Q1 2021 Lands End Inc Earnings Call

June 2, 2021

[music].

Good day and thank you for standing by welcome to the lands end first quarter 'twenty 'twenty 1 for earnings conference call. At this time, all participants are in a listen only mode. After the speakers' per.

<unk> there will be a question and answer session.

Ask your question during the session you will need to press star 1 on your telephone if you acquire any further assistance. Please press star zero and I would now like to hand, the conference over to your speaker today, Bernie Mccracken Chief Accounting Officer. Please go ahead.

Good morning, and thank you for joining the lands and earnings call for a discussion of our first quarter results, which we released this morning and can be found on our website blades Ed Dot com for the call today, you will hear from Jerome Griffith, Our Chief Executive Officer, Jim <unk>, Our President and Chief Financial Officer, and because the company's prepared remark.

And 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 Inc.

<unk> of our annual report on form 10-K, a quarterly reports on form 10-Q.

The 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 and subsequent events and developments may cause the company's outlook to change of note in this respect with Covid.

T pin debit continues to have and impacted our business and it's the ratio could materially 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 for the most directly comparable GAAP measures can be found in our earnings release issued earlier today, a copy of which is posted in the Investor Relations section of our website at lids and dot com with that I will turn the call over to Jerome Griffith.

Thank you Barry good morning, and thank you for joining us today for a discussion of our first quarter results. We are extremely pleased with our first quarter results across key financial metrics with performance far exceeding our expectations.

And the momentum in our global ecommerce business is stronger than ever as we continue to execute our digitally led product and marketing strategies.

Our continued global E Commerce growth is underpinned by our best in Class Foundation, and our continued advancements across our 4 strategic pillars of product digital Uni channel distribution as well as infrastructure and processes.

For the first quarter revenue grew 48% and global E Commerce increased 44% year over year, while adjusted EBITDA increased $34.1 million to $22.5 million from the first quarter of 2020.

While the first quarter 2020 performance was obviously impacted by COVID-19, compared to the first quarter of fiscal 2019 revenue increased 22% Global E. Commerce revenue grew 26% and adjusted EBITDA increased $19.5 million.

Our results demonstrate the strength and momentum and our business that began pre COVID-19 and is continuing as we emerge from the pandemic.

Through our digitally led and data driven focus we increased global new customers by 71% and the first quarter, our total global customer file expanded the first quarter by 27% from the prior year.

Our digitally led strategy as well as our product and marketing enabled us to achieve customer retention and more than 55% of these.

And these customers become more productive over time as they shop more with our brands and importantly, we are efficiently acquiring these customers who on average become profitable within the first year.

These metrics illustrate the work we have done over the past 3 years to create a foundation to profitably grow our market share and the global E Commerce apparel business.

We attribute our successful new customer acquisition and retention strategy to our enhanced marketing initiatives implemented over the past several years, specifically the significant shift towards digital marketing.

In past earnings calls, we have discussed with you the search engine optimization techniques that we use to drive traffic and grow market share.

With digital marketing our primary focus we accelerated our spending within paid social media during the quarter.

The results so far have been great our paid social marketing was more productive and other digital marketing initiatives and the first quarter and was the primary driver of the strength and our new customer acquisition.

Within our paid social initiatives and early stages, and our strong data analytics capabilities, we see significant opportunity to continue to efficiently drive new customers to lands end.

Our U S e-commerce sales were strong increasing and impressive 47% during the first quarter.

Beyond the U S. We are also incredibly pleased with the performance of our E Commerce business in Europe, which was up 55% and the first quarter as we continued to benefit from the initiatives, we implemented to drive market share gains.

The strong acceptance of the lands end brand and this region furthers, our confidence and a strong growth opportunity in front of us as we executed a similar playbook to what drove the strength and the U S and advanced our market share position.

I'd like to turn now to our product.

We continue to emphasize our let's get company and messaging this quarter as casual comfort remained a priority for our customers and let our global ecommerce business, our strongest performing categories were focused on comfort and versatility, including swimwear sleepwear and net.

Swimwear was a standout this quarter as customers began to make travel plans again.

Within the category swimwear performed across the entire family with positive customer response to the versatility and our product assortment.

Sleepwear and home continued to outperform and we are expanding the offering to year round in order to capitalize on this broader opportunity.

Our net business remains a top performing category as we continue to update our colors and styles to meet our customers' lifestyle needs.

As an example, we combined cold weather fabrics with warm weather colors as we build upon our seasonal transitional offering.

And our product is well positioned to benefit from what we believe is a permanent shift to a more casual comfort aesthetic.

