LE - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen and welcome to the Lands’ End’s First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference call maybe recorded. I would now like to turn the conference over to Bernie McCracken.

You may begin.

Bernie McCracken

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

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

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

Jerome Griffith

you thank and today. Thank everyone you, for Bernie, us joining

fourth of off strong pleased line the approximately End to first made largely Lands’ quarter in our profitability our Delta Air grew and and the straight launch When consumer we our across quarter driven million growth double-digit to year ago. We are in have made priority international the demonstrating growth We delivered our increases great from on starting year Lands’ American $X.X our of categories. growth to in increased and to by a initiatives. be year, saw in top business as first XX% get Sales classic was key innovation growth very $X product brand. a progress Lines sales continued quarter last the a by our businesses. Adjusted as note. the U.S. We well strategic embrace our that back million joined I EBITDA Heritage End third the

level of are infrastructure. We initiatives key of continue also areas: as increase number them. we collaboration in a accomplishing these and XXXX, product, make of advances the In to distribution, areas, strategic key we this on focused that digitization, execution four through will the between are

Before providing highlights call would initiatives, our the an from to I update strategic like on out quarter. some

sun Strength First, particularly those presented knit-tops offers sales as products, relevance that increased swimwear to protection and business we of that quality, product our well as in receive by value, our assortment response our as driven our an categories. to continued and was bottoms consumer. styles favorable offer the

and than our have consecutive new higher increase at continued to driven purchased are key Second, re-buying buyers they last a by pleased that a we our who Within file, in customer we segment, rate years. customer in are our purchasing build items double-digit year. extremely

tells younger new are attracting than that us are products somewhat and our base. groups broader to consumer mix, skewing all which a age we they appealing are customer from buyers also our Importantly, existing

experience Illinois kiosk opened of stores interested outside and in conversion in driving if first of saw our second our in an quarter company rate our our Massachusetts. the available The outside in improvements retail underway the due customer two pleased offering the the online new product is concept. are strong we the is to integrate retail operated experience. overall technology We well stores into with Chicago Boston increase we segment, high-quality the efforts during results we new in locations new quarter, Burlington, traffic rollout the with In the early our shopping marketing and during customer with a Third, and is expanded through offerings. are Kildeer, improved and

further that in-store this confident While Lands’ impact remain were March, the we May. we the impacted quarter, of decline headed as store to shops of improvement believe strategy. and sales improve we shopping. of of in retail extreme we well in half attribute the Overall, in We sales which our April of trends much performance the right on the path End first weather as at in back challenged retail comp in Sears and terms saw our the February are the

of for to data fashion a items a better intelligence and swimwear, and ahead, leverage pricing do customer. inventory focus data on advanced will we analytics well driving bottoms a remain force categories our as customer-centric sense core knit-tops, organization. Looking as product, outerwear, we on as to our that makes Within everything behind with continued drive seasonal

points this deliver conversion data been in items our on level key rate. and another we are an analysis, fabrics, Our highly as file to to points in information develop customer additional driving efforts the have purchasing within new are learning perceived selling value. silhouettes, there successful Taking on fabrications, in using as well in price design this behavior styles growth where our popular and fabrics, categories to product these hone driving based increase our price and the what silhouettes in top greatest is and

most or embellishment item such cotton sweater. pattern, print, Supima key we based a our fashion on women’s into customer effective is example, elements we like For know as newness insert data, when

product We favorite for also data feature our stretch leveraging from pants. see a we new chinos customer provide wants, have attract we active appreciates, that such increase kids’ believe customer By knees we men’s with a purpose add more opportunity the reinforced as or activity to buyers. of purchasing product our our success when a in the that and buyers an to

U.S. bring more taken fresh in us of with that so certain discuss, significantly the of Jim the is strategic start This, have mix, to areas also our effectiveness be improve combined to at As will season the tighter our and business. within in inventory particularly assortment, product enabling we control, inventory inventory enhance direct each with quickly we more can steps promotions.

