-term inventory. the fresher, debt $X Its reduction down year, at the age compared we though compared negative last $XXX.X was our related inventory inventory impact as million, remain this principal end more sheet. its of our $XX million take at to end Inventory compared the last was a $XXX.X quarter quarter $XX.X was of year. our

recently facility of existing in but facility November closing a also facility the We which ABL with refinances credit revolving of terms $XXX borrowing million the The announced new fees. and XXXX. matures unused new similar million, $XXX lower with

is there are access current short with execute a favorable continued long our term we provides pleased liquidity initiatives. that no as us more this reserves we intention to and structure facility it strategic utilize to While on at cost

Looking ahead, spend the majority million ERP expect we be the we’ll open With and associated that, up $XX continue XXXX. million to The $XX other this approximately in questions. with investments. of call technology information for to is to CapEx

Operator

from the Thank you. Group. line [Operator Instructions] Craig-Hallum Our first Fuhrman of of question comes Alex

Your line is now open.

Alex Fuhrman

a my taking for and really congratulations third you nice thank on quarter. question Hey,

then bunch perhaps if that know number I going reminder here, know are about year of or the and to you stores decision sounds of to XX to due looking know your leases make all in I if right in correctly, plans the close performs you’re know leases wanted it that like I’m What larger your ask to spring doing still a this before looking of retail and here have at that would thinking You next the I’m XXXX. XXXX. on there kind you substantially believe be a spring in then you next, how of of to the about year see math your that maybe the or you business the most sign be come the in year mean spring that would you point following would is the

Jerome Griffith

of couple things Alex. a Well,

to I year say of month meant leases. think leases XX you instead XX

Alex Fuhrman

I Yeah say meant to that.

Jerome Griffith

Yes.

months. XX come the of come them leases majority said every due the All we January. as of next in The through

January So the we and a this trench went process a remaining January, go following then January so we’ll a and trench the have we through that this similar year. next through

take XX look at said, appropriate more line is at You negotiate what we able customer this be we and profitability, sales the Sears keep only are, XX either to able were that at to ‘XX retention, and know we’ll decision but terms, look the We on or to lease a we as the our the by remaining profitable decided weren’t be months. forward the look for to we them, our not terms, what we’ll felt them point. with at the rent reach to term, store we that have store make conversations to close. of look top on go wouldn’t favorable then also group able about With decided

months. anticipate next over I’d XX similar So a the process

Alex Fuhrman

on about Okay, I wall is basis… all about I’m talking profitability you you’re when guess getting the you’re a four I talking stores and imagine what at here, know

Jerome Griffith

Four wall, yes.

Alex Fuhrman

of love to get understanding. to better I’d sense And a just try

of you just is as look how are of know you get going a as talking fixed as the of that know stores how retail just business at senses that mean we better trying kind component you that’s trimmed long much fixed to there’s to know expense you as – you stores XXXX. that reduce you could with of baseline number I much know be certain that there stake into the expense? any how much have is be versus expense of You

Jerome Griffith

any It’s be. would combination business. tremendously retailer just like It’s not a a intensive fixed

of to lot management in a if relates component if and of function of related for have ended able variable up out related fixed any but district. amount a a closing them. expenses stores instance You all a that a store, amount portion business of each that’s the of significant significant look come We’d to out those have be do if one that you that district, close to expenses – store that we to you those to too more then will expenses a so of you’ll those fixed take step eliminate

through think manage we’re So months XX looking us appropriately. see we you’ll and it at manage these that as next I

Alex Fuhrman

to helpful. more component weather very have you Can expecting QX, strong it that’s was weekend inventory like be performed sits seasonal you looking us far last items seasonal than and how sounds to if Thanks. mean or of for your Okay, of I give And into then a as cold the look so sense for or Thanksgiving how the year you’re December a more December. month and your less major company.

Jim Gooch

product we well, even started into seasonal even cold not performed The off a really though as fall, actually it’s fall. relatively

weather outerwear accessories phenomenal, turtlenecks have well, cold was been phenomenal, pretty now performing has very sweaters been been have well, flannel good. shirts have performed You

with we’re pretty that seen to-date. So the we have selling pleased

can in I you some getting as is you quiet think the clean. in our inventory, see inventory cases, know

you know four as will into concerned, well. cold great. the in you will you performs up. far four like not it a good But how Having in lot standpoint and said way that our some out even biggest is then feeling be quite go feel that, go looking of from to coming door and on yet. We long that still and we go, quarter out this through transition see about year do investment we’ll stuff product; we’re quarter there’s Christmas we a spring know next half to are know January gear throughout has the going the of feel one business there’ll into have we’re We got weather rest an but the still you we season. Delta off way launch know Since the is well, of launch started quarter as January as

sold really and product it know degrees here. the looks XX when You morning up it was like woke well this I good,

it’s think it’s on I coast, east so going cold to looking good. all the get

Alex Fuhrman

That’s very very you helpful. Thank much.

Operator

and This you great participating all may thank does the you for Ladies today’s no questions conclude time. Everyone, showing disconnect. am further in program a day. Thank you have I this and at gentlemen, conference. and

Lands' End (LE) 5 Dec 172017 Q3 Earnings call transcript