Q3 2020 Lands End Inc Earnings Call

December 3, 2020

[music].

Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to standby. Thank you for your patience.

[music].

Ladies and gentlemen, thank you for standing by and welcome to the lands in third quarter 2020 earnings Conference call.

This time, all participant lines on on this and only mode.

After the speaker's presentation, there will be a question and answer session to ask a question go on the session you will need to press Star then one on your telephone please be advised on today's conference is being recorded.

Acquire any personal assistance. Please press Star then zero I will now hand, the conference over to Bernie Mccracken, Chief Accounting Officer. Please go ahead.

Good morning, and thank you for joining the lands end earnings call free discussion of our third quarter fiscal 2020 results, which we released this morning and can be found on our website lands end dotcom well.

On the call today, you will hear from Jerome referenced our Chief Executive Officer, and President and Jim due to our Chief operating Officer end Chief Financial Officer.

After the Companys prepared remarks, we will conduct a question and answer session. Please also note that the information we're about to discuss includes forward looking statements such statements involve risks and uncertainties. The company's actual results could differ materially from those discussed on this call factors that could be true, but just such differences include but are not limited to those items noted.

Included in the company's SEC filings, including our annual report on form 10-K.

Quarterly reports on form 10-Q, and form 8-K dated June 2nd 2020.

Forward looking information that is provided by the company on this call represents the company's outlook as of today and we do not undertake any obligation to update forward looking statements made by us so.

What events and developments may cause the company's outlook to change Oh, no disrespect to COVID-19 pin debit continues to have significant impact on our business and its duration could materially out alter our outlook door.

During this call, we'll be referring to non-GAAP measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles a.

A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures can be found on our earnings release issued earlier today.

Copy of which is posted on the Investor Relations section of our website at lands end dotcom with.

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

Thank you Bernie good morning, and thank you for joining us today for a discussion of our third quarter results.

We were extremely pleased with our third quarter performance our teams executed at an exceptional level to achieve strong results. Despite the challenges created by code.

Hi, both proud and grateful for their efforts.

The investments Weve put toward leveraging data analytics to inform our strategies around product E Commerce, and marketing continued to pay dividends and driving growth in new customers and strong retention rate.

We have also made great strides in driving improved profitability to that end. In addition to once again generating double digit growth on our global ecommerce business, we delivered 52% adjusted EBITDA growth in the third quarter. This performance underscores the momentum behind the lands end brand on the progress, we're making in delivering long term profit.

Total gross.

Additionally, the launch of lands end into Kohl's Dot Com and 150 Kohl stores at the end of September is off to a strong start base.

Based on the early success, we plan to expand the lands end assortment and increase the number of points of distribution from 150 Kohl stores to 320 21.

Also during the third quarter as previously announced we completed the refinancing of our term debt further improving our liquidity position, which Jim will speak to shortly.

Turning to some brief highlights of our financial results third quarter total revenue grew approximately 6% driven by our global ecommerce sales, which were up approximately 20% ahead of our expectation for low double digit growth for this business.

We grew adjusted EBITDA of 52% to approximately $29 million and expanded adjusted EBITDA margin by approximately 240 basis points to 7.9%.

We continue to lean into our strong heritage as an American lifestyle brands that offers comfort quality, great value and a customer first approach to service at the same time, we remain focused on advancing our digitally led strategies.

We further demonstrated our ability to consistently get the product right as we leverage data analytics to inform our key item strategy and maintain high quality value oriented offering.

For the third quarter, our strongest performers were sleepwear and loungewear and net.

Please also performed well reflecting demand for transitional outerwear for the fall season home.

Home furnishings, particularly bed and Bath remains an area of strength as people spend more time at home we.

We will maintain our emphasis on comfort in value as consumers continue to work from home and spend more hours indoors during the cold weather months.

Turning now to marketing, we remain focused on utilizing data analytics and search engine optimization programs to attract new customers, while simultaneously leveraging data to drive greater personalization with existing customers.

We also continued to successfully leverage AI to analyze customer behavior and further refine our promotions to optimize sales and achieve higher margins.