We expect the changes that we began to see at the start of the pandemic are here to stay as many customers will continue to work from home or move to a new hybrid and office and at homework, even as the economy fully reopens.

And we see comfort playing a bigger role and wear to work as such our khakis and woven businesses are attractively positioned to capitalize on the continued strength and the casual wardrobe, particularly as customers refresh their wardrobes and preparation for the office.

Turning now to our third party partnerships. We are pleased with our performance both at Kohl's and Amazon this quarter, which both exceeded expectations.

These relationships have enabled us to expand our reach to consumers with similar attributes to the lands end customer.

And as we look to future partnerships, we will continue to be targeted and thoughtful and our distribution.

With a strong foundation and flexible operating model, we have been able to navigate this unprecedented period and position ourselves even stronger on the other side of this pandemic.

Our performance over the last 3 years gives us confidence that we are well positioned to drive long term profitable growth as we continued to advance on proven strategies to capitalize on the shift and consumer behavior, which I will speak to you following Jim's discussion of our financial performance.

With that I will turn it over to Jim.

Thank you Jerome and good morning.

We're very pleased with the strong results we delivered during the first quarter as we continued to build on our data driven initiatives.

Given the impact of Covid 1919 last year I'll make select comparisons to our first quarter of 2019, and my prepared remarks to help normalize our improving trends.

For the first quarter total revenue of $321.3 billion, that's an increase of 48% from 2020 and 22% from 2019.

Our performance compared to our 2019 levels demonstrates the continued strength and our underlying business as we emerge from the pandemic.

Our global ecommerce sales increased 44% from 2020, and 26% from 2019, and some momentum we had and our business heading into the pandemic is accelerating.

The strength was led by impressive growth of 47% and our U S E Commerce business and we also saw growth and our international business up 37%.

Driven by Europe, increasing 55% from 2020.

Our better than expected results were driven by strength across a number of our key categories, including swimwear sleepwear and knits. This for.

Performance was supported by marketing strategies that continue to message for the value and comfort and our product assortments.

Revenue for our third party business increased to $11.8 million.

$10.3 million improvement compared to last year.

This increase was driven primarily by the launch of our full product assortment on kohls com and a curated assortment of our key items and a 150 of their store locations.

And our outfitters business sales increased 28% with a faster than expected recovery and our national accounts and school uniform sales.

We're seeing demand and our travel related national accounts and begin to ramp up as people return to planning trips.

We now expect this recovery to accelerate throughout 2021 and into 2022.

School uniforms is also showing signs of recovery and we expect this business to normalize and schools reopen this fall.

While small and medium sized businesses have been slower to recover we remain confident that the strategy and we're putting forth will drive improvement for the business over the long term.

Gross margin and the first quarter increased to 46%.

And when we got 260 basis point improvement from 2020.

Gross margin expansion was led by our U S E Commerce business with improved promotional strategies and continued use of data analytics for both our pricing and inventory management, helping to drive higher merchandising margin.

This resulted in delivering the highest gross margin level and over 4 years.

More importantly, we believe our merchandising margin improvements are sustainable given the enhanced data analytics capabilities and more disciplined inventory management strategies, we've implemented over the past couple of years.

This strength more than offsets the higher shipping costs as well as for impact from sales mix and our growing lower margin third party business.

As a percentage of sales SG&A improved to 39, 1%.

That's down approximately 970 basis points from 2020 and.

540 basis points from 2019.

The improvement was due to leveraging the higher sales and continued overall cost controls slightly offset by higher digital marketing spending.

Our better than anticipated results led to net income for the quarter, a $2.6 million or <unk> <unk> per share compared to a net loss of $20.6 million or <unk> 64 per share and 2020, and a net loss of $6.8 million or <unk> 21 per share and 2019.

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

For the quarter adjusted EBITDA was 22, and 5 million, which was significantly above our expectations. Our EBITDA improved from a loss of $11.6.002 million 20.

And earnings of $3 million and 2019 turning.

Turning to the balance sheet inventories at the end of the quarter were $394.3 million compared to $383.2 million a year ago.

From sell through of our global ecommerce business has positioned us with healthy and lean inventories as we head into the second quarter.

Yeah.

Before providing our guidance I'd like to share an update on our Capex plan. So overall, we're still projecting capex to be approximately $26 million for 2021.

In addition to our spending on our customer facing initiatives. We've started the development of our new warehouse management system for.

Focus on personal management, while optimizing our third party carrier rates.

