Q4 2024 Lands' End Inc Earnings Call
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Operator: Good day, and welcome to the Lands End Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode.
And welcome to the Lands' end fourth quarter earnings Conference call.
At this time all participants are in a listen only mode.
Operator: Following the speaker's remarks, the floor will be open for questions. If you would like to ask a question at that time, please press star 1 on your telephone keypad. You may remove yourself from the queue by pressing star 2.
The Speakers' remarks, the floor will be opened for questions.
If you would like to ask a question at that time. Please.
Please press star one on your telephone keypad you.
You may remove yourself from the queue by pressing star two.
Operator: Please note, today's call will be recorded, and I will be standing by if you should need any assistance. It is now my pleasure to turn the call over to Bernie McCracken, Lands End's Chief Financial Officer. Please go ahead.
Speaker Change: Please note today's call will be recorded and I will be standing by if you should need any assistance it.
Speaker Change: It is now my pleasure to turn the call over to Bernie Mccracken Landon's Chief Financial Officer. Please go ahead.
Bernard Louis McCracken: Good morning, and thank you for joining the Lands' end earnings call for a discussion of our fourth quarter and fiscal 2023 results, which we released this morning and can be found on our website Landsend dot com.
Bernard Louis McCracken: Good morning, and thank you for joining the Lands End Earnings Call for a discussion of our fourth quarter and fiscal 2023 results, which we released this morning and can be found on our website, landsend.com. I'm Bernie McCracken, Lands End's Chief Financial Officer, and I'm pleased to join you today with Andrew McLean, our Chief Executive Officer. After the 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.
Bernard Louis McCracken: Bernie Mccracken lands and Chief Financial Officer, and I'm pleased to join you today with Andrew Mcclain, Our Chief Executive Officer.
Bernard Louis McCracken: After the prepared remarks, we will conduct a question and answer session.
Bernard Louis McCracken: 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 factor.
Bernard Louis McCracken: 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 and 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. However, subsequent events and developments may cause the company's outlook to change. During this call, we'll be referring to non-GAAP measures, which are not prepared in accordance with generally accepted accounting principles.
Bernard Louis McCracken: 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, and quarterly reports on Form 10-Q.
Bernard Louis McCracken: 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.
Bernard Louis McCracken: Subsequent events and developments may cause the company's outlook to change.
Bernard Louis McCracken: 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.
Bernard Louis McCracken: A reconciliation of non-GAAP financial measures to 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 landsend.com. With that, I will turn the call over to Andrew. Thanks, Bernie.
Bernard Louis McCracken: A reconciliation of non-GAAP financial measures to 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 Lands' end dot com with that I will turn the call over to Andrew.
Andrew J. McLean: Thanks, Tony Good morning, and thank you for joining us today our.
Andrew J. McLean: Good morning, and thank you for joining us today. Our results for the fourth quarter and full year 2023 reflect the continued execution of Lands End's value creation strategy. We delivered strong performance in the fourth quarter, including throughout the holiday season, closing out a fiscal year where we generated positive momentum across the organization and drove increased profitability. Our deliberate efforts to generate more profitable sales continued to deliver in Q4 and resulted in a 14% increase in gross profit dollars, adjusted EBITDA of approximately $32 million, which was above the high end of our guidance range, and gross margin expansion of approximately 550 basis points. Additionally, Q4 marked our fourth consecutive quarter of significant inventory improvement. With inventory down 29% year-over-year in the quarter, we were able to be nimble and disciplined throughout the holiday season, prioritizing newness during what is a highly promotional period for our industry.
Andrew J. McLean: Our results for the fourth quarter and full year 2023.
Andrew J. McLean: The continued execution of land and its value creation strategy.
Andrew J. McLean: We delivered strong performance in the fourth quarter, including throughout the holiday season.
Andrew J. McLean: Closing out our fiscal year, where we generated positive momentum across the organization.
Andrew J. McLean: Increased profitability.
Andrew J. McLean: Our deliberate efforts to generate more profitable sales continued to deliver in Q4 and resulted in a 14% increase in gross profit dollars.
Andrew J. McLean: Adjusted EBITDA of approximately $32 million, which was above the high end of our guidance range and gross margin expansion of approximately 550 basis points.
Andrew J. McLean: Q4 marked our fourth consecutive quarter up significant inventory improvement with.
Andrew J. McLean: With inventory down 29% year over year in the quarter, we were able to be nimble and disciplined throughout the holiday season prioritizing unit during what is a highly promotional period for our industry.
Andrew J. McLean: Looking ahead, we remain focused on further improving our inventory return through the speed and efficiency initiatives we are implementing across our supply chain. As a solutions-oriented business, we're deepening our focus on building the brand to best align our assortment with customer shopping behavior. We're bringing our two key customer cohorts, resolvers and devolvers, the items they love and are looking for while introducing freshness across our assortment more frequently throughout the year via new styles, colors, and fabrics. We're doing so with more full-price selling, lower levels of clearance sales, and less promotional activity. Our authority in out-of-work solutions was a key driver of our strong margin performance in the fourth quarter, both in the U.S. and internationally. As discussed last quarter, we reduced our investment in heavy outerwear and moved toward lighter fabrics and materials. Our Wonderweight offering of middleweight packable jackets performed exceptionally well. As a transitional outerwear solution, ideal for layering, we are weatherproofing our assortment and using this offering to extend the outerwear buying journey.
Andrew J. McLean: Looking ahead, we remain focused on further improving our inventory turn from the speed and efficiency initiatives, we are implementing across our supply chain.
Andrew J. McLean: As a solutions oriented business.
Andrew J. McLean: Deepening our focus on building the brand to best align our assortment with customer shopping behaviors were bringing our two key customer cohorts resolver and involve risk.
Andrew J. McLean: The items, they love and they're looking for while introducing freshness across our assortment more frequently throughout the year via new styles colors with capex.
Andrew J. McLean: Doing so with more full price selling lower levels of clearance sales and less promotional activity.
Andrew J. McLean: Our authority in Outerwear solutions was a key driver of our strong margin performance in the fourth quarter.