the customer also relentless our to continually efforts We in experience. improve remain

on effort the best search. well focusing site both capabilities product capture Part our are personalized this as to phase. We our the searches in reach of the and highly as customer ways, including discovery functionality third-party using is digital on our customer both during page product improving to search the

use our for search product our are with We habits site search best-in-class searching optimization with and updated enhancing customers that engine practices, language align descriptions when the that products. including

her quickly and translate higher into and can that will that new engage example, our to want relevant We is for traffic results fits wherever brands. with existing tankinis, For easily more with she shopping if ensure ultimately she conversion the and find chooses she believe both to for customers. we swimsuit this

we addition, customer using to are analytics In our the experience. personalize data

that connect products will We know with customer online our right what their of the as the offline the have on means same. for as journey highlight and communications the what purchasing in we that right customers highlight view a customer for This their both Lands’ may to best behavior data-driven for site different strategic personalization products look End behaviors than are we one or on the the right at e-mail like we leverage contest. friend, maybe not we time

helped deliver with our Our initial with rate customers’ first the that our needs. conversion confidence increase during on our gives are recommendations personalization work point quarter, in which data-driven us an has

vendors existing market, particularly a it enhance through evolving products programs. our working addition, product our enable strategy, where are on with sense, makes we increase sourcing the In This partnerships in and on purchases. promotions to more focusing product with honing strategically drive these vendors, fabric on plan leverage our and to to us that new will strategy, and enhancing speed marketing improvements elevate We refined quality, key development.

how appropriate our make that to open, we to have in we an also terms In customers brand purchase. easier have stores inviting new opened products on customers strategy, we distribution shop they are same the they or developing purchased focused of where ensuring approach, it and no And in our to and person, and choose for where are planned a setting. matter find that making experience our products, great the uni-channel through

own it that As start our I shop have landsend.com, website, on than now half recognized searches we we ever to while mentioned, easier of Amazon. making are apparel through

are are we we with So, customers to channel half see the marketplace are early use love. success, Based this key exploring Asia buying that our we completely are new Based discover early for to that the another Europe consumers to our our on and this same expand our thrilled working and results, new globally. to and in provide our third-party of see of customer products. e-commerce Amazon our on to other over is brand, brand items Amazon customers existing we

more exploration early steps. we and provide very definitive after this We take are in will stages we of updates

program Turning to I requires so Lands’ we program, Lines and Outfitters Delta proud XX for growth this such uniform End that during by quarter large and similar business. the the of gain our the attract from for its employees us believe visible to XX,XXX be exposure large in strong a to and compete opportunities. of flawlessly. saw Delta we May on business, Air We positions our am driven executing experience, employees credibility

we and the the awarded stages program were Airlines we that are in to in planning come the half in of For of January XXXX. uniform example, launch for second American business the expect

has a business with also Our number going we a very have as and of accounts potential gained accounts new school pipeline uniform solid began of forward. momentum working

enhancing we launched and planning We throughout to system our business ERP procurement of the are support our to modules Finally, the continue we and undertaking far. financial initiatives processes long-term the rollout work improving recently so gone to direct growth. and drive new infrastructure smoothly has on that our our the

by management fulfillment implementation will phase complete next that and We ERP and the in enable enterprise substantially our more their end expect with that flexible will of inventory The XXXX. be upgrade of optimization will technology options. we system investment be order

executing infrastructure this We to initial have beginning for of preparation initiatives, we in a in for planning implementation our improve data remain and strategic to support even same become system time, In product company on focused an objectives. phased new fiscal At will summary, long-term XXXX. network. leveraging to digitally-driven work further more the assortment, our define our our started the achieve and enhance business project this our we us the our help continue distribution

with End, be our to End as Lands’ as to way the the remain review that move routed will products in in on in we communicating business. progress easier financial well-positioned Jim the evolve remained what detail. pleased to continue And more the us becoming this over Our with a results uni-channel telling it we I making offering effort Lands’ making are it goals. meet customers With we are we our throughout that, long-term by believe to to to retailer. will We our shop them journey turn personalized to they a for them responding want we toward and