Our let's get comfy messaging continued to resonate with consumers and that will remain front and center through the holiday season.

Our strong product offering combined with our focus on employing a data driven approach drove continued market share gains with approximately 55% growth in new customers.

We're very pleased with the high percentage of rebuy rates, we continue to see on our core customer base as well as with our newer customers. This retention is highly encouraging and we still see ample market share opportunity ahead of us.

As a unit channel operator, we remain committed to delivering a consistent high quality seamless customer experience across all channels to enhance our customer connection wherever whenever and however, they choose to shop doors.

During the quarter, we launched Apple pay and mobile checkout with very positive early reads on both.

We also expanded our data driven approach to our catalog and catalog circulation through.

Through utilizing data on existing customers, we optimized products per page and fine tuned our circulation as a result response rate grew approximately 12% on a slight decline in circulation driving higher ROI in our catalog.

I'm very proud of our team as they work to maximize essentially efficiency is evident in these results and the lands end brand and catalog is now stronger than ever.

Looking ahead, we are confident that the investments we have been making in our infrastructure end foundation throughout the past few years position us well to drive further market share gains and the evolving retail landscape.

I will speak more to these longer term strategies following Jim's remarks with.

With that I'll turn it over to Jim.

Thank you Jerome and good morning.

Our global ecommerce business once again delivered strong performance in the third quarter well as expected our outfitter business remain challenged as a result of the pandemic.

We continue to make great progress on the strategies, we about line, while leveraging our strong foundation to advance our growth initiatives.

Total revenue increased 5.9% to 360 million compared to 340 million last year.

Momentum continued in our global ecommerce business, which increased 20%.

Strong results on our U.S. ecommerce business, which grew approximately 14%.

And our international E Commerce business with a 51% increase for the quarter.

During the quarter, we saw strength on a number of our categories, including fleece sleepwear loans were notes as well as in our home business.

With many consumers still working from home these categories delivered double digit growth from the quarter as our marketing strategies emphasize the comfort and value in our product assortments.

Partially offsetting the strong global ecommerce growth sales on her outfitter business were down 26% due to ongoing pressure as a result of coke at 19.

Yes, Fitters results reflect overall sequential improvement versus last quarter although.

Although our travel related national account, and our small and midsize businesses remain challenged.

The most significant improvement came in our school uniform business, where sales were approximately flat to last year for the quarter.

Overall, we expect performance in this business to remain choppy with the recent spike in the pandemic.

Moving to our retail business sales decreased approximately 44% in the third quarter to $8 million.

This decrease was driven by lower traffic through the pandemic, partially offset by improved conversion in our stores.

Gross margin in the third quarter increased approximately 10 basis points to 45.4% as compared to last year gross margin benefited from our improved promotional strategies and continued use of analytics. This.

This was partially offset by higher shipping costs and surcharges as well as sales mix from our growing third party business.

As a percentage of sales that's true in every improved by approximately 230 basis points to 37.5% compared to 39.8% in the third quarter of last year.

This improvement as a result of increased sales combined with continued disciplined expense management across our entire business.

Income tax expense was 2.8 million compared to an expense of 1.3 million last year.

Net income for the quarter was 7.2 million or 22 cents per share compared to net income of 3.6 million or 11 cents per share last year.

In addition to these GAAP measures adjusted EBITDA is an important profitability measures that we use to manage our business internally.

For the quarter adjusted EBITDA was 28.6 billion.

Which is approximately 52% increase versus last year adjusted EBITDA of 18.8 million.

Turning to the balance sheet inventories at the end of the quarter were 499.8 million roughly flat to a year ago.

The strong sell through of our global ecommerce business has positioned us with healthy and lean inventories as we head into the holiday season.

Inventory levels related to our outfitter business, our elevated although this is not seasonal or fashion product. So we expect to work through this merchandise as the business environment improves.

During the third quarter, we secured a new term loans of 275 million.

The loan proceeds combined with borrowings under the company's JBL facility were used to refinance or prior term loans, which was due in April of 2021.