Andrew J. McLean: In the U S and internationally.
Andrew J. McLean: As discussed last quarter, we reduced our investment in heavy outerwear and move towards lighter fabrics and materials.
Andrew J. McLean: Our wonder wait offering of middleweight Packable jacket performed exceptionally well.
Andrew J. McLean: As a transitional outerwear solution ideal for layering, where weather proofing, our assortment and using this offering to extend the outerwear buying season.
Andrew J. McLean: Across our digital channels, we're creating more compelling and more personal customer journeys, which is driving increased traffic and engagement from new and existing customers, with social media working particularly well. As we've said before, we're taking a more outfit-centric approach to our assortment that features significantly more productive inventory and facilitates demand across natural adjacencies. Our success in outerwear helped facilitate sales of layering products, effectively supporting the new seasonal launches of our women's tops and bottoms. Sweaters had a wonderful season, with the customer migrating to new silhouettes, like our Quarter Zip Drifter Sweater, hitting a trend that was easy for all our customer cohorts to lean in on and tying back to our Supima Luxury Tee Program, another of our brand USP Launches of new age and size appropriate jeans and chinos incorporating solutions for heat and comfort have been additional strengths for us, with our boyfriend jeans bringing an unrivaled level of comfort and fit, while our striped chino pants sold through in days, which helped deliver a message to our customers.
Andrew J. McLean: Across our digital channels, we are creating more compelling and more personal customer journeys, which is driving increased traffic and engagement from new and existing customers.
Andrew J. McLean: With social media, working particularly well.
Andrew J. McLean: As we've said before we are taking a more outfit centric approach to our assortment that feature is significantly more productive inventory and facilitates demand across natural adjacencies.
Andrew J. McLean: Our success in August were helped facilitate sales of layering products effectively supporting the new seasonal lunch is up our women's tops and bottoms businesses.
Andrew J. McLean: Blackstone has had a wonderful season with the customer migrating to new silhouettes, I talk quarters that drift or sweater hitting a trend that was easy for all our customer cohorts to lean in on and tying back to us through Pima luxury T program, another of our brand USPS or unique selling points.
Launches of new age and size appropriate genes in chinas incorporating solutions for heat and comfort has been additional strengths for us without boyfriend gene, bringing an unrivaled level of comfort and fit while our stripes Chino pant sell through in days.
Which helped to deliver a message to our customer.
Andrew J. McLean: Don't wait for the discounts, or you'll miss out. Our performance across our swim and vacation solutions was also encouraging. We continue to introduce newness across our SWIM categories, including new colors and textures, which customers responded well to throughout the full year. It is notable in SWIM that we are building on the successes of our franchise products. Tugless, for 40 years, has expanded its footprint this year, adding new products, including a crossback strap and a texture fabrication.
Andrew J. McLean: Don't wait for the discounts are youll Miss that.
Andrew J. McLean: Our performance across our swim and vacation solutions was also encouraging.
Andrew J. McLean: We continue to introduce newness across our swim categories, including new colors and textures.
Andrew J. McLean: Which customers responded well to throughout the full year.
Andrew J. McLean: It is notable in swim that we are building on the successes of our franchise products Toklas for 40 years aren't Goto swimsuit expanded its footprint this year, adding new products, including our cross backstop and a texture fabrication.
Andrew J. McLean: This innovation, leveraging existing brand franchises, is part of our plan to maintain our authority as a leading swim brand in America. Before I turn to performance in our various, Beginning in Q1, we expect to change the way we talk about our performance to be more consistent with the evolution of our brand. B2C comprises our North American and international businesses, serving consumers across a number of channels.
Innovation leveraging existing brand franchises as part of our plan to maintain our authority as a leading swim brand in America.
Andrew J. McLean: Before I turn to performance in our various businesses beginning in Q1, we expect to change the way we talk about our performance to be more consistent with the evolution of our brand.
B to C comprises our north American and international businesses, serving consumers across a number of channels.
Andrew J. McLean: Well, B2B comprises our school uniforms and business uniforms first. More to come on this next quarter. Our U.S. e-commerce business, our largest B2C channel, delivered a third consecutive quarter of great margin performance with an increase in gross margin of approximately 520 basis points, year over year, due to our more targeted approach to promotions, driving higher quality sales, and improved inventory management. As we've discussed before, we continue to maximize key events and holidays to drive demand. Following record performance through the Black Friday to Cyber Monday period, we leveraged our data throughout the holiday season to adapt our assortment in real time based on how our customers were responding. This aligns with our broader strategy of putting inventory to work by taking a more outfit-centric approach that exploits category selling across natural adjacent channels. Moving to our third-party business, we found continued success in our balanced approach to working with a handful of like-minded partners that share our vision for customer-focused solutions. That resulted in a low single-digit improvement in revenues, coupled with gross profit dollars increasing by over 50%.
Andrew J. McLean: <unk> comprises our school uniform business uniforms verticals.
Andrew J. McLean: More to come on this next quarter.
Andrew J. McLean: Our U S e-commerce business, our largest pizza see channels delivered a third consecutive quarter of great margin performance with an increase in gross margin of approximately 520 basis points.
Andrew J. McLean: Year over year due to a more targeted approach to promotions driving higher quality sales and improved inventory management.
Andrew J. McLean: As we've discussed before we continue to maximize key events and holidays to drive demand.
Andrew J. McLean: Following record performance through the Black Friday, cyber Monday period, we leveraged our data throughout the holiday season to adapt our assortment in real time based on how our customers were responding.
Andrew J. McLean: This aligns with our broader strategy of putting inventory to work by taking a more outfit centric approach that exploits category selling across natural adjacencies.
Andrew J. McLean: Moving to our third party business, we find continued success and a balanced approach towards working with a handful of like minded partners that share our vision for customer focused solutions.
Andrew J. McLean: That resulted in a low single digit improvement in revenues, coupled with gross profit dollars increasing by over 50%.