Jim Gooch

everyone. morning, Good

we fiscal adjusted EBITDA mentioned, double-digit with pleased growth quarter. and significant revenue to Jerome the strong with first As in are the XXXX start

revenue decreased million our Sales $XXX.X in segment and last to For million grew direct to sales XX.X% XX% to $XXX.X compared million quarter, increased to million. $XX.X the year. retail $XXX.X XX.X%

for Delta with total by retail X.X% revenue decreasing partially closed and growing Excluding XX%. direct adjusting Sears X.X% increased stores, segment offset the

key continue core to to items within their In terms categories. product, consumers of well respond

quarter, living During the strong a growth specifically knits to our led our first in swimwear and beach addition was by business, bottoms.

assortment and we purchases. our pleased are momentum buyers file in as repeat our and enhanced are As buyer Jerome especially targeted metrics increasing the and marketing continue with to efforts in improvement improved loyalty product driving our see mentioned, active

the outfitter strong driven business by Within saw direct Lands’ we growth in the segment, launch our of End Delta.

and were quarter required We As uniform first part end the orders was approximately May through shipped XX% the by of shipped XXXX. in launch fourth the comprised XX% approximately quarter XX. of first launch, all shipped in personnel XXXX in quarter which of the approximately be to of of XX% had of the the

second initial We quarter, After expect second we in the second remainder from XXXX. essentially to the shipping quarter in XX% approximately launch. national which see the ship of of conclude minimal the orders ends the until expect period the revenue will quarter, the Delta to

standard working expect offering also closely during we products XXXX. beyond to kits product expand debut our We and the that with these provided Delta to launch at are

finalizing our and In currently timing we take American Delta of of XXXX as in to place addition expect business, this We approach Airlines. launch the will we quarter we the the on date. update are to launch fourth

with Turning a Sears retail had shops to operated year to declining. company End the our lesser a our at business, and disappointing we extent start Lands’ stores both our

Our same-store quarter. for the decreased sales XX.X%

Our performance by March. and was in weather negatively events impacted February

is unproductive primarily our by However, begin product very of our into we improved to April a our and in May. did negatively in stores clearance Same-store was focused trend, improve sales gross and reduce for reduction unprofitable see sales that company sell-through to higher our retail company-operated in-season sales. sales also margins. impacted on company-operated, The in continued

During we Sears. last quarter to fewer Sears ended the had at year XXX XX shops the quarter, compared locations and first with

will quarter As Therefore, there third leases we an the year end. were of additional shops of half additional XXX quarter of end at XX Sears. shops more end the shops quarter quarter. than in no Approximately that to have XX also an were at with that in close since closing been which expect and expire that third have end, we notified process the

second X We that We in May also and on quarter ended first XX the stores, in recently Illinois, Burlington, XX. on company-operated the April with XX stores. Massachusetts opened the was Kildeer, new

effective gross lesser X open $XXX X.X% margin direct a assortment, margin Sears. mix segment Delta promotional In of gross during test the The to to continue approximately segment, inventory and partially business in shops in increased XX aged sales to clearance our offset our sales. unichannel led gross stores approximately margin to contraction lower margin by customer-focused margin strategy. to expand of to launch The by lower more driven inventory management. higher to to offset Gross mainly year additional stores and a XXX basis last due We related seasonal of approximately year stores XXX to partially margin extent the X our are decreased profit we points XX.X% unprofitable from to to gross improved Company-operated retail the primarily million as or was $XX.X planning XX%. increased points million. points and basis XX.X% decreased company-operated a reduction which improved basis by management at our the