Now I'd like to discuss our outlook for the second quarter and for the full year as we think about the relative performance our outlook reflects strong growth over pre pandemic levels, particularly taking into account for 2021 will be a recovery period and our outfitters business.

Beginning with the second quarter, we expect net revenue to be between 345 and $355 million driven by our momentum and our global ecommerce business. We expect net income of $1.5 to 4 million and diluted earnings per share to be between 5 and 12.

We expect adjusted EBITDA to be and the range of $20 million to $23 million.

For the full year, we are raising our estimates based on our strong performance thus far in 2021.

We now expect net net revenue to be between 161, and $1.65 billion, primarily driven by our momentum and our global ecommerce business and the continued recovery and our outfitters business.

We're raising our net income outlook to a range of 27, and a half to 34 million and diluted earnings per share to be between 84 and.

And $1 <unk> for.

We now expect adjusted EBITDA to be and the range of $114 million to $122 million.

The assumptions and our guidance account for higher shipping costs and surcharges that we believe will continue throughout 2021.

We expect our continued strength and merchandise merchants will more than offset these headwinds.

With that I'll turn the call back over to Jerome.

Thanks, Jim we're extremely proud of our accomplishments this quarter as well as over the past year. Despite a still challenging environment, our strength and resilience was further demonstrated by the momentum and our business during the first quarter with global e-commerce, delivering 26% growth over our 2019 pre pandemic trends.

As we look ahead, we see significant opportunities for lands end grounded and our 4 strategic pillars of getting the product right.

Being a digitally driven company <unk>.

Implementing a unit channel distribution strategy, and enhancing our infrastructure and processes to drive long term profitable growth for our shareholders.

Through the pandemic the accelerated shift to online shopping and increased demand for comfort and enabled us to leverage our business model to further advance our market share position importantly.

Importantly, with over 95% of our business transacted online, we continue to see ample opportunity in front of us as we believe the pandemic has changed customer shopping behavior driving a significant increase in U S households, willing to shop online, particularly within our target demographic as a result, we believe our total addressable market has.

Nearly doubled further expanding our runway for growth.

In terms of our marketing initiatives, we continue to invest and their digital strategies, which now represent approximately half of our marketing spend our heightened focus on paid social media has been yielding strong results and driving profitable new customer acquisition, and we will continue to test new strategies and combination with refinements to search engine optimization and.

Social media.

At the same time, we continue to drive efficiencies and catalog spending to optimize profitability.

Through a combination of these successful marketing strategies and our data driven initiatives, we see opportunity for continued growth and retention and new customers.

Looking to our product assortment and we will continue to lead our let's get comfy campaign, emphasizing comfort as well as versatility.

We believe that comfort is here to stay and we are well positioned to meet the needs of consumers as they refresh their wardrobes and preparation for a return to the office at least part time.

And to resume a more social lifestyle we.

We will also remain focused on wear now apparel with the introduction of seasonal colors and net as we head into this summer and.

As always we will leverage our use of data analytics to inform product assortments as we continue to adapt to our consumers' evolving needs.

Turning to our third party partnerships with regards to calls we remain on track to expand distribution to 300 Kohl's doors in 2021 and look forward to continuing to grow this successful partnership.

We are seeing assortments resonate with customers both online and in stores.

Subsequent to quarter end, we launched our second Draper, James Swimwear collection, which we're excited about given the strength and our first collection.

Building on this partnership we also announced plans to launch Sleepwear and home collections with Draper James founded by Reese Witherspoon and this fall as we continue to see strong demand in these categories.

We also remain pleased with the performance of our lands end marketplace. While it is still early in our marketplace represents a small portion of our business. We believe this is an opportunity to expand our reach by providing customers with complementary products that address additional needs. We will continue to look for third party brands to welcome to our site and expand our overall offering.

Net building on what Jim discussed in regard to the evolution of our outfitters business.

And the pace of recovery International and school uniform accounts is occurring faster than we had anticipated furthering our optimism and this business, we remain focused on driving growth and our small and medium sized customers, which is recovering at a slower pace last quarter. We discussed steps that we're taking to advance our position as the authority and branded apparel and.

And hard goods for small and medium sized businesses.

With the changes we are making to enhance our website and processes combined with their test and react approach to marketing and pricing. We continue to believe that the smaller and medium sized accounts of outfitters could grow to represent approximately half of the outfitters business over the long term.

In conclusion, we're extremely pleased with our first quarter results. Despite the many headwind and still facing the apparel industry.

And the momentum in our business supports the underlying strength, particularly in our global ecommerce business.