Andrew J. McLean: Our new exclusive SWIM product in 200 target doors is performing well, and our focus on assortment tiered to the individual marketplace delighted our customers and created both the engagement and journey between channels that we believe amplifies the opportunity. As our product and Owned Channels Evolve, we are seeing the behavior and positioning improve within our marketplaces, speaking to the value we place on managing personalized customer journeys. We continue to execute on our licensing strategy, which adds asset-light, recurring income streams while allowing us to continue to focus on our core capabilities. As we said in our last call, we expect to begin seeing royalties in 2024 from our recent licensing agreements for club stores, primarily Costco, kids categories, and footwear.
Andrew J. McLean: Our new exclusive swim product and 200 target doors.
Andrew J. McLean: <unk>, well and our focus on Assortments tier to the individual marketplace delighted our customer and created both the engagement and journey between channels that we believe amplify the opportunity.
Andrew J. McLean: As our product.
Andrew J. McLean: And one channels evolve we are seeing the behavior and positioning improve within our marketplaces speaking to the value we place on managing personalized customer journey.
Andrew J. McLean: We continued to execute on our licensing strategy, which adds asset light recurring income streams, while allowing us to continue to focus on our core capabilities.
Andrew J. McLean: As we said on our last call. We expect to begin seeing royalties in 2024 from our recent licensing agreements for club stores, primarily Costco kids categories of footwear.
Andrew J. McLean: Moving forward, we have a belief that expansion into existing and white space products, channel, and geographic licenses can increase the reach of our brand, finding the customer when they want to shop, where they want to shop, and amplify performance across the entire brand footprint. Turning to our international business, we are pleased with how our performance in Europe is trending and firmly believe that the business is stable. Like in the U.S., we continue to prioritize assortment units and better inventory management with a focus on protecting margin through lower levels of promotional activity. However, revenue was down 6% year-over-year in Europe.
Andrew J. McLean: Moving forward, we have a belief that expansion into existing and white space product channel and geographic licenses can increase the reach of our brand finding the customer when they want to shop, where they want to shop and amplify performance across the entire brand footprint.
Andrew J. McLean: Turning to our international business, we are pleased with how our performance in Europe is trending and firmly believe that the business has stabilized.
Andrew J. McLean: Like in the U S. We continued to prioritize assortment newness and better inventory management with a focus on protecting margins through lower levels of promotional activity.
Andrew J. McLean: While revenue was down 6% year over year in Europe. The business increased gross profit dollars by 24% and expanded gross margin by over 1000 basis points of year over year.
Andrew J. McLean: The business increased gross profit dollars by 24% and expanded gross margin by over 1,000 basis points year-over-year. We were also pleased to see early success in our efforts in Europe to unlock speed and innovation to deliver our customers the best products, quality, and service. We're leveraging new global sourcing capabilities, including with partners like Lee & Fung, to more quickly respond to customer needs and supplement our assortment with market goods, including festive styles like satin skirts that were in demand during the holiday season, while testing new outerwear silhouettes like our long gilet vest.
Andrew J. McLean: We were also pleased to see early success in our efforts in Europe to unlock speed and innovation to deliver our customers the best product quality and service.
Andrew J. McLean: We're leveraging new global sourcing capabilities, including with partners like ligand funds to more quickly respond to customer needs and supplement our assortment with market goods.
Andrew J. McLean: <unk> fastest styles like satin skirts that we are in demand during the holiday season, while testing new out to west and the west like our lungs, you lay vest.
Andrew J. McLean: Turning to our <unk> to be up for this business.
Andrew J. McLean: Turning to our B2B outfitters, we saw nice performance during the quarter as our effort to deepen the new customer funnel began to bear fruit, resulting in the launch of new partnerships and continued progress in our school uniforms. We're seeing an encouraging trend upward for the. Our customer service and can-do attitude, coupled with our highly recognizable brand DNA, set us apart in this space. Over the last year, we've deepened relationships with new and prospective customers. We accomplished this through restructured sales and service organizations that placed decision-making closer to the customer and supported it with rigorous feedback processes to ensure their voice was heard and acted upon.
Andrew J. McLean: We saw nice performance during the quarter as our efforts to deepen the new customer funnel began to bear fruit, resulting in the launch of new partnerships and continued progress in our school uniform business.
Andrew J. McLean: We're seeing an encouraging trend upward for the business.
Andrew J. McLean: Customer service and can do attitude, coupled with a highly recognizable brand DNA set us apart in this space over the last year, we deepened relationships with new and prospective customers.
Andrew J. McLean: We accomplished this through restructured sales and service organizations that place decision, making closer to the customer and supported it with rigorous feedback processes to ensure that voice was hurt and acted upon.
Andrew J. McLean: Ultimately, we took it upon ourselves to make 2023 about crisp, on-point execution, receiving, by way of example, an A-plus grade on our school uniforms business from decision-makers across the country. We will continue this focus into 2024 as an underlying business in the U.S. Simultaneously, our restructured, high-performance sales and business development teams are building a robust pipeline of opportunities, implementing initiatives to support leadership in service and technology, and providing future upside to the business. Internally, we are pleased with the Book of Recurring Business being generated, both in time and in volume.
Andrew J. McLean: Ultimately we took it upon ourselves to make 2023 about Chris on execution, receiving by way of example, and a plus grade on our school uniforms business from decision makers across the country.
Andrew J. McLean: We will continue this focus into 2024 as an underlying business USP.
Andrew J. McLean: Simultaneously, our restructured high performance sales and business development teams are building a robust pipeline of opportunities implementing initiatives to support leadership and services and technology and providing future upside to the business internally. We are pleased with the book of recurring business being.
Andrew J. McLean: <unk>, both in time and in volume.
Andrew J. McLean: To summarise, we made tremendous progress on our strategy and put Lands End in a great position to build on our successes in the years ahead. I'm confident that by continuing to extend our leadership as a solutions provider of choice, we'll be able to drive enhanced value for our customers, employees, shareholders, and other stakeholders over the long term. Bernie will now discuss our fourth quarter performance as well as our 2024 outcome. Thank you, Andrew.