Upon the closing of the refinancing maximal building availability on to the NGL facility was expanded by 75 million to 275 million.

The new term loan extends our debt duration and further enhances our strong liquidity position with a more flexible balance sheet.

Turning to our outlook for the fourth quarter. We now expect net revenue to be between 500, and 520 million driven by on global ecommerce business.

As a reminder, last years results included approximately $40 million from our American Airlines loans.

After adjusting for the American airline Clonch expected net revenue for the quarter with the between a 2% decrease in a 2% increase versus prior year.

We expect net income of 13.5 to 17.5 million and diluted earnings per share to be between what do you on and 53 cents.

We expect adjusted EBITDA to be in the range of 38 to 43 million.

And with that I'll now turn the call back go get Jerome to discuss the progress on our core growth strategies.

Thanks, Jim Despite the continued uncertainty related to call, but we continue to demonstrate our ability to manage our business effectively and deliver meaningful EBITDA growth during a very difficult environment.

We remain focused on driving market share gains through continuously enhancing our engagement with existing customers and gaining market share through our on channel as well as through new partnerships and collaborations.

Our four core growth strategies remain getting the product right being a digitally driven company implementing a unit channel distribution strategy and enhancing our infrastructure and processes.

As previously mentioned, we're very pleased with the response to our product offering in the quarter as we head into the holiday season. It will be an important time for gift, giving our key item strategy will focus on sleepwear outerwear and home with.

Within these categories since holiday is an important time for family we plan to emphasize whole house family messaging, specifically with regards to patterns.

Let's get comfy theme highly relevant in today's environment will remain the focus of our messaging.

Within digital we continue to see incredible opportunity to drive traffic and market share as we refine our search engine optimization techniques on.

Our holiday promotional on markdown strategy will continue to leverage data analytics and machine learning to effectively determine optimal prices for our customers.

As a result, we expect lower markdowns and higher product margin rates than previous years, despite the highly promotional environment and incremental shipping expenses.

As we advance our data analytics capabilities from quarter to quarter, we will continue to gain further knowledge of customer behavior trends.

Turning to our retail business, we continue to monitor retail trends to evaluate a post pandemic store strategy. However, with the current rise in cases of COVID-19, our priority right now is the health and safety of our associates and customers.

Turning to our more recent growth initiatives beyond our on channel. We're very pleased to see the strong response the lands end brand on both coasts dotcom and end. The 150 launched stores the product is resonating with customers and we will be expanding our assortment within these doors and coal Dot Com. In addition, we plan to double our door count with kohls to 300.

In 2021.

We remain confident that this is a great opportunity to expand our reach given the kohl's customer profile shares. The same demographic features as the lands end customer.

In our outfitters business, our long term strategy is to focus on our personalization capabilities, which we believe will attract new customers as well as serve the needs of existing customers.

We plan to implement enhancements to our business out better site to leverage some of the improvements we have implemented on our consumer website.

While we're on the early stages, we believe this will support longer term growth and our outfitters business.

With regard to the lands end marketplace. We now have 13 third party vendors selling product on our web site and we are seeing initial results in line with our expectations. Our goal is to reach 20 to 25 third party vendors selling product by year end.

Before I turn it over to Q on I. I'd like to update you on our initiatives around diversity and inclusion within our organization as this remains of significant importance to us as an organization.

First we've established a diversity and inclusion council consisting of members of our organization, who come from diverse backgrounds, and we'll work to create programming end goals for our company to work towards that end. The council has established both training modules and the speaker series that are respectively required on an open to all of our on.

Employees, we have also established business resource groups to provide support for our employees with share experiences.

We want all of our employees to feel they have a voice and the support they need to utilize it. Our journey has just begun but we're committed to learning and improving every day.

In conclusion, we're incredibly energized by the strong momentum in our business, we recognize the uncertainty in the environment and it may extend for a period of time, creating both challenges and opportunities and we will manage our business accordingly.