Continue to execute our disciplined approach grounded and our 4 pillars to profitably grow our business for the long term. We believe we have a strong foundation in place and and expanding total addressable market and I am extremely excited for our significant opportunities that lie ahead, we look forward to updating you on our progress and future quarters with that we will open it up for question.

<unk>.

Thank you as a reminder to ask a question you will need to press star 1 on your telephone so lets China question and pass the Pankey, Please standby will be compared to Ken and Dave asked there.

Cash first question comes from Alex Fuhrman with Craig Hallum. Your line is now open.

Great. Thanks, very much for taking my question and congratulations on a really incredible start for the year.

Wanted to ask about the big sort of reward drove and the opportunity ahead as people start to return to their workplaces. It sounds like your product assortment and certainly resonated and people were working from home with comparable closed and similarly, it sounds like a big opportunity.

And it kind of be that comfortable wear to work brand as people start to get back to the office. When did you start to see sort of a pickup in work apparel and and you gave us a sense of based on what Youre seeing now how long do you think this is going to continue for us it's going to be throughout 2021, and thats going to be sort of a multi year.

Reward drove net people catch up from not having updated their work at higher and the last year and a half.

Hey, Alex and surround thanks a lot.

We think that going forward, what youre seeing is almost a resurgence and the apparel industry.

Over the last year, you've seen fewer people shopping in stores more people shopping online and in fact, the big increases and online shopping have come from Gen X and baby Boomers. So what we think is really going forward youre going to see continued interest of shopping online and continued interest and comfort.

We've seen the same product categories resonate with customers recently as we have over the course of 2020 everyone's looking for comfort.

And Thats natural fibers that stretch.

And our network business, our loungewear businesses have been great and we've seen that continue into 2022, a little bit more and dresses little bit more and bottoms, but generally our product assortment and lends itself well to comfort and versatility. So we think that this is a trend and Glenn.

For it and it's not going to be a blip with with something happening in 2021, and then fading away and 'twenty 2.

Great. Thanks that makes a lot of them and then we'd love to talk more about the gross margin you mentioned that rising freight costs and just supply chain constraints and general are likely to continue throughout the year and yet gross margin has been up really nicely because of your merchandise margins.

And where is that coming from with commodity costs rising is it just been a reduction of markdowns or people buying more at full price.

Love to just hear a little bit more about how you think about managing gross margin throughout the rest of the year.

Yes.

It's really coming from 2 places mainly Alex So the first is our sourcing team has been doing a great job.

Our sourcing and product so we've been seeing some nice reductions in our and our App.

Average unit cost.

And then the second is what we're doing from a promotional perspective, and we've talked I think about the last for.

Few quarters about what we're doing from a dynamic promotion pricing and what we're doing from being able to be more promotional.

Productive.

Overall, reducing our level of promotion, so I think allowing better shelters more profitable shelters, and therefore rates and our gross margins.

Great that's really helpful.

And then lastly, if I could just ask about the uniform business.

It sounds like Youre, starting to see a nice recovery there whats the expectation of how that's likely to play out.

Over the next.

Couple of quarters.

It sounds like back to school off to a strong start when did that business really tend to reach its peak season and in the calendar.

Yes, I think I think we still expect it to recover different places from the different industries or the different businesses and the school business as you mentioned very early stages there.

So thats, all anecdotal and what we're hearing and the market is most of the schools are hoping to be back and person living with limited.

So assuming that they are back and schools with in person learning, we expect that business and normalize this year.

The National accounts has really been the pleasant surprise for us going into this year.

We anticipated a longer recovery there.

But led by some of this return to travel specifically the leisure travel.

All signs are that we haven't seen that business travel recovery.

But the numbers coming out of the industry are that leisure travel is returning close to pre pandemic levels and therefore, we're seeing that business recover for us.

And then the total US right now is our small and medium size I think as markets and.

And cities and counties and businesses go back we are seeing a recovery, but we still think that's probably a multiyear so school normalizing this year and national accounts going into next year, and probably small and mid size also going into next year and see a fully normalized level of business.

Great that's really helpful. Thank you.

Thank you. Our next question comes from Steve Marotta with C. L. King Your line is now open.

Good morning, Jerome and Jim Congratulations on the quarter, just peeling the onion back 1 more layer on the back to school season, and overlay that with potential shipping delays are there any issues from and you're in stocks regarding back to school, which.

Would it be expected to start to occur I assume and about 6 weeks or so.

I would say we are certainly seeing challenges like everybody else thing and the industry were doing what would tend to expedite it.

The other instances, where we're doing things from from system.

Shipping by Air we're doing things, where we are expediting the ocean freight.