Andrew J. McLean: To summarize the quarter and year, we made tremendous progress on our strategy and put lands' end in a great position to build on our successes in the years ahead.
Andrew J. McLean: I'm confident that by continuing to extend our leadership as the solutions provider of choice will be able to drive enhanced value for our customers employees shareholders and other stakeholders over the long term.
Speaker Change: And he will now discuss our fourth quarter performance as well as our 2020 for outlook.
Speaker Change: Thank you Andrew for the fourth quarter total revenue came in at the high end of our guidance range of $515 million, a decrease of 3% compared to last year or approximately flat when adjusting for the 2022 closure of our Japan E Commerce business and the <unk>.
Bernard Louis McCracken: For the fourth quarter, total revenue came in at the high end of our guidance range at $515 million, a decrease of 3% compared to last year, or approximately flat when adjusting for the 2022 closure of our Japan e-commerce business and the conclusion of our work with Delta in early 2023. Gross profit dollars increased by 14%, and gross margin improved by 550 basis points compared to a year ago. This efficiency drove a 31% increase in adjusted EBITDA and a 160 basis point improvement in adjusted EBITDA margin versus 2022 and above the high end of our guidance. Global e-commerce revenue was $405 million in the fourth quarter, a decrease of 2% compared to last year, and approximately flat when adjusted for the Japan e-commerce closure, which generated $7 million in 2022. Compared to the fourth quarter of fiscal 2022, U.S. e-commerce was flat, and European e-commerce decreased 6%.
Andrew J. McLean: <unk> of our work with Delta in early 2023 gross profit dollars increased by 14% and gross margin improved by 550 basis points compared to a year ago. This efficiency drove a 31% increase in adjusted EBITDA.
Andrew J. McLean: And a 160 basis point improvement in adjusted EBITDA margin versus 2022 and above the high end of our guidance.
Andrew J. McLean: Global ecommerce revenue was $405 million in the fourth quarter.
Andrew J. McLean: Kris or 2% compared to last year and approximately flat when adjusted for the Japan E Commerce closure, which generated $7 million in 2022.
Andrew J. McLean: Compared to the fourth quarter of fiscal 2022.
Andrew J. McLean: E Commerce was flat and Europe e-commerce decreased 6%.
Bernard Louis McCracken: Outfitters revenue for the fourth quarter was $54 million, a decrease of 11% compared to last year; excluding the $5 million difference in year-over-year revenue from Delta, the Outfitters business was down 3% in the quarter. However, revenue for our third-party business increased 3% in the fourth quarter. Driven by the relatively strong performance across our online marketplaces, we also increased gross profit dollars by over 50% and gross margin by over 1,300 basis points as a result of our tailored marketplace assortment strategies. Gross margin in the fourth quarter was 38%. An approximately 550 basis point improvement from the fourth quarter of 2022. The margin improvement was driven by new products across the assortment, strength in transitional outerwear and adjacent product categories, reduction in sales of clearance inventory, and improvement in supply chain costs. We delivered adjusted EBITDA of $32 million in the fourth quarter, 31% year-over-year, which was slightly above the high end of our guidance range. Our net loss for the quarter was $9 million, or $0.27 per share.
Andrew J. McLean: Outfitters revenue for the fourth quarter was $54 million, a decrease of 11% compared to last year, excluding the $5 million difference in year over year revenue from Delta the outfitters business was down 3% in the quarter.
Andrew J. McLean: Revenue for our third party business increased 3% in the fourth quarter driven by the relatively strong performance across our more online marketplaces.
Andrew J. McLean: We also increased gross profit dollars by over 50% and gross margin by over 1300 basis points as a result of our tailored marketplace assortment strategies.
Andrew J. McLean: Gross margin in the fourth quarter was 38%.
Andrew J. McLean: Approximately 550 basis point improvement from the fourth quarter of 2022.
Andrew J. McLean: The margin improvement was driven by the new products across the assortment strength introduced transitional outerwear at adjacent product categories reduction in sales of clearance inventory and improvement in supply chain costs.
Andrew J. McLean: We delivered adjusted EBITDA of $32 million in the fourth quarter up 31% year over year, which was slightly above the high end of our guidance range.
Andrew J. McLean: Our net loss for the quarter was $9 million.
Andrew J. McLean: Or <unk> 27 per share our adjusted net income for the quarter was $8 million or 25 per share.
Bernard Louis McCracken: Our adjusted net income for the quarter was $8 million, or $0.25 per share. Turning to our balance sheet, in December, we successfully completed a refinancing of our existing term loan, well ahead of its maturity in September 2025, and entered into a new term loan of $260 million that matures in December 2028.
Andrew J. McLean: Turning to our balance sheet and.
Andrew J. McLean: In December we successfully completed a refinancing of our existing term loan well ahead of its maturity in September 2025, and entered into a new term loan of $260 million that matures in December 2028.
Andrew J. McLean: The completion of this refinancing initiative was an important step and lands and trajectory.
Bernard Louis McCracken: The completion of this refinancing initiative was an important step in Lands End's trajectory and provides us with more favorable terms under which we can continue to invest in the strategic growth and evolution of the company. Inventories at the end of the fourth quarter were $302 million compared to $426 million a year ago, representing a 29 percent improvement during the quarter. As Andrew said earlier, Q4 marked our fourth consecutive quarter of inventory improvement, and we averaged a 25% reduction every quarter of our 2023 fiscal year. This was a result of the actions the company had taken to improve inventory efficiency by reducing purchases and capitalizing on speed-to-market initiatives. Now, let me touch on a few performance highlights for the 2023 fiscal year.
Andrew J. McLean: And provides us with more favorable terms under which we continue to invest in the strategic growth and evolution of the company.
Andrew J. McLean: Inventories at the end of the fourth quarter were $302 million.
Andrew J. McLean: Compared to $426 million, a year ago, representing a 29% and <unk> during the quarter.
Andrew J. McLean: As Andrew said earlier Q4 marked our fourth consecutive quarter of inventory improvement and we averaged a 25% reduction every quarter of our 2023 fiscal year.
