LE - Earnings call transcript Q2 2019

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Operator

Good day, ladies and gentlemen. And welcome to the Lands' End Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session and instructions will be given at that time. [Operator Instructions].

conference this reminder, a maybe recorded. As

now Mr. Bernie would begin. like Sir, to today's for host your McCracken, may introduce you I Chief Officer. Accounting

Bernie McCracken

morning. be fiscal XXXX Lands' which we joining a Good morning of our results, you and website this call can discussion quarter earnings on for the second our released thank And found End for landsend.com.

Chief and Chief call Jerome Griffith, Executive and Officer from Operating you our our Gooch, hear President Officer. will today Jim On the and Financial Officer Chief

After we the results we actual and remarks, statements. will conduct also note risks a contribute not in but XX-Q. Please company’s quarterly differences company’s prepared XX-K could discussed including to could reports forward-looking question-and-answer differ that are to SEC such includes limited involve The session. Form the discuss Form materially those statements information included from Such and uncertainties. on Annual about are this the noted company’s our and on items filings, include, Factors on to, call. Report that those

by developments is information company’s obligation as outlook Subsequent to this on represents call we forward-looking the statements company and the change. provided company’s The today. forward-looking made update not events undertake the And to may do any cause of by us. outlook that

be During Principles. These non-GAAP this in non-GAAP to Generally will call, Accounting Accepted measures accordance we measures. referring are with not prepared

be found which earnings landsend.com. the financial non-GAAP of of of Relations in our our measures to measures the in reconciliation Investor website can comparable issued A a posted directly earlier most release is copy today, at section GAAP

Jerome to over call the turn will I that, With Griffith.

Jerome Griffith

second financial a thank you and review Good business morning. of joining for you, And us Bernie. results. for quarter our Thank

increasing the reiterating to results net second EBITDA Based progress half, are our our delivered our initiatives. on we fiscal and strong have and illustrating we're EPS and of high-end income XXXX. guidance We the our confidence for adjusted above our across making strategic revenue and range, pleased our were at the expectations sales in

of grew the by momentum over for Our X.X% which adjusted increased led This sales in launch. when e-commerce ongoing Delta and lapping our business, global X%. growth the was Sears closures the

In growth operated Company once comparable X.X%. at U.S. addition, again retail sales strong delivered our stores

the right, in getting and infrastructure. as led are company, a discussed strategies processes a centered strategy, business we've on our the past, and growth operating As executing unique channel product improving digitally

The numerous strategic revenue progress initiatives to to we're of long-term achieve to stated for margin high billion in XXXX. EBITDA $X $X.X making our on us single-digit put our continues billion fiscal to across track objectives and

and great will growth customer. as of with assortment to knit Our our engagement to in our Land's swim, a purpose the be attract strategy outerwear, with product optimization mission our destination by driven is core of value to that our our bottom. continued End We hone believe key deepen our offers delivering customers item new we by customers product our categories and

layers, fit are through as, product we We the articulate we objectives that layers water, main this and four weather, own the everybody. driving strategy layers, own

data interest design customer department and continues our organization demand create by productive data, align improve Our ability product product better leverage is and with more our assortment applied then data to science our to merchandising inventory. purchase to which and

to with For our continue we our both knit for use mix customers. as the the we particularly to were quarter, pleased optimize women in men, second data and bottoms businesses assortment and our

No our new of shorts new Iron we fabrication, patterns. big in shorts illustration and silhouette in more colors including offerings and this saw to is good A addition a our Chino expand opportunity where Linden to with business adding

have improving confidence our our hard learned online to garners from as consistent fit our benefited providing customers and Our buy fit loyalty. bottoms business that around we also work gives

variety of a we added business, denim our In washes. fabric along with XXX-degree shaping, and

Our strength polos tanks, across and knit well sell novelty. as top as tees

We are collection. we versus customer our as to we enhancements merchandising extremely shopping made see in the pleased strong assortments colors to items continue full and have response patterns, the with favorite key

slow in in our the third we to up position the the a last picked had continued more year. compared fully better see which season, to into season. and later Swimwear preferences, closely you our but assortment more quarter we've a shift to will as to start quarter saw continue will in-stock Overall, fall as reflect the customer

adding with newness, an rainwater will knits providing updated expanded drive and variety our down ahead, excited to continue that and fleece, to this, strong we're We to Looking bottoms by assortment our ensure looks combined our to more outerwear results. to coats be assortment offerings. packable enjoy believe customers