And that's certainly adding a little bit of cost and but we're doing some of that from the key items.

At this point, Steve I'd say, we think it's manageable.

That's not to say that we're not going to have some 1 off issues like everybody else.

But again I think for teams doing a great job of trying to manage around it.

That's great. That's very helpful and did the results from the first quarter alter your longer term outlook I believe that was sales of $1.90 to $2.1 billion and high single digit EBITDA margins.

We haven't updated that yet.

I think there is a potential of certainly if these trends continue but at this point, we're going to stick with the 1.9 to 2.1.

Okay, and it's something on a more granular level can you give an example, how your data analytics recognized something that you could alter your product assortment that you wouldn't have otherwise known just from normal trajectory of sales returns and if you will and my sales returns I mean.

Growth in a particular category for sure 1 other things that.

We look at is how much development time, we put in how many styles. We develop what's the exact right amount of styles and color ways to put into the assortment and if you look at the last several years since Jim and I have been here, we've cut the number of styles that we produce on an annual basis almost in half.

And that's really helped us with productivity as a line and then when you look at Europe your optimal sales curve.

Our AI programs, we will look at what the optimal sales programs. Our sales curves are for each individual style and color way and can change pricing based upon demand and order to reach that optimal curve. So those things combined are really helping us very much with how many styles for producing how many <unk>.

Other ways, how many prints and and how we're managing selling through to maximize gross margin.

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

Okay.

Thank you.

This concludes today's conference call. Thank you for participating you may now disconnect.

And Ian.

Yes.

Sure.

[music].

And.

[music].

Good day and thank you for standing by welcome to the lands end first quarter 'twenty 'twenty 1 for earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.

Ask a question during the session you will need to press star 1 on your telephone if you acquired any further assistance. Please.

Net star Zero, and I would now like to turn the conference over to your Speaker today, Bernie Mccracken Chief Accounting Officer. Please go ahead.

Good morning, and thank you for joining the lands end earnings call for a discussion of our first quarter results, which were released this morning and can be found on our website and dot com for the call. Today, you will hear from Jerome Griffith, Our Chief Executive Officer, Jim <unk>, Our President and Chief Financial Officer after the company's prepared.

And we will conduct a question and answer session.

And our annual report on form 10-K, a quarterly reports on form 10-Q. The 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 and subsequent events and developments made it caused the company's outlook.

Change of note in this respect with Covid.

T and debit continues to have an impact on our business and its duration could materially 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 for the most directly comparable GAAP measures can be found in our earnings release issued earlier today, a copy of which is posted in the Investor Relations section of our website at lids and dotcom and with that I will turn the call over to Jerome Griffith.

The momentum and our global E Commerce business is stronger than ever as we continued to execute our digitally led product and marketing strategies.

For the first quarter revenue grew 48% and global ecommerce increased 44% year over year, while adjusted EBITDA increased $34.1 million to $22.5 million from the first quarter of 2020.

While the first quarter of 2020 performance was obviously impacted by COVID-19, compared to the first quarter and fiscal 2019 revenue increased 22% Global E. Commerce revenue grew 26% and adjusted EBITDA increased $19.5 million.

Our results demonstrate the strength and momentum and our business that began pre COVID-19 and is continuing as we emerge from the pandemic.

Through our digitally led and data driven focus we increased global new customers by 71% and the first quarter, our total global customer file expanded the first quarter by 27% from the prior year.

Our digitally led strategy as well as our product and marketing enabled us to achieve customer retention of more than 55%. These.

These customers become more productive over time as they shop more with our brands and importantly, we are efficiently acquiring these customers who on average become profitable within the first year.

These metrics illustrate the work we have done over the past 3 years to create a foundation to profitably grow our market share and the global E Commerce apparel business.

We attribute our successful and new customer acquisition and retention strategy to our enhanced marketing initiatives implemented over the past several years, specifically and a significant shift towards digital marketing.

In past earnings calls, we have discussed with you the search engine optimization techniques that we use to drive traffic and grow market share.

With digital marketing our primary focus we accelerated our spending within paid social media during the quarter.

Within our paid social initiatives and early stages, and our strong data analytics capabilities, we see significant opportunity to continue to efficiently drive new customers to lands end.

Our U S e-commerce sales were strong increasing and impressive 47% during the first quarter.

And the U S. We are also incredibly pleased with the performance of our E Commerce business in Europe, which was up 55% and the first quarter as we continued to benefit from the initiatives, we implemented to drive market share gains the.

And the strong acceptance of the lands end brand and this region furthers, our confidence and a strong growth opportunity in front of us as we execute a similar playbook to what drove the strength and the U S and advanced our market share position.