Andrew J. McLean: This was a result of the actions that company has taken to improve inventory efficiency by reducing purchases and capitalizing on speed to market initiatives.
Speaker Change: Now let me touch on a few performance highlights for the 2023 fiscal year.
Speaker Change: Gross margin for the year increased to <unk> 430 basis points to 43% compared to 38% in fiscal 2022, driven by significant expansion primarily in the back half of the year.
Bernard Louis McCracken: Gross margin for the year increased approximately 430 basis points to 43%, compared to 38% in fiscal 2022, driven by significant expansion primarily in the back half of the year. Adjusted EBITDA for fiscal year 2023 was $84 million, slightly above the high end of our guidance compared to $71 million in fiscal 2022. These results reflect our continued efforts to prioritize higher quality sales and balance sheet efficiency, which has continued to expand our profit margins across our business units. To demonstrate the power of our new approach versus focusing primarily on revenue, we brought in an additional 17 cents of profit for every dollar of lower revenue versus last year. We're confident that as we return to revenue growth, we'll be able to build on our success by continuing to prioritize and drive quality, profitable sales. For the fiscal year, we had a net loss of $131 million, or $4.09 per share. We had an adjusted net loss of $5 million, or $0.15 per share, which excludes the $107 million impairment of Goodwill in the third quarter due to the decline of our stock price and resulting market capitalization, as well as other significant items.
Speaker Change: Adjusted EBIT for fiscal year, 2023 was $84 million slightly above the high end of our guidance compared to $71 million in fiscal 2022.
Speaker Change: These results reflect our continued efforts efforts to prioritize higher quality sales and balance sheet efficiency, which has continued to expand our profit margins across our business units.
Speaker Change: To demonstrate the power of our new approach versus focusing primarily on revenue. We brought in an additional 17 profit for every dollar of lower revenue versus last year.
Speaker Change: We're confident that as we returned to revenue growth, we'll be able to build on our success by continuing to prioritize and drive quality profitable sales.
Speaker Change: For the fiscal year, we had a net loss of $131 million or $4 <unk> per share.
Speaker Change: We had an adjusted net loss of $5 million or.
Speaker Change: Or <unk> 15 per share, which excludes the $107 million impairment of goodwill in the third quarter due to the decline of our stock price and resulting market capitalization.
Speaker Change: As well as other significant items.
Speaker Change: In the fourth quarter SG&A was 34% of net revenue an increase of 510 basis points compared to the fourth quarter of 2022.
Speaker Change: For the full year, SG&A increased $23 million to $550 million or 37% of net revenue.
Bernard Louis McCracken: In the fourth quarter, SG&A was 34% of net revenue, an increase of 510 basis points compared to the fourth quarter of 2022. For the full year, SG&A increased $23 million to $550 million, or 37% of net revenue, compared to $527 million, or 34% of net revenue, in fiscal 2022. The 350 basis point increase was driven by de-leverage from lower revenues and higher incentive-based personnel costs
Speaker Change: <unk> to $527 million or 34% of net revenue in fiscal 2022.
Speaker Change: 350 basis point increase was driven by deleverage from lower revenues and higher incentive based personnel costs. After a comprehensive review of our organizational structure, we executed a high single digit percent reduction in corporate head count in January we did.
Speaker Change: Turbines that creating a flatter more agile organization, which set us up to continue to profitably grow over the long term, while generating additional cost savings that can be reinvested in the business. This reduction combined with earlier changes in our sourcing organization constitute a total reduction of approximately.
Bernard Louis McCracken: After a comprehensive review of our organizational structure, we executed a high single-digit percent reduction in corporate headcount in January. We determined that creating a flatter, more agile organization would set us up to continue to profitably grow over the long term while generating additional cost savings that can be reinvested in the business. This reduction, combined with earlier changes in our sourcing organization, constitutes a total reduction of approximately 10% of our corporate headcount. These organizational changes reflect the new narrative of our teams around how we think about the skills, strategies, and requirements to grow our business in the future. During fiscal 2023, we returned $12 million of cash to shareholders in the form of approximately 1.5 million shares repurchased, including $2 million in the fourth quarter. Additionally, under the board's previous authorization, we repurchased 2.3 million shares for an aggregate $20 million.
Speaker Change: 10% of our corporate head count.
These organizational changes reflect the new narrative our teams around how we think about the skills strategies and requirements to grow our business in the future.
Speaker Change: During fiscal 2023, we returned $12 million of cash to shareholders in the form of approximately one 5 million shares repurchased.
Speaker Change: Including $2 million in the fourth quarter.
Speaker Change: Under the board's previous authorization, we repurchased two 3 million shares for an aggregate $20 million.
Speaker Change: As announced earlier this month the board of directors has authorized a new $25 million share repurchase program set to run through March 2026.
Speaker Change: Now moving to guidance, we are continuing to prioritize high quality sales and improved cash flows, which we expect to drive continued gross profit and margin expansion during the spring summer selling season.
As a reminder, Q1 2023 included the conclusion of the Delta contract, which positively impacted our revenue by over $25 million.
Bernard Louis McCracken: As announced earlier this month, the Board of Directors has authorized a new $25 million share repurchase program set to run through March 2026. Now, moving to guidance. We are continuing to prioritize high quality sales and improved cash flows, which we expect to drive continued gross profit and margin expansion during the spring and summer selling seasons. As a reminder, Q1 2023 included the conclusion of the Delta contract, which positively impacted our revenue by over $25 million and approximately $12 million in adjusted EBIT. In the first quarter, we expect net revenue to be between $255 million and $285 million, with gross merchandise value, or GMV, expected to be low to middle single-digit growth. We believe GMV, which accounts for all merchandise sold to customers through B2C and B2B channels, as well as the retail value of the merchandise sold through third-party channels, is an important indicator of the performance of comparable growth of our businesses. We expect an adjusted net loss of $9.5 million to $7.5 million and adjusted diluted loss per share to be between $0.30 and $0.24.
Speaker Change: And approximately $12 million and adjusted EBITDA.