Delta the to the quarter, remainder for headwinds we margin. gross ahead look we second as As expect the the as well promotional remain launch highly continued to of environment

increased expect through our half due expenses stabilize to income higher will promotional XXX our first year revenue do XXXX. and and of to personnel and this SG&A million. the sequentially the productivity accruals. back points $X.X million which of and we improve initiatives by was in margins next an to in However, initial cost administrative basis marketing year loss improve $XXX benefits of to as sourcing partially as we continued compared operating should incentive driving improve yield approximately begin Selling million improved leverage million of was quarter expense Operating $X.X in XXXX. offset of down percentage $X.X a margins management,

of first the a combined is was to recent favorable audit XX.X% settlement Our tax quarter. a the prior negative XX.X% the in in principally year’s tax with rate effective a tax quarter, benefit tax last for which reform. compares negative state The periods result

loss loss million per was of compared XX% last $X.X share tax rate $X.XX or to per we audit, this a the a $X.X be As or year. result approximately for the expect to net year. $X.XX Net million favorable quarter share for of the

for GAAP year. we In measures addition outlined compared is we million EBITDA to internally manage EBITDA the our to important the above, a quarter. million, $X use million last that was $X.X measure that that’s increase Adjusted adjusted an $X.X to profitability business

the of balance at a million million was quarter $XXX.X Total the year. $XXX.X take at last let’s to cash Now, look compared the sheet. end

of in was progress Our which with flow. $XXX.X a down $X.X is combined was inventory, of the to operating the year. improve better end the inventory to Inventories last compared cash million, direct million million result of sell-through at lead seasonal $XX improvement reducing quarter, times on continued flows

investment looking not to to $XX the $XX payments. inventory. finally, quarterly be year management implementation And strategic questions. to million $XXX.X our our of $XXX.X continue health will but long-term for overall the the in to ahead, We million to time ERP support Net up order improved our we pleased debt both to I only level, that, and this initial with be help targets. are at financial due in and CapEx infrastructure in million our investments expect decreased making believe to compared XXXX our our reduction us achieve to continue the the approximately with the last we in due largely principal to we long-term Overall, With million will investments system. initiatives new open call

Operator

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

now Your line open. is

Alex Fuhrman

taking there stores getting next you want any feeling now Thank change been there strategy and little quarter really any as more color to question a to in as the have that the you congratulations approach love far very or on the Great. got customers bit consistent have that? you my out that feedback for the thinking initial you about just productivity employees here. few years? your and on I from that how you get how much have about are there just couple over opened, the been a would new nice Is a

Jerome Griffith

couple this at strategy, opened. point, in change of real have no we stores Yes, a Alex. Thanks, only

outside store which was concept and is in Chicago. that’s one Kildeer, the of right new first The

productivity higher existing much are very the what very what pleased like, We with than looking results is stores are. early are our

We a store. small the very assortment have in

us. We are to men’s working that for carrying seems women’s be well and swimwear relatively

We store online where center, convenient see to of that buy good well you competitors don’t it we seems for that an got in us. drive have the store also air a the in the The have store we just very area. the the is anything up way set that availability open to shopping be up, to in working in lot

it’s pleased Apple, a are We near Foods, street great, thought are are down expected. be it, a be would the store. with from but it it’s productive well We very coming really We what and of Gap, Whole we out very thought we we we The doing kind with it. will

well. I say we Burlington, a track. And locations that’s response And to, will early be opened got Massachusetts which largest and we up opening X strategy. store year, to store so part on we far right up are on We would distribution a would but our own in looking be closing, the in where Burlington had up back our them that well X are opening or said have track but store temp in where That’s as our stores be was outside was. right to of think one of that opened towards we we that of we we up in we they going be days, and and more Sears having the forward part stores still

Alex Fuhrman

a business, at uniforms launch Great. well went the the like and helpful. of also it then just impact you. nice here. sounds That’s Thank uniforms the Delta to And about really ask had new wanted really

just like continues It the quarter, if few have you what regular understand uniforms what to a of marketing of like that like two – Can SG&A look quarter. few added business? you it years that accounts of e-commerce if how couple the to might trying margin the is big just the and and a a to for the do Delta, and margin about mean, does next a a business I sounds in little become that as you margins? give be I it think with business years, chunk Is us grow. potentially were to On growing be bit a sense uniforms the EBITDA that lower impacted gross other assume is over year mentioned overall or the fair business? your that for less double-digits bigger it really associated similar business, to a there could