I'd like to turn now to our product.

We continue to emphasize our let's get counting messaging this quarter as casual comfort remained a priority for our customers and let our global ecommerce business, our strongest performing categories were focused on comfort and versatility, including swimwear sleepwear and net.

Swimwear was a standout this quarter as customers began to make travel plans again.

Within the category swimwear performed across the entire family with positive customer response to the versatility and our product assortment.

Sleepwear and home continued to outperform and we are expanding the offering to year round in order to capitalize on this broader opportunity.

Our net business remains a top performing category as we continue to update our colors and styles to meet our customers' lifestyle needs.

As an example, we combined cold weather fabrics with warm weather colors as we build upon our seasonal transitional offering.

And our product is well positioned to benefit from what we believe is a permanent shift to a more casual comfort aesthetic.

And we see comfort playing a bigger role and wear to work as such our khakis and woven businesses are attractively positioned to capitalize on the continued strength and the casual award growth, particularly as customers refresh their wardrobes and preparation for the office.

Turning now to our third party partnerships. We are pleased with our performance both at Kohl's and Amazon this quarter, which both exceeded expectations.

These relationships have enabled us to expand our reach to consumers with similar attributes to the lands end customer.

And as we look to future partnerships, we will continue to be targeted and thoughtful and our distribution.

With a strong foundation and flexible operating model, we have been able to navigate this unprecedented period and position ourselves even stronger on the other side of this pandemic.

With that I will turn it over to Jim.

Thank you Jerome and good morning.

We're very pleased with the strong results we delivered during the first quarter as we continued to build on our data driven initiatives.

Given the impact of Covid 1919 last year I'll make select comparisons to our first quarter of 2019, and my prepared remarks to help normalize our improving trends.

For the first quarter total revenue of $321.3 billion, that's an increase of 48% from 2020 and 22% from 2019.

Our performance compared to our 2019 levels demonstrates the continued strength and our underlying business as we emerge from the pandemic.

Our global ecommerce sales increased 44% from 2020 and 26% from 2019 as the momentum we had and our business heading into the pandemic is accelerating.

The strength was led by impressive growth of 47% and our U S E Commerce business and we also saw growth and our international business up 37% driven by Europe, increasing 55% from 2020.

Our better than expected results were driven by strength across a number of our key categories, including swimwear sleepwear and knits.

This performance was supported by marketing strategies that continue to message the value and comfort and our product assortments.

Revenue for our third party business increased to $11.8 million, a $10.3 million improvement compared to last year.

This increase was driven primarily by the launch of our full product assortment on kohls dot com and a curated assortment of our key items and a 150 of their store locations.

And our outfitters business sales increased 28% with a faster than expected recovery and our national accounts and school uniform sales.

We're seeing demand and our travel related national accounts and begin to ramp up as people return to planning trips.

We now expect this recovery to accelerate throughout 2021 and into 2022.

School uniforms is also showing signs of recovery and we expect this business to normalize as schools reopen this fall.

While small and medium sized businesses have been slower to recover we remain confident that the strategies were pretty for it will drive improvement for the business over the long term.

Gross margin and the first quarter increased to 46%.

And when we had 260 basis point improvement from 2020.

This resulted in delivering the highest gross margin level and over 4 years.

This strength more than offset higher shipping costs as well as the impact from sales mix and our growing lower margin third party business.

As a percentage of sales SG&A improved to 39, 1%.

That's down approximately 970 basis points from 2020 and.

540 basis points from 2019.

The improvement was due to leveraging the higher sales and continued overall cost controls slightly offset by higher digital marketing spending.

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

For the quarter adjusted EBITDA was 22 and $5 million, which was significantly above our expectations. Our EBITDA improved from a loss of 11.6.002 million 20.

And earnings of $3 million and 2019 turning.

Turning to the balance sheet inventories at the end of the quarter were $394.3 million compared to $383.2 million 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 second quarter.

Before providing our guidance I'd like to share an update on our Capex plan. So overall, we're still projecting capex to be approximately $26 million for 2021.

In addition to our spending on our customer facing initiatives. We've started the development of our new warehouse management system focused on personal management, while optimizing our third party carrier rates.

Now I'd like to discuss our outlook for the second quarter and for the full year and so we think about the relative performance our outlook reflects strong growth over pre pandemic levels, particularly taking into account. The 2021 will be a recovery period and our outfitters business.

Beginning with the second quarter, we expect net revenue to be between 345 and $355 million.

Driven by our momentum and our global ecommerce business.