The an terms best sellers see and in swim. in increasing moving us styles also to this our by of insights swim of and our opportunity moving less features offerings quarter forward strengthen gained items. assortment forward position popular silhouette We eliminating

whether wherever, shop, Regarding to or brick-and-mortar to is whenever customer however, our wants and distribution our stores. our product strategy, offer in digitally our goal

our direct-to-consumer of heavily heritage over clothing continue lean our sales. which XX% selling With online, we represents e-commerce, of to into

the customer through to we purchase relevant high items our in making right algorithmic targeting when the reinforce investing is to steps driving results customers new audiences. buyer growing last lookalike with strategies, single-digits our up through acquisition are teens file and intent mid are digital in customer acquisitions and that high, show quarter We search key of the in growing the digital new

results is from buy. digital the capture for searching efforts cycle. to quarter, continued a We is customer, the short purchase because she needs. know positive She to our our shopping wants customer has to what saw she we she consideration what During

up win her show results. when we search in we So

demonstrate the these to engine, efforts. more highly who examples not customer purchase data does search will search by likely And tells to customer initiated a our anniversary who fully of share seen, have than is two internal the In we quarter what its which guided within we successful three the our recoup proprietary QX, of I'll we're As this. cost search. implementation times first quick search the us.

internal as Flannel, and made and traditionally from our data XXXX well to spring. products winter we the into that later external the had Cashmere these our opportunity search an year. Turtleneck, seasonal it clear We goods, customers to offer sell traditional First, in such

target dollars items, still the sold much is than counter our peak always seasonal merchandise these assortment. testing of We're million smaller several base the we quarter. for the audience season While in on second

goods, signals demand to and shorts, digit Second, buy period. listening shop. the opportunity July sent, there tees as warm customer sale time period. that tanks now Categories would in such increasingly in the summer such the during lift A digital to more our we how noted customer wear invest weather the to in time June, shorts saw is a indication triple of chooses that as now, be women clear

machine algorithms. This out customers helpful is learning-based who This past we year, for sorting prefer to browse particularly search. also sorting capability rather rolled than

personalized And mobile grow, high to just has how As our a believe important product continues are become. continue assortment understand we contributing conversion algorithms, tune, that which we we our rate. to traffic to fine

restricted not store key Lands' digital a give by are ready footprint, whenever purchase. our can we End customer to she's we Since items her favorite

smartphone. in our resulted in elevating, Lands' Our on traffic engaging now of focus digital efforts End the half around

start-to-finish experience, striving shopping As to back to them we and trip, that come again. customers' for a will our continue result, easy, again fast, inspire in a smartphone invest fun

conversion We to Currently, to countered continue over the within mobile along believe see positive everything average rate conversion off trajectory, hear move approximately these the the mobile of X.X conversion investments in we about retail mobile we is times our are challenges as paying X.X%. industry. industry

company customer stores, stores. to associates which operated in very sales highly retail know showcase assortment, exceptional customers pleased knowledgeable to our shop want strategy engage that brand. through is our we our digital the with brand by our also with the our enable We in offer customer growth retail X.X% as and our our comp service further us saw illustrated stores We're

gateway customers to able in-store associates available kiosk and that entire in recommend addition, stores. our our our to In are provides now assortment our are a selections our with

comfort, sales our we an this from purchase then increase Students And seen and online is our during style significant Wisconsin try for place charge shipped fit school's size the stores order with free made school As distribution on in-store in logo kiosk. season. in-store their our back-to-school have every can and their taking of from uniform center. appropriate example, in a online

very and heritage. brand also marketing brand and powerful Our a strong we tool how remain in expand our represent disciplined we stores to leverage footprint our

During quarter, stores the we end the second two quarter opened to with stores. U.S. XX

XXXX, the we the locations. fiscal to For to of remainder year stores more XX four at end plan U.S. open

we currently contribution in XXXX, stores with approximately store are targeting By four end wall generate that XX attractive of economics select margins. the locations,

driver for of this represents outfitters major strategy, company. component business is our it of Our a programs, periodic Due long-term generates business growth significant growth a to revenue launches while some sales volatility. our key

will remain fourth further launch on scheduled the in track with for which illustrate capabilities Airlines our uniform the the We American business. quarter,

these strive relationships this business and successful with existing We partners. and as will other continue to we to leverage new grow

will I touch profitability. to our improve on Lastly, plans

that accelerate margin growth EBITDA We and our our goal. spend believe meet EBITDA top line our our continue we SG&A appropriately to grows, scale can long-term as to

We costs and management in management investments our we're more now the and efficiencies. overall also of order Jim warehouse business discuss making process see to will through opportunities in greater realization projects, to of detail. the reduce this benefits IT the

be To hired office, as of excited our believe we earlier managing year. We've can move end, lead that we and we an are to more will to veteran buying this greater announced savings forward. Hong opening in industry our own office Kong realize We cost today, also by spent. directly material this later the

affiliate buying agent separation our Sears since recall, Sears, utilized may you provide we services. to the have As from