The strong foundation, we put in place and the progress we continue to make on our strategic initiatives give us great confidence in our ability to navigate the challenges and capitalize on the opportunities as we drive growth on our business. We look forward to updating you on our progress in future quarters and with that we'll open it up to questions.

Thank you as a reminder to ask a question you any depressed so I didn't want to your telephone to withdraw your question. Please press the pound key.

Our first question comes on the line of Alex from men with Craig Hallum. Your line is now open.

Great. Thank you very much for taking my question on congratulations on a really strong quarter wanted to ask about what you've been seeing so far it sounds like the the unseasonably warm weather had had you not had a little bit of an impact on your outerwear business on anything to call out you know now that were just on the other side of of Thanksgiving weekend.

About how your brand performed during during Black Friday and through cyber Monday.

Anything notable to call out there.

Hey, Alex Thanks for the question.

I think like everybody else, we're seeing a shift in consumer behavior. This holiday season was obviously an emphasis on online shopping.

Black Friday itself was a positive day for us both domestically and internationally, we saw solid growth on our business a year over year end, we're pretty encouraged by the continued resilience in performance on our global E Commerce business, but to the fourth quarter got off to a slower start in the U.S., particularly due to our heavy outerwear category I don't like.

You bring up.

Whether I always think whether it's kind of a cheap excuse, but I think as everybody knows cold weather hasn't really started debt and I'd be couple that with people staying home and indoors not commuting because a covert the demand for heavy outerwear just isn't there yet.

Look at our on the categories as you would expect the other categories are performing well same categories and third quarter going into the fourth quarter that people have had good demand for.

Great debt, that's really helpful. Thanks, and then on you know it sounds like you guys are acquiring a lot of new customers here at least in the in the third quarter on where that been coming from has there been any particular marketing channel that that's been effective or or or new products that have been bringing new customers in or is that just being kind of a continuation of of the effort that you've been putting in place for us.

While now.

It's a bit of a mix I mean, obviously search has always been the lion share of where we have new customers coming in from a marketing standpoint, but what we've seen is bad debt.

Other areas are performing super well for us, even though we put smaller dollars into on social media has been doing really well and we've got from video out on connected TV, what seems to be doing pretty good job for us.

All of that with no big increases in net wear lounge wear active wear which is moving in and a lot lot of newer customers for us and those customers tend to be on the younger side from where our existing customer bases, so that looks pretty good for us.

Great. That's helpful. On and then lastly, if I could just ask on on the outfitters side of the business I mean, obviously that debt pretty you know.

Closely impacted by by the pandemic I'm just curious you work with a lot of the big net companies out there in retail and transportation I mean, what's the outlook for next year I mean at what point do you think on things are going to start turning around for some of your big customers.

I think that what you're going on as she is on a longer claw back in any of the travel related products or anybody else really related to travel right. Now we're seeing increases, albeit small increases I think where we're really going to be concentrated in the outfitters business is going to be on the small and mid.

Sized businesses and making their customer experience easier, we think theres, a big opportunity for us to improve the customer experience on line of getting your product logo on are getting your products.

Optimized and methodical way and making that an easier.

And is your customer experience and.

Going to see a lot of concentration in that part of the business.

You know Alex I think you touched on on that as far as the outfitters, It's really three different businesses. If you remember it's about one third school, one third small and midsize business and one third the large national accounts.

So Jerome mentioned that the large national accounts is probably going to be the slowest recovery.

We were very excited to see the sequential improvement that we mentioned in the school business from that business is actually fairly flat for the quarter.

That's great well. Thanks, thanks, very much on both of you.

Thank you on next question comes from the line of Steve Marotta, Let's see how King and Associates. Your line is now open.

Good morning, Jerome and Jim Congratulations on the third quarter as well as far as Jerome you just touched on it as it relates to staying at home.

Outerwear, assuming we get a relatively normal winter season from this moment forward could there still be on.

Negative impact on that category, just because people aren't going out as much and if so how do you quantify that.

I think Steve from when we put out with guidance, we've taken that into account from what we think will be happening over the course of the next day or the next few months as you know the cold weather is really in front of us not behind us based upon the date so far so.