Speaker Change: In the first quarter, we expect net revenue to be between $255 million and $285 million with gross merchandise value or <unk> expect it to be low to middle single single digit growth.
Speaker Change: We believe GMB, which accounts for all merchandise sold to customers through B to C and b to b channels as well as the retail value of the merchandise sold through third party channels is an important indicator of the performance of the comparable growth of our businesses.
Speaker Change: We expect an adjusted net loss of $9 5 million to.
Speaker Change: $207 $5 million and adjusted diluted loss per share to be between 30 and 24.
Speaker Change: We expect adjusted EBITDA to be in the range of $9 million to $11 billion.
Speaker Change: For the full year, we expect net revenue of 1.33 to 145 billion.
Speaker Change: While GMB is expected to be low to middle single digit growth.
Speaker Change: We expect adjusted net income of $3 million.
Speaker Change: $212 million and adjusted diluted earnings per share of <unk> 10 to 38.
Speaker Change: We expect adjusted EBITDA to be in the range of $84 million.
Speaker Change: $296 million our guidance for the full year incorporates approximately $30 million in capital expenditures.
Bernard Louis McCracken: We expect adjusted EBITDA to be in the range of $9 million to $11 million. For the full year, we expect net revenue of $1.33 to $1.45 billion, while GMB is expected to be low to middle single-digit growth. We expect adjusted net income of $3 million to $12 million and adjusted diluted earnings per share of $0.10 to $0.38. We expect adjusted EBITDA to be in the range of $84 million to $96 million. Our guidance for the full year incorporates approximately $30 million in capital expenditures.
Speaker Change: As we have discussed we expect our improved inventory management to enable us to maintain inventory had normalized levels and bolster our work to further expand gross margin moving forward with that I will turn the call back over to Andrew.
Andrew J. McLean: Thanks, Bernie our fourth quarter results demonstrate the continued success of our strategy.
Andrew J. McLean: And our performance throughout 2023, which has been characterized by steady improvements in our operating and financial position.
Andrew J. McLean: Giving the way for sustainable profitable growth.
Andrew J. McLean: Before we open the floor to questions I'd like to touch on innovation.
Andrew J. McLean: As we have discussed, we expect our improved inventory management to enable us to maintain inventory at normalized levels and bolster our work to further expand gross margin moving forward. With that, I will turn the call back over to Andrew. Thanks, Bernie.
Andrew J. McLean: <unk> has always been at the forefront of innovation.
We delivered the first one 800 number service and we were one of the first internet retailers.
Andrew J. McLean: This specifically as I touched on we are returning to in 2024.
Andrew J. McLean: Our fourth-quarter results demonstrate the continued success of our strategy and our performance throughout 2023, which has been characterized by steady improvements in our operating and financial position, paving the way for sustainable, profitable growth. Before we open the floor to questions, I'd like to touch on innovation. Lands End has always been at the forefront of innovation.
Andrew J. McLean: Innovation can come from anywhere in the business.
Andrew J. McLean: And alongside some of the AI driven tools that we're applying to our uniforms business.
Andrew J. McLean: I wanted to highlight our sourcing and product teams, who recently applied to patent a new wave shaper our body.
Andrew J. McLean: Body sculpting swimsuit technology solution through constant customer curiosity, and the belief that we can amplify our solutions competence.
Andrew J. McLean: We delivered the first 1-800 number service, and we were one of the first internet retailers. This specifically is a touchstone we're returning to in 2024. Innovation can come from anywhere in the business, and alongside some of the AI-driven tools that we are applying to our uniforms, I wanted to highlight our sourcing and product teams, who recently applied to patent a new WaveShaper, a body-sculpting swimsuit technology solution. Through constant customer-first curiosity and a belief that we can amplify our solutions, these teams continue to set Lands End, an iconic American brand, apart and ready for life's every journey, as we look to 2024 and beyond. I am confident we have the right team and the right strategy to enable our ability to build on our progress to create value for our stakeholders over the long term. That concludes our prepared remarks. We look forward to your questions. The floor is now open to your questions. If you would like to ask a question at this time, please press star 1 on your telephone keypad. You may remove yourself from the queue by pressing star 2.
These teams continue to set lands' end, an iconic American brand.
Andrew J. McLean: And ready for life's every journey.
As we look to 2024 and beyond.
Andrew J. McLean: I'm confident we have the right team and the right strategy to enable our ability to build on our progress to create value for our stakeholders over the long term.
Speaker Change: That concludes our prepared remarks.
Speaker Change: We look forward to your questions.
Speaker Change: The floor is now opened for your questions. If you would like to ask a question at this time. Please press star one on your telephone keypad.
Speaker Change: You may remove yourself from the queue by pressing star two.
Speaker Change: Again, Thats star one to ask a question.
Speaker Change: Our first question comes from Josh Herrity with Telsey Advisory Group. Please go ahead.
Josh Herrity: Hi, good morning.
Josh Herrity: Just to follow up here on the gross margin performance continues to be impressive.
Josh Herrity: In the fourth quarter.
Josh Herrity: 550 basis point improvement how much how much do we think about is driven by full price selling and better.
Josh Herrity: Assortment.
Josh Herrity: Our response to that assortment and how much is more external factors.
Operator: Again, that's Star 1 to ask a question. Our first question comes from Josh Herity with Telsey Advisory Group. Please go ahead.
Josh Herrity: Supply chain freight et cetera, and then as we think about FY 'twenty four what do you see as the gross margin opportunities in the year ahead.
Bernard Louis McCracken: Hi, good morning. I just wanted to follow up on the gross margin performance. It continues to be impressive. In the fourth quarter of that 550 basis point improvement, how much should we think about as driven by full price selling and a better assortment in response to that assortment? And how much is more external factors, supply chain, freight, et cetera? And then, as we think about FY24, what do you see as the gross margin opportunities in the year ahead? And then, I guess, as perhaps a corollary to that, how should we think about the shaping of the new licensing businesses flowing through the P&L as the year progresses and how that shapes the top line and the margin as well? Thank you. Buh-bye! Good morning, Josh.