Jim Gooch

correct the than have are with first was in Yes, is either you that’s so Delta business but slightly through to the probably bit, said in of the of what American you don’t Delta is just deterioration largest year what the coming the for we year in will see that we that be gave their before misspoke, get next benefit Yes, profitability margins have average. little lower, course employees And at next is what’s Delta. can the gross overall much a Airlines, the from the you launch. We but another margin Alex anticipate will allocation. chunk we that the coming rate when or better quarter

this will or of that things then be end they turnover So either the sometime replacing of already -- rest the launch Airlines towards year. year some replacing employees Delta’s should Delta next American current the purchased, of and

Alex Fuhrman

really That’s helpful. Great.

Operator

Thank you.

comes the C.L. King of next question Steve from & Marotta of Associates. Our line

Your line open. is

Steve Marotta

Congratulations income? little morning, there pulled and was Jerome a SG&A first a which of specific question Good out other the the into other bit quarter. quarter income, in about a Jerome, reclassification on Jim.

Jerome Griffith

a that’s there, think in Steve. tax I reclassification

Steve Marotta

reclassification a that that Is permanent Okay. or was one-time?

Jim Gooch

write-down Sure. that’s that’s a one-time. receivable, of And a also

Steve Marotta

nature, those Okay, one-time were in so all okay.

would affect not wouldn’t EBITDA materially long-term your – So affect they that percentages?

Jim Gooch

No.

Steve Marotta

market an customers those your From and standpoint, you to enough. future? to the fair bit That’s ability can about see little Amazon in talk a

Jerome Griffith

Sure.

been for We have now. with way look X.X right months Results a I months, only think meaningful them X in great. about

half program seems is swimwear key End, are interesting for a are selling, our than selling clothing them. that What’s and as us in interesting pleased and Amazon, are be online are this of is what customer we is big small extremely What’s to we have online start we swimwear more shopped bottoms customer to at you End us have have and well marketing marketing them globally, business so at to than business good a business new for have good long-term good with bottoms We Amazon, haven’t customers a customers, that lapsed and no news are we great are been searches Lands’ well. items, so business we mix a and meaning with customers, never new we Lands’ a Amazon. more been we going the in their have a a coming half them globally, of year. over at they XX% we of And a have them have

are there with we So, happens and we with the think that and and year. pleased through this fruit, early marketing bearing holiday into the our results what we extremely efforts to on see are Amazon excited season going are next

Steve Marotta

Joe So but or the Amazon, catalog instance buys to a Joe in is question have is for if to their something Midwest had known to from directly, speak somewhere that information now on you accurate? them never send you Smith the Smith, them

Jerome Griffith

We our are systems the warehouse directly that fulfilling this have from not here we point time at available. with in

from fulfilling Amazon. are We

to directly sending is Amazon So them.

Steve Marotta

relationship you want about And fair other growth, Europe you talking you are similar when Amazon other or relationship or a potentially are that in similar on platforms players there? enough. do could could Okay, – be a European have you there with

Jerome Griffith

product their internationally. work And in there that start feeds be to would are them as in yes time. to we players can to big individual players get websites. are answer market The to markets on we we We that will that Amazon working and talks be plan with this other and in point yes, to how with and with them internationally are we question exploring and at

it’s that opportunity better job through us. – a early do that’s used somebody not we a but with. days, think we could much for I It’s size, selling else’s to it’s big market something are

stores England marketing very a the with business department relatively we robust with familiar now are them have we with I if it, We there, of Debenhams, have don’t do small them. a in online business with right and you one know but marketplace

Steve Marotta

a just more your percent One XX% as correct? roughly is question, of reminder, as direct international sales, a

Jim Gooch

Yes.

I before. an that think yes. we approximate have number number, That’s given

Steve Marotta

much. very you Thank

Operator

Ladies Q&A session for that today. program. today’s And does you thank does the Thank in and you. conclude conference. conclude today’s participating That gentlemen,

Everyone You have may disconnect. day. all great a

Lands' End (LE) 12 Jun 182018 Q1 Earnings call transcript