I think we've taken that into account on the in the guidance.

I think as far as the quantification Steve to Jerome point, it's in the guidance I think the other thing we feel really good about and we mentioned that because we had such a healthy back end of the second quarter in the third quarter. Our inventory positions are still healthy so lean that even though we might have a little bit of challenge on some of the heavy outerwear, we don't think theres a lasting impact.

There.

Got you do you comment International Commerce was up really really well can you comment on the tactics that helped that what is that as a percentage of sales right now and how can you capitalize on that segment of the business going forward.

I think a lot of the things that are working their internationally are a lot of the things like that that you hear us doing on the U.S. side I'm still on so many of those things we've been doing for the last several quarters there from what weve been doing from a digital price.

Spector from what we've been doing from a balance data <unk> analytics perspective from what we've been doing with capturing new cost customers will now roll on many of those things out, especially in Europe, and we've really seen significant positive impacts there.

And how big a percentage of sales was that in the third quarter.

I don't think we give that as the specific number.

But but I think you can go back to history and do some of the math obviously continues to grow.

So broke low global ecommerce business is now probably up over 80% as a percent of our total with some of the challenges on the outfitter business and that continued growth and on the commercial.

Okay very helpful. Thank you I'll take the rest of my questions offline. Thank you. Thanks.

Thanks, Steve.

Thank you there are no further questions at this time.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

[music].

Ladies and gentlemen, thank you for standing by welcome to the lands end third quarter 2020 earnings Conference call.

At this time all participant lines on on the slowing mode.

After the speaker's presentation, there will be a question and answer session to ask a question on the session you will need to press Star then one on your telephone please be advised on today's conference is being recorded.

Acquire any personal assistance. Please press Star then zero I will now hand, the conference over from Bernie Mccracken, Chief Accounting Officer. Please go ahead.

On the call today, you will hear from Jerome Robbins, our Chief Executive Officer, and President and Jim Gooch, Our Chief operating Officer end Chief Financial Officer.

After the Companys prepared remarks, we will conduct a question and answer session. Please also note that the information we're about to discuss includes forward looking statements such statements involve risks and uncertainties. The company's actual results could differ materially from those discussed on this call factors that could contribute to such differences include but are not limited to those items noted.

And included in the company's SEC filings, including our annual report on form 10-K.

Quarterly reports on form 10-Q, and form 8-K dated June 2nd 2020.

What events and developments may cause the company's outlook to change.

In this respect the cobot day T. pandemic continues to have significant impact on our business and its duration could materially out alter our outlook.

During this call, we'll be referring to non-GAAP measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles.

A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures can be found on our earnings release issued earlier today.

A copy of which is posted on the Investor Relations section of our website at lands end dotcom with.

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

Thank you Brian Good morning, and thank you for joining us today for a discussion of our third quarter results.

We were extremely pleased with our third quarter performance our teams executed at an exceptional level to achieve strong results. Despite the challenges created by call. It.

Hi, both proud and grateful for their efforts.

Investments weve put toward leveraging data analytics to end form our strategies around product E Commerce, and marketing continued to pay dividends and driving growth in new customers and strong retention rate.

We have also made great strides on driving improved profitability to that end. In addition to once again generating double digit growth on our global ecommerce business, we delivered 52% adjusted EBITDA growth on a third quarter. This performance underscores the momentum behind the lands end brand on the progress we are making in delivering long term profit.

Total growth.

Additionally, the launch of lands end into Kohl's Dot Com and 150 Kohl stores at the end of September is off to a strong start base.

Based on the early success, we plan to expand the lands end assortment and increased the number of points of distribution from 150 Kohl stores to 320 21.

Also during the third quarter as previously announced we completed the refinancing of our term debt further improving our liquidity position, which Jim will speak to shortly.

We grew adjusted EBITDA of 52% to approximately $29 million and expanded adjusted EBITDA margin by approximately 240 basis points to 7.9%.

We further demonstrated our ability to consistently get the product right as we leverage data analytics to end form our key item strategy and maintain high quality value oriented offering.