Speaker Change: And I guess.
Speaker Change: Perhaps a corollary to that how should we think about the shaping of the new licensing businesses flowing through the P&L as the year progresses, and how that shapes, the top line and the margin as well.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Good morning, Josh.
Josh Herrity: Yes, I think the gross margin.
Speaker Change: Fourth quarter, what Youll find is we talked about in the first half of the year that it was a lot of our gross margin improvement was driven by supply chain benefits, mostly inbound freight what you'll find as we move through the year, though we've really improved our product and our discounting came way down so when you break down Q4.
Speaker Change: It is much less about supply chain savings, we did as we've talked all year, we focused on our supply chain improvements that we can make there. So we did see some benefit in lower product costs, but predominantly most of that 550 basis points is driven by newness in our product and selling more full priced products.
Bernard Louis McCracken: Yeah, I think the gross margin from the fourth quarter, what you'll find is, you know, we talked about in the first half of the year that a lot of our gross margin improvement was driven by supply chain benefits, mostly inbound freight. What you'll find as we move through the year, though, is that we really improved our product, and our discounting came way down. So when you break down Q4, it is much less about supply chain savings; we did, as we've talked all year, we focused on supply chain improvements that we could make there. So we did see some benefits and lower product costs. But predominantly, most of that 550 basis point is driven by newness in our product and selling more full price products, and just lower discounting when we do promote.
Speaker Change: Ed just lower discounting when we did promote.
Speaker Change: As far as looking forward all of the work that we have done on creating a more efficient supply chain that benefit because it is usually a year out starts to really drive a difference in 2024. So you will see lower product costs, driven by those efficiencies to support the business going forward.
Speaker Change: Along with a lot more newness.
Speaker Change: Hopefully.
Speaker Change: As we can driving more full product for full price sales for our product.
As far as the licensing dose.
Speaker Change: As you can see in our guidance our revenues are down and that is driven by licensing our kids and shoes businesses, which is why we've now started to provide gross merchandise value as a as a as a kpis. So that we can show that the overall brand is growing and as we guided.
Bernard Louis McCracken: As far as looking forward, all of the work that we have done on creating a more efficient supply chain, that benefit, because it is usually a year out, starts to really drive a difference in 2024. So you will see lower product costs driven by those efficiencies to support the business going forward, along with a lot more newness and, hopefully, as we can, driving more full product, full price sales for our product. As far as the licensing goes, as you can see in our guidance, our revenues are down. That is driven by licensing our kids' and shoes businesses, which is why we've now started to provide gross merchandise value as a KPI so that we can show that the overall brand is growing. And as we guided its low single digits to mid-single digits,
Speaker Change: It's low single digits to mid single digits.
Speaker Change: And as we've tried this.
Speaker Change: Keep pounding on.
Speaker Change: We are driving higher gross profit dollars and that's what we expect to see every quarter. This year is to drive higher gross profit dollars of course Q1, we are up against that challenge.
Speaker Change: Delta and the completion of that contract.
Speaker Change: Excluding Delta, we will drive higher gross profit dollars in Q1 and for the rest of the year.
Speaker Change: It's helpful. Thank you goodbye.
Speaker Change: Thanks, Jeff.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question will come from Eric better with small cap consumer research. Please go ahead.
Eric Better: Good morning.
Andrew J. McLean: And as we've tried to keep pounding on, we are driving higher gross profit dollars. And that's what we expect to see every quarter this year, higher gross profit dollars. Of course, in Q1, we are up against the challenge of Delta and the completion of that contract. So, excluding Delta, we will drive higher gross profit dollars in Q1 and for the rest of the year. Hopeful, thank you. Good luck. Thanks, Josh.
Eric Better: Good morning, Eric.
Eric Better: Hi, can we talk a little bit about the marketplaces.
Eric Better: Is there potential to add other marketplaces business and B. How are you seeing the returns as you start to segment you previously talked about how you can now.
Eric Better: Shift product between the different marketplaces.
Eric Better: What are the opportunities there in terms of margin.
Eric Better: Yes, good morning, Eric It's Andrew it's a great question.
Andrew J. McLean: With the marketplaces.
Andrew J. McLean: Remembering.
Just note that.
Andrew J. McLean: Every coal assets or any that we have a single inventory.
Operator: Thank you. Our next question will come from Eric Vetter with Small Cap Consumer Research. Please go ahead. Good morning. Good morning, Eric.
Andrew J. McLean: The marketplaces onto our dot com site, and we're able to.
Andrew J. McLean: Which between channels and fulfill from that single inventory. So there's a lot of efficiency that's baked into it we're not shipping to someone else's distribution center and having the inventory there be contingent.
Andrew J. McLean: Hi. Could we talk a little bit about the marketplaces? A, is there potential to add other marketplaces to the business? And B, how are you seeing the returns as you start to segment?
Andrew J. McLean: You previously talked about how you can now shift product between the different marketplaces. What are the opportunities there in terms of marketplaces? Yeah, morning, Eric. It's Andrew.
Andrew J. McLean: So with the marketplaces, we see opportunity and we talked about.
Andrew J. McLean: Specifically about like minded partners on the call we're in process of adding.
Andrew J. McLean: It's a great question. With the marketplaces, it's worth remembering, and I just note this on every call, as does Bernie, that we have a single inventory for the marketplaces and our dot com site, and we're able to switch between channels and fulfill from that single inventory. So there's a lot of efficiency that's baked into it. We're not shipping to someone else's distribution center and having the inventory there be dependent. So there's a slightly different price point, there's a slightly different customer relationship, and there's a different customer journey that happens on each of those marketplaces.
Andrew J. McLean: A couple of elevated potash, there's one more hoping to talk about it in the next few months.
Andrew J. McLean: And I think at the same time, it's about.
Continuing to work with our partners, we've got we particularly look at Macy's and target.
Andrew J. McLean: And opportunities to grow our business, there and I think it's horses for courses I don't know if thats an American expression.
The notion that we want to get optimized on the assortment for each of those so that's a slightly different price point that is a slightly different customer relationship and has a different customer journey.
