Release Date: December 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lands' End Inc (LE, Financial) reported a 17% year-over-year increase in adjusted EBITDA, reaching $20 million for the third quarter of 2024.
- The company achieved a 20% year-over-year improvement in inventory position and a double-digit increase in inventory turn rate.
- Lands' End Inc (LE) experienced a 20% increase in new customer acquisition in the third quarter, driven by strategic marketing efforts.
- The US e-commerce business delivered its seventh consecutive quarter of margin improvement, with a 350 basis point increase.
- The European business saw a gross margin increase of approximately 900 basis points, with gross profit up 13% year-over-year.
Negative Points
- Total revenue for the third quarter decreased by 2% compared to the previous year.
- The US e-commerce sales decreased by 2% compared to the third quarter of 2023, excluding the impact of transitioning kids and footwear products to licensing agreements.
- Sales from the school uniform channel were down 8% year-over-year, primarily due to the timing of customer orders.
- The company reported a net loss of $0.6 million or $0.02 per share for the third quarter.
- As a percentage of sales, SG&A expenses increased by approximately 250 basis points compared to 2023, driven by higher digital marketing spend.
Q & A Highlights
Q: The new customer acquisition increase of 20% is definitely a call out. What are you seeing working there? What are the demographics of these new customers? And how is it informing your product development? Also, can you provide more color on the Black Friday weekend and the kickoff to the fourth quarter? What are you seeing in terms of the promotional landscape? Lastly, what percentage of goods come from China, and what are your thoughts on tariff impact and pricing?
A: We've worked to put agility into our supply chain, and China now accounts for less than 6% of our open to buy. We're moving towards the western hemisphere to reduce shipping time. Regarding new customers, we're seeing younger demographics, about 10 to 12 years younger than our traditional customer, coming from various channels. Our marketing strategy is tailored to reach both traditional and new customers. We are not engaging heavily in the promotional landscape, focusing instead on managing inventories tightly and maintaining high margins.
Q: Can you talk about your licensing strategy? What criteria do you use when looking for new licenses, and what is the expected split between licensed and non-licensed products?
A: We aim for about 20% of our business to come from licenses. We focus on non-core categories like beauty, luggage, and fragrance. International expansion is also a focus. The criteria for licensing include established partners with a proven track record and alignment with our brand values. We look for a combination of loyalty and minimum payments to ensure longevity and protection for our P&L and balance sheet.
Q: You've done a tremendous job reducing inventories. How should we think about inventory opportunities moving forward?
A: We expect to maintain normalized inventory levels going forward. As we improve our infrastructure and supply chain processes, we'll build efficiencies that allow us to buy closer to trend, reducing the need to hold large inventories.
Q: Can you explain the guidance for revenue and GMV, particularly the lower GMV guidance despite revenue being within the prior range?
A: The transition of our kids and footwear products to licensing arrangements impacts revenue year-on-year, particularly in Q4. However, this does not affect GMV as these businesses will continue selling Lands' End branded products.
Q: Regarding your third-party business, how long do you expect it will take to translate into increased traffic to the Lands' End website? How much of the GMV increase in Q3 is attributed to third-party expansion?
A: Our third-party business, including partnerships with Nordstrom and Costco, is tailored to specific customers and has exceeded expectations. While there is a lag in seeing these customers transition to our website, we do see them. About 80% of our marketplace sales are from new customers or those who haven't shopped with us in over five years. This helps us de-risk inventory and gain valuable customer insights.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