For the third quarter, our strongest performers were sleepwear and loungewear and net.

Please also performed well reflecting demand for transitional outerwear for the fall season.

Home furnishings, particularly bed and Bath remains an area of strength as people spend more time at home.

We will maintain our emphasis on comfort on value as consumers continue to work from home and spend more hours indoors during the cold weather months.

Turning now to marketing we remain focused on utilizing data analytics on search engine optimization programs to attract new customers, while simultaneously leveraging data to drive greater personalization with existing customers.

We also continue to successfully leverage AI to analyze customer behavior and further refine our promotions to optimize sales and achieve higher margins.

Our let's get Comfy messaging continues to resonate with consumers and that will remain front and center through the holiday season.

Our strong product offering combined with our focus on employing a data driven approach drove continued market share gains with approximately 55% growth in new customers.

As the unit channel operator, we remain committed to delivering a consistent high quality seamless customer experience across all channels to enhance our customer connection wherever whenever and however, they choose to shop doors.

During the quarter, we launched Apple pay and mobile checkout with very positive early reads on both.

We also expanded our data driven approach to our catalog and catalog circulation through.

I'm very proud of our team as they work to maximize essentially efficiency as evidenced in these results and the lands end brand and catalog is now stronger than ever.

I will speak more to these longer term strategies following Jim's remarks.

With that I'll turn it over to Jim.

Thank you Jerome and good morning.

Our global ecommerce business once again delivered strong performance in the third quarter well as expected our outfitter business remain challenged as a result of the pandemic.

We continue to make great progress on the strategies, we have out line, while leveraging our strong foundation to advance our growth initiatives.

Total revenue increased 5.9%.

The $360 million compared to $340 million last year.

Momentum continued in our global ecommerce business, which increased 20% with strong results on our U.S. ecommerce business, which grew approximately 14%.

And our international E Commerce business with a 51% increase for the quarter.

During the quarter, we saw strength on a number of our categories, including fleece sleepwear lounge wear on that.

That's well it's on our home business.

With many consumers still working from home these categories delivered double digit growth from the quarter as our marketing strategies emphasize the comfort in value and our product assortment.

Partially offsetting the strong global ecommerce growth sales on our outfitter business were down 26% due to ongoing pressure as a result of COVID-19.

The outfitters results reflect overall sequential improvement versus last quarter although.

Although our travel related national account, and our small and midsize businesses remain challenged.

The most significant improvement came on our school uniform business, where sales were approximately flat to last year for the quarter.

Overall, we expect performance in this business to remain choppy with the recent spike in the pandemic.

Moving to our retail business sales decreased approximately 44% in the third quarter to $8 million.

This decrease was driven by lower traffic through the pandemic, partially offset by improved conversion in our stores.

Gross margin in the third quarter increased approximately 10 basis points to 45.4% as compared to last year gross margin benefited from our improved promotional strategies on continued use of analytics.

This was partially offset by higher shipping costs and surcharges as well as sales mix from our growing third party business.

As a percentage of sales EPS generic improved by approximately 230 basis points to 37.5% compared to 39.8% in the third quarter of last year.

This improvement as a result of increased sales combined with continued disciplined expense management across our entire business.

Income tax expense was 2.8 million compared to an expense of $1.3 million last year.

Net income for the quarter was 7.2 million or 22 cents per share compared to net income of 3.6 million or 11 cents per share last year.

In addition to these GAAP measures adjusted EBITDA is an important profitability measures that we use to manage our business internally.

For the quarter adjusted EBITDA was 28.6 billion.

Which is approximately a 52% increase versus last year adjusted EBITDA of $18.8 million.

Turning to the balance sheet inventories at the end of the quarter were 499.8 million roughly flat to a year ago.

The strong sell through of our global ecommerce business has positioned us with healthy and lean inventories as we head into the holiday season.

Inventory levels related to our outfitter business, our elevated although this is not seasonal or fashion on product. So we expect to work through this merchandise as the business environment improves.