We expect net income of $1.5 to 4 million and diluted earnings per share to be between 5 and 12.

We expect adjusted EBITDA to be and the range of $20 million to $23 million.

For the full year, we are raising our estimates based on our strong performance, thus far and 2021.

We now expect net net revenue to be between $1.6 1 and $1.65 billion, primarily driven by our momentum and our global ecommerce business and the continued recovery and our outfitters business.

We are raising our net income outlook to a range of 27, and a half to 34 million and diluted earnings per share to be between 84.

And $1 <unk> for.

We now expect adjusted EBITDA to be in the range of $114 million to $122 million.

The assumptions and our guidance account for higher shipping costs and surcharges that we believe will continue throughout 2021.

We expect our continued strength and merchandize margins will more than offset these headwinds.

With that ill turn the call back over to Jerome.

Thanks, Jim.

We're extremely proud of our accomplishments this quarter as well as over the past year. Despite a still challenging environment, our strength and resilience was further demonstrated by the momentum and our business during the first quarter with global e-commerce, delivering 26% growth over our 2019 pre pandemic trends.

As we look ahead, we see significant opportunities for lands end grounded and our 4 strategic pillars of getting the product right.

And digitally driven company.

Implementing a unit channel distribution strategy, and enhancing our infrastructure and processes to drive long term profitable growth for our shareholders.

Through the pandemic the accelerated shift to online shopping and increased demand for comfort enabled us to leverage our business model to further advance our market share position.

<unk> nearly doubled further expanding our runway for growth.

In terms of our marketing initiatives, we continue to invest and our digital strategies, which now represent approximately half of our marketing spend our heightened focus on paid social media has been yielding strong results and driving profitable new customer acquisition, and we will continue to test new strategies and combination with refinements to search engine optimization and <unk>.

Social media.

And at the same time, we continue to drive efficiencies and catalog spending to optimize profitability.

Through a combination of these successful marketing strategies and our data driven initiatives, we see opportunity for continued growth and retention and new customers.

Looking to our product assortment and we will continue to lead our let's get comfy campaign, emphasizing comfort as well as versatility.

We believe that comfort is here to stay and we are well positioned to meet the needs of consumers as they refresh their wardrobes and preparation for a return to the office at least part time and to resume a more social lifestyle.

We will also remain focused on wear now apparel with the introduction of seasonal colors and net as we head into the summer.

As always we will leverage our use of data analytics to inform product assortments as we continue to adapt to our consumers' evolving needs.

Turning to our third party partnerships with regards to calls we remain on track to expand distribution to 300, Kohl's stores and 2021 and look forward to continuing to grow the successful partnership we are seeing assortments resonate with customers both online and in stores.

Subsequent to quarter end, we launched our second Draper, James Swimwear collection, which we're excited about given the strength and our first collection building on this partnership we also announced plans to launch sleepwear and home collections with Draper James founded by Reese Witherspoon and this fall as we continue to see strong demand in these categories.

And.

Net building on what Jim discussed in regard to the evolution of our outfitters business.

Last quarter, we discussed steps that we're taking to advance our position as the authority and branded apparel and hard goods for small and medium size businesses.

With the changes we are making to enhance our website and processes combined with their test and react approach to marketing and pricing. We continue to believe that the small and medium sized accounts of outfitters could grow to represent approximately half of the outfitters business over the long term.

In conclusion, we are extremely pleased with our first quarter results. Despite the many headwinds still facing the apparel industry. The.

And the momentum in our business supports the underlying strength, particularly in our global ecommerce business.

We'll continue to execute our disciplined approach grounded and our 4 pillars to profitably grow our business for the long term. We believe we have a strong foundation in place and and expanding total addressable market and I am extremely excited for our significant opportunities that lie ahead, we look forward to updating you on our progress and future quarters with that we will open it up for question.

And.

Thank you as a reminder to ask a question you want me to press Star 1 on your telephone.

Your question and pass the Pankey, please standby will be compile the Q&A last day.

Our first question comes from Alex Spam and with Craig Hallum. Your line is now open.

Great. Thanks, very much for taking my question and congratulations on a really incredible start for the year.

And to kind of kind of be that comfortable wear to work brand as people start to get back to the office. When did you start to be sort of a pickup and in work apparel and can you give us a sense of based on what Youre seeing now how long do you think this is going to continue for us it's going to be throughout 2021, and thats going to be sort of a multi year.

Your reward drove at people catch up from not having updated their work at higher and the last year and a half.

Hey, Alex sure Ron Thanks, a lot.

We think that going forward, what youre seeing is almost a resurgence and the apparel industry.