June fully we to the Our transitioned current XXXX plan spring through contract season. by runs XXXX, be and

improving our comp in excited our and we company our sales our file We're remain our in e-commerce focused growth operated executing business, our and stores. business continued In and making NCA, on positive continued strides, improvement We're initiatives. growing results. strategic our our about in buyer store conclusion,

and With it Jim to performance third over that, review turn to year. full our review quarter financial outlook our for the the and I'll

Jim Gooch

good and you, Thank morning. Jerome

the delivered above range, As margin pressure. EBITDA despite pleased and sales to expectations gross Jerome of net income our we're our adjusted and mentioned, have at high-end

to of year. launch quarter, End and company total the the our revenue shops to $XXX.X at Lands' impact After was For $XXX.X fewer Sears due last X.X% million last both, for in compared from decreased X.X%. XXX revenue operating increased the to million period Airlines Delta adjusting The counting year. decline second same

continued a product bottoms, in significant great saw well We of stores. on value our which company we business, as continue strength X.X%, knits e-commerce performance in most across our solid growth and quality high operated saw customers. with our in at strength our focus relevant, increased delivering as to as particularly to We global categories,

but quarter, increase up single-digits second new did environment, total traffic Online conversion slightly. value in mid teens. highly buyers revenue, promotional with the in order high with increased decline customers Aligning average the in and the

In ended expected, $XX.X our this retail at million significant store a by Sears, closures, million. XX from business, end expiring year. the as quarter the of with to have We all which of shops sales decreased leases with $XX.X of Sears number

with strong stores increase store the see operated in performance a company to X.X% continue comp We our quarter. sales for

stores the stores performance of We stores. U.S. also two year. additional open four stores operated an with to very ended new We our quarter new XX plan company with and remain and an opened additional this the pleased

school by Within of prior offset that due to of our year final business as growth business. down This million in the the sales outfitters, second portion were in shipped the quarter. was declined was our Delta $X.X launch decrease partially uniform the comping

Looking our expected between of the $XX making $XX launch, fourth estimated on quarter still XXXX. million progress with be ahead, occur million, being to we're and majority is to American in the Airlines which continued

The to approximately pricing XX.X%. Gross industry. decline to margin XXX in in basis additional was down promotional seen was taken throughout related second gross response primarily activity quarter points to margin the actions

quarter. sequential again on do slow expansion plan our we gross improvement margin the revenue our to resume we in the July, us profitability in margin enabled trends, pressure. and expectations a start in which After a quarter, and current Based achieve for to saw third exceed June our May, expect the in despite

to administrative Sears and of number decrease and cost the $XXX.X the $X.X primarily million, in by decreased structure. expenses leverage of due Selling million to our continued locations

we as structure, a revenue, our manage we of to variable to our percentage cost As business. we scale XX efficiently grow as improvement, of had basis points leading improved continue

million favorable of was quarter foreign the or by million tax year. benefit Income loss net $X $X.X loss for compared million entities. last for certain of or per driven share Net quarter, $X.X $X.XX to a the the per treatment of share was $X.XX a

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

For $X guidance high-end to the $X the million, quarter, adjusted EBITDA which million was of was our million. at $X.X range of

$XX.X end of The debt the balance the compared a Net voluntary to to is result million quarter cash million decreased million of to to $XXX sheet. cash $XXX.X Turning loan. of term at our year. was million compared of balance $XXX.X Total lower last million the prepayment year. long-term last $XXX.X

of quarter end the the last million, were million up second compared at the Inventories $XX.X $XXX.X to the end of that's year. quarter

last inventory As a you tightly efforts season manage and merchandise. our critical to year recall, will short end after of

So, we to heading spring/summer the this built season. levels our inventory year our in-stock improve into selling

have current historically shipments arise in help and from They congestion. port increases tariff levels. get mitigate appropriate, with In merchandise. very of to could addition, inventory potentially to front seasonally accelerate that low-aged also are comfortable We're we our we and delays

of our the now our minutes ERP We've attention our Enterprise completed of portion implementation IT like final to initiatives. system. discussing and rollout, I'd few we're our to Order Management spend our Now, a turning

will enabling working orders capital should line our result productivity real-time our to This additional as improvement. channels. opportunities internal and provide inventory and top external through global offer visibility both and in with ability us in to fulfill growth us for improve inventory, This our increase we

which also would structure, labor cost through would to out We've in System, shipping our which scope improvements begun turn package our us optimize drive Management and to Warehouse and management. performance process enable productivity

our offset current gross to fiscal with XX% and looking to at most pricing $X to moment impact of to you take analysts approximately year. the customers I passing update through negotiating vendor base a million million guidance, are recent savings to Before We of being announced the to these some through able turning anticipate to want expected the in news. tariffs a other The have for our our in $XX tariff tariffs of opportunities business. recently on costs