During the third quarter, we secured a new term loans of 275 million.

Loan proceeds combined with borrowings under the company's JBL facility were used to refinance our prior term loans, which was due on April 2021.

Upon the closing of the refinancing maximum though the availability under the ABL facility was expanded by 75 million to 275 million.

The new term loan extends our debt duration on further enhances our strong liquidity position with a more flexible balance sheet.

Turning to our outlook for the fourth quarter. We now expect net revenue to be between 500, and 520 million driven by our global ecommerce business as.

As a reminder, last year's results on clinical approximately $40 million from our American Airlines loans.

After adjusting for the American Airlines launch expected net revenue for the quarter would be between a 2% decrease on a 2% increase versus prior year.

We expect net income of 13.5 to 17.5 million and diluted earnings per share to be between wouldn't you on and 53 cents.

We expect adjusted EBITDA to be on the range of 38 to 43 million.

And with that ill now turn the call back over that Jerome to discuss the progress on our core growth strategies.

Our four core growth strategies remain getting the product right being a digitally driven company implementing a unit channel distribution strategy and enhancing our infrastructure end processes.

Within these categories since holiday is an important time for family we plan to emphasize whole house family messaging, specifically with regards to pattern.

Our let's get comfy theme highly relevant end today's environment will remain the focus of our messaging with.

Within digital we continue to see incredible opportunity to drive traffic end market share as we refine our search engine optimization techniques.

Our holiday promotional on markdown strategy will continue to leverage data analytics and machine learning to effectively from an optimal prices for our customers as.

As a result, we expect lower markdowns and higher product margin rates than previous years, despite the highly promotional environment and incremental shipping expenses.

As we advance our data analytics capabilities from quarter to quarter, we will continue to gain further knowledge of customer behavior trends.

Turning to our more recent growth initiatives beyond our on channel. We're very pleased to see the strong response the lands end brand on both coasts dotcom and end the 150 launched stores.

The product is resonating with customers and we will be expanding our assortment within these doors and Kohl's dot com.

In addition, we plan to double our door count with calls to 320 21.

We remain confident that this is a great opportunity to expand our reach given the kohl's customer profile shares. The same demographic features as the lands end customer.

In our outfitters business, our long term strategy is to focus on our personalization capabilities, which we believe will attract new customers as well as serve the needs of existing customers.

We plan to implement enhancements to our business out better site to leverage some of the improvements we have implemented on our consumer web site.

While we're on the early stages, we believe this will support longer term growth and our outfitters business.

Before I turn it over to Q on AG I'd like to update you on our initiatives around diversity and inclusion within our organization as this remains of significant importance to us as an organization.

First we have established a diversity and inclusion council consisting of members of our organization, who come from diverse backgrounds, and we'll work to create programming end goals for our company to work towards that end. The council has established both training modules and the speaker series that are respectively required up and open to all of our on.

We have also established business resource groups to provide support for our employees with share experiences.

We want all of our employees to feel they have a voice and the support they need to utilize it. Our journey has just begun but we're committed to learning and improving every day.

As a reminder to ask a question you any depressed star then one on your telephone to withdraw your question. Please press the pound key.

Our first question comes from the line of Alex from men with Craig Hallum. Your line is now end.

Great. Thank you very much for taking my question on congratulations on a really strong quarter.

I wanted to ask about what you've been seeing so far it sounds like the unseasonably warm weather had has had a little bit of an impact on your outerwear bid net anything to call out you know now that were just on the other side of of Thanksgiving weekend.

About how your brand performed during during Black Friday and through cyber Monday.

Anything notable to call out there.

Hey, Alex Thanks for the question.

I think like everybody else, we're seeing a shift in consumer behavior. This holiday season was obviously an emphasis on online shopping black Friday itself was a positive day for us both domestically and internationally, we saw solid growth on our business year over year on a pretty.

Encouraged by the continued resilience and performance on our global ecommerce business, but for the fourth quarter got off to a slower start in the U.S., particularly due to our heavy outerwear category I don't like to break up.