Over the last year, you've seen fewer people shopping in stores more people shopping online and in fact, the big increases and online shopping have come from Gen X and baby Boomers. So what we think is really going forward youre going to see continued interest and shopping online and contingent interest and comfort.

We've seen the same product categories resonate with customers recently as we have over the course of 2020 everyone's looking for comfort that's.

Thats natural fibers at stretch.

And our knitwear business, our loungewear businesses have been great and we've seen that continue into 2022.

More and addresses a little bit more and bottoms, but generally our product assortment and lends itself well to comfort and versatility. So we think that this is a trend going forward and it's not going to be a blip with with something happening in 2021, and then fading away and 'twenty 2.

Great. Thanks that makes a lot of debt and then would love to talk more about the gross margin you mentioned that rising freight costs and just supply chain constraints and general are likely to continue throughout the year and yet gross margin has been up really nicely because of your merchandise margin.

And where is that coming from with commodity costs rising as it has it just been a reduction of markdowns or people buying more at full price, we would love to just hear a little bit more about how you think about managing gross margin throughout the rest of the year.

Yes.

Really come from call. It 2 places mainly Alex So the first is our sourcing team has been doing a great job.

We're sourcing and our products.

We've been seeing some nice reductions and our and our average unit cost.

And then the second is what we're doing from a promotional perspective, and we've talked I think about the last few quarters about what we're doing from a dynamic promotion pricing and what.

What we're doing from being able to be more promotional.

Productive.

Overall, reducing our level of promotions, I think allowing better shelters more profitable filters, and therefore rates and our gross margins.

Great that's really helpful.

And then lastly, if I could just ask about the uniform business.

It sounds like Youre, starting to see a nice recovery there whats the expectation of how that's likely to play out over the next.

A couple of quarters.

It sounds like back to school off to a strong start and when.

Did that business really tend to reach its peak season and in the calendar.

Yes, I think I think we still expect it to recover different phases from the different industries.

Or are the different businesses the school business as you mentioned very early stages there.

So that's all anecdotal and what we're hearing and the market is most of the schools are hoping to be back and person living.

And with them.

So assuming that they are back and schools within person and learning, we expect that business and normalize this year.

The National accounts has really been the pleasant surprise for us going into this year.

We anticipated a longer recovery there.

But led by some of this return to travel specifically the leisure travel.

All signs are that we haven't seen that business travel recovery.

But the numbers coming out of the industry are that leisure travel is returning close to pre pandemic levels and therefore, we're seeing that business recover for us.

And then the slowest right now is our small and medium size I think as markets and.

Great that's really helpful. Thank you.

Thank you. Our next question comes from Steve Marotta with C. L. King Your line is now open.

Would it be expected to start to occur I assume and about 6 weeks or so.

I would say we are certainly seeing challenges like everybody else thing and the industry were doing what would tend to expedite it.

The other end.

And says we're doing things from from system.

<unk>.

Shipping by Air we're doing things, where we're expediting the ocean freight.

And that's certainly adding a little bit of cost and but we're doing some of that from the key items.

At this point, Steve I'd say, we think it's manageable.

That's not to say that we're not going to have some 1 off issues like everybody else.

But again I think the team is doing a great job of trying to manage around it.

That's great that's very helpful and did the results and the first quarter alter your longer term outlook I believe that was the sales of $1.92.1 billion and high single digit EBITDA margin.

We haven't updated that yet.

You know I think there is a potential of certainly if these trends continue but at this point and stuck with a 1.9 to 2.1.

Okay and.

On a more granular level can you give an example, how your data analytics recognized something that you could alter your product assortment that you wouldn't have otherwise known just from normal trajectory of sales returns and if you will and my sales returns growth and a particular category.

For sure 1 other things that.

And we look at is how much development time, we put in how many styles. We develop what's the exact right amount of styles and color ways to put into the assortment and if you look at the last several years since Jim and I have been here, we've cut the number of styles that we produce on an annual basis almost in half.

That's really helped us with productivity is in line and then when you look at Europe. Your optimal sales curve. Our AI programs, we will look at what the optimal sales programs. Our sales curves are for each individual style and color way and can change pricing based upon demand and order to.

To reach that optimal curve. So those things combined are really helping us very much with how many styles were producing how many color ways, how many prints and and how we're managing selling through to maximize gross margin.

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

Thanks, Steve.

Thank you this.

This concludes today's conference call and thank you for participating you may now disconnect.

Q1 2021 Lands End Inc Earnings Call

Request a DemoDemo

Lands End

Earnings