XXXX, shipments. further reducing we to China XX% approximately our to anticipate ahead Looking to exposure our total of

impact we tariffs to from million our anticipate approximately year. $X then to ongoing result, a $X As the million per be increased

guidance. Turning to our

net the between outfitters the For expect store with to Lands' by $X.XX nine locations. revenue of continue shops growth full billion, at direct-to-consumer will our openings. our to be in $X.X and and year, End This business, new partially we by reduction driven combined Sears be billion offset

million mentioned including earnings and $X.XX. earlier. We share and are our million, increasing and between I between diluted that net to $XX be income impact be to $XX tariff $X.XX per that's the outlook And

expect the We incremental that marketing initial partially million. our million expectations these compared $XX expect half of additional to as of to costs reducing to by We $X offset the incremental investments spend an we to now second $XX $XX million planned XXXX. to million for

focused brand be driving These investments customer acquisition. will and on new awareness

maintaining are million outlook million. adjusted We our $XX EBITDA to of $XX

store by of CapEx Management expect $XX our million, we Order new driven and Finally, system additional approximately Enterprise openings.

the business between For $XXX million, to the offset in be compared e-commerce net growth by our shops at we Sears third revenue to million year. continued of reduction by last driven $XXX quarter, expect and XX

to $X.X diluted and net $X.XX share between $X income per to We million and of earnings be $X.XX. million expect

adjusted the range million. We $XX to million $XX EBITDA be expect of in to

that, the we'll call for with up questions. And open

Operator

you. Thank [Operator Instructions]

Alex question with first comes Our Craig-Hallum from Fuhrman Capital.

is line now open. Your

Alex Fuhrman

Hey, guys. I Thanks guidance. nice to question congratulations taking my on quarter and the wanted for ask a about here.

down than was like is should year good up QX. here EBITDA that. it quite of bit this Just a a the implication more should in that results up year, EBITDA here the guidance, slightly It the in QX then bit here full down in amount on based QX Looks QX. little looking was guidance the and at in be be

expecting to improvement the of trying dissect how the of coming in in you've is here that see natural launch file trends and the seen So, better to much been of just the buyer quarter? just trying the is And that natural that, increases the throughout you've year? you're the seeing just that just continuation what American understand, from versus Airlines to kind fourth

Jerome Griffith

Yeah, things. of I both those Alex. of a it's combination Thanks, think

I remember improving the have trends. you have to think we

Delta we're continue fourth the impact first launch. up the as then comping in from We pick into you half. mentioned the And Airlines quarter, see in And expect half, we'll American to launch. Airlines those the back the the then

all of support combination guidance. those I the So, things think our

Alex Fuhrman

were just business that get bit back track? And about what mean, able slow that curious, do nicely Okay. expected I then little in business, sounds season. course to was you to of got a swim the thinking start like there rebounded And a than driving that to that you'd it then off and throughout on the slower particular start? correct and Anything

Jim Gooch

of Alex? a had a not May X Yeah, in are was bit was continued and quarter. saw swim to print that we the resonate doing, into up terrible. one swim due back what How little into to great Quarter But June August. not well up sort partially consumers. then was you really Hi. then with July, pick slow month, didn't we very it and pick

just too able to but we was any summer consumer not already, much were picked really make, it as quarter, a that start of demand slow we up just the went because on. were bought So, changes to

Alex Fuhrman

half. here Okay. categories other been seasonal just thinking you you the bit outerwear closer for needs a that? inventory And the your feel have a right about, to That's category helpful. Do And for is consumers the big purchasing perhaps levels expectation well? therefore coming might has actual you their then be you. up as Outerwear for in always it, that know, little back big

Jerome Griffith

Yeah.

the a to you strategy We than think much key that really extremely And our year, really cashmere same. key our up and key for. XXXX of customers in If did worked the as we better QX had. lot It's QX, come XXXX. outerwear. And strategy items XXXX, well. of the we in back that part the Flannel that our back into shirts, to item sweaters, go chalked last items look is I'm

for -- put So, in holiday year. we're we learned well And what we season. really far. we've so We've plans feel resonate about for which think good it pretty in the the bought place, last

Alex Fuhrman

you And Well, look holiday seeing that's very much. Thank great. forward to your assortments.

Jim Gooch

Thanks, Alex.

Jerome Griffith

to Thanks, Alex. Will you. talk

Operator

Thank [Operator Instructions] you.

And conclude question-and-answer all today's in does for disconnect. session. wonderful thank participating Ladies a Everyone gentlemen, may day. conference. you and This have today's you

Lands' End (LE) 5 Sep 192019 Q2 Earnings call transcript