Whether I think whether it's kind of a cheap excuse, but I think as everybody knows cold weather hasn't really started debt and I'd be couple that with people staying home and end or not commuting because the call, but the demand for heavy outerwear just isn't there yet.

You look at our other categories that you would expect or other categories are performing well same categories.

Third quarter going into the fourth quarter that people have had good demand for.

Great Thats really helpful. Thanks, and then on it sounds like you guys are acquiring a lot of new customers the or at least in the in the third quarter on where that been coming from has there been any particular marketing channel that's been effective or or new products that have been bringing new customers then or is that just being kind of a continuation of of the effort that you've been putting in place.

A while now.

This is dependent on mix I mean, obviously search has always been the lion share, where we have new customers coming in from a marketing standpoint, but what we've seen is that a couple of other areas are performing simple well for us even though we put smaller dollar on to on social media has been doing really well and we've got from video out on connected TV.

What seems to be in line with pretty good job for US a couple that with big increases in net wear lounge wear active wear which is going on and a lot lot of newer customers for us and those customers tend to be on the younger side from where our existing customer bases, so that looks pretty good for us.

Great. That's helpful. And then lastly, if I could just that on on the outfitters side of the business I mean, obviously that debt pretty.

Closely impacted by the pandemic I'm just curious you work with a lot of the big debt.

Companies out there in retail and transportation I mean, what's the outlook for next year I mean at what point do you think on things are going to start turning around for some of your big customers.

I think that what you're going to see is on a longer claw back in any of the travel related products.

But it's really related to travel right now we're seeing increases, albeit small increases I think where we're really going to be concentrated on the outfitters businesses on to be on the small and mid sized businesses and making their customer experience easier, we think theres, a big opportunity for us to improve the customer experience.

On line of getting your product logo on or getting your products.

And methodical way and making that an easier.

And is your customer experience and we're going to see a lot of concentration in that part of the business.

So Jerome mentioned that the large national accounts is probably going to be the slowest recovery.

We're very excited to see the sequential improvement that we mentioned on the school of business from that business was actually fairly flat for the quarter.

Thats great well. Thanks, thanks, very much on both of you.

Thank you on.

Next question comes from the line of Steve Marotta, Let's CL King and Associates. Your line is now open.

Good morning, Jerome and Jim Congratulations on the third quarter as well as far as Jerome you just touched on it as well.

Relates to staying at home.

Outerwear, assuming we get a relatively normal winter season from this moment forward could there still be a negative impact on that category, just because people aren't going out as much and if so how do you quantify that.

I think Steve from what we've put out with guidance, we've taken that into account from what we think will be happening over the course of the next the net.

Yes, you know what.

It is really in front of us.

Behind us based upon the date so far so.

I think we've taken that into account on the and the guidance.

I think as far as a quantification Steve to Jerome point, it's in the guidance I think the other thing we feel really good about and we mentioned that because we had such a healthy back end of the second quarter in the third quarter. Our inventory positions are still healthy so lean that even though we might have a little bit of challenges from the heavy outerwear.

We don't think Theres, a lasting impact there.

Got you and can you comment international Commerce was up really really well can you comment on the tactics that helped that what is that as a percentage of sales right now and how can you capitalize on that segment of the business going forward.

I think a lot of the things that are working on her internationally or lot of the things that you're doing on the us side. So.

So many of those things we've been doing for the last several quarters share from what Weve been doing from a digital perspective from what we've been doing from a balance data analytics perspective from what we've been doing with capturing new cautious customers will now roll on many of those things out, especially in Europe, and we've really seen significant positive impacts there.

And how big a percentage of sales was that in the third quarter.

I don't think we give that specific number.

But I think you can go back to history and do some of the math, obviously continues to grow the overall low global ecommerce business is now probably up over 80% as a percent of our total with some of the challenges on the outfitter business and that continued growth on.

On the commercial.

Okay very helpful. Thank you I'll take the rest of my questions offline. Thank you.

Thanks, Steve.

Thank you there are no further questions at this time.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

Q3 2020 Lands End Inc Earnings Call

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