Andrew J. McLean: That happens on each of those marketplaces. So we tend to look at them in isolation.
Andrew J. McLean: So we tend to look at them in isolation, and it's not just price point-related. It's product-related, and that's something that we continue to fine-tune. We have some fairly sophisticated tools that we're able to apply against that. In terms of the return rate question, you know, we have had higher returns with one of our partners in the past. We've worked through that, and overall, we've been lowering returns as a consequence of how we put that merchandise mix out there. Is it where we want it to be? Returns are never where we want them to be in business.
Andrew J. McLean: It's not just price point relate to the product related and that's something that we continue to fine tune.
Andrew J. McLean: Some fairly sophisticated tools that we're able to apply against that.
Andrew J. McLean: In terms of the returns ranked question.
Andrew J. McLean: We have had higher returns with one of our partners in the past.
Andrew J. McLean: We've worked through that and overall, we've been lowering the returns as a consequence of how we put that merchandise mix there.
Andrew J. McLean: Is it where we want it to be returned to our Napa, where we want them to be in the business I don't think theres any retailer can say that but we have certainly worked our way through it and we continue to look at it.
Andrew J. McLean: I don't think there's any retailer that can say that, but we've certainly worked our way through it, and we continue to look at it. I think if you want to walk away from this, it's just like we continue to see marketplaces as an important journey and something that we'll continue to build and use to elevate our brand and expand our brand journey or our customer journey. And Eric, the only thing I'd add to that is, from a true performance standpoint, all of our marketplaces raised their gross margin rates over the last year and generated a nice total gross margin input for the whole company. Wow. I have a little bit of a related question.
Andrew J. McLean: I think if you want to walk away from this week.
Andrew J. McLean: We continue to see marketplaces, as an important journey and something that we will continue to build and used to elevate our brand and expand our brand journeys our customer journeys.
Speaker Change: And Eric the only thing I'd add to that is.
Speaker Change: From a true performance all of our marketplaces raised their gross margin rates over the last year.
Speaker Change: <unk> generated a nice total gross margin input for the for the whole company.
Speaker Change: Bob.
Bob: I'd say a little bit of a related question. So you talked about controlling the inventory and having in Europe in your work.
Andrew J. McLean: So you talk about controlling the inventory and having it in your warehouse, being able to ship it, how does licensing flow through that? How do you control, you know, the licensing product and how they show themselves, and how the product goes through as you expand the categories and other pieces here? Again, a great question. With licensing, you have to control your brand. I mean, it's really important that, you know, you find like-minded partners. I think that, with a lot of years of licensing experience behind me, if you go out and find a partner who necessarily offers the best rates, you don't necessarily get the best for your brand, and it's not great in the long term. So you have to find someone who is like-minded.
Bob: A house mail to ship it how does licensing flowed through that how do you control the.
Bob: Licensing product and how they show themselves and how the product goes through.
Bob: As you expand the categories and other pieces here.
Bob: With the.
Speaker Change: Great question with license that you have to control your brand I mean, that's really important.
Speaker Change: You can find like minded partners I think that with a lot of years of licensing experience behind me.
Speaker Change: You go out and find the partner I don't necessarily offers the best rates he doesn't necessarily get the best Speaker O'brien to Theres not great in the long term. So you have to find someone like minded. The first year of an arrangement tends to be about 18 months long and you use the first six months to really build the brand book.
Andrew J. McLean: The first year of an arrangement tends to be about 18 months long, and you use the first six months to really build a brand book and get a meshing of the DNA, so it's fully baked between your brand and the partner. And then, ultimately, you write in control over that. So we have control over the assortments with rights of approval, and then increasingly, specifically for categories like SWIM, it's our product. We design it, and it's a tech pack that the partner will then produce to our standards. So a lot of control goes into that because you're building something for the long term. That's how I look at it. It's how we look at it as a business, and it tends to run maybe a little slower in startups, hence that 18 month first year, but really, it's the right way to do it, and it builds something long-lasting and enduring.
Speaker Change: Matching up the DNA, so fully baked between your brand and the partner and then ultimately you're right and control over that so we have control of the Assortments.
Speaker Change: With rights of approval with an increasingly specifically for categories like swim.
Speaker Change: Our product we design it and.
Speaker Change: Pack that partner with that produce to our standards. So.
Speaker Change: A lot of control goes into that because you're building something for the long term.
Speaker Change: Hi.
Speaker Change: That's how I look at it as how we look at it as a business.
Speaker Change: Tends to run maybe a little slower on startup.
Speaker Change: Hence that 18 month first year, but really it's the right way to do it and it was.
Speaker Change: Something along last thing and enduring.
Speaker Change: And more.
Speaker Change: More tactical our execution side.
Speaker Change: Interesting thing for the licenses.
Speaker Change: That will provide especially the kids and the shoes licenses there'll be two aspects.
Speaker Change: To that license.
Speaker Change: Our partners are going to sell on our website also.
Speaker Change: They will they will put that product in our warehouses to be sold to our customers in the same bags and boxes that they receive other lands end product, but then those partners will also be going out to third parties and performing wholesale.
Andrew J. McLean: And from a more technical or execution side, the interesting thing about the licenses that we'll provide, especially the kids and the shoes licenses, there'll be two aspects to that license. Our partners are going to sell on our website also, and they will put that product in our warehouses to be sold to our customers in the same bags and boxes that they receive for other Lands End products.
Speaker Change: Sales that we will then make a royalty on it.
Speaker Change: Alright.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Last question inventories, you've done an incredible job, reducing the amount of inventories.
Speaker Change: How should we be thinking about.
Speaker Change: What is ideal.
Speaker Change: B, what should we be thinking about inventory levels into 2024. Thank you.
Bernard Louis McCracken: But then those partners will also be going out to third parties and performing wholesale sales that we will then make a royalty on. All right. Last question: inventory. You've done an incredible job reducing the amount of inventory. How should we be thinking about, A, what is ideal, and B, what should we be thinking about inventory levels into 2024? Thank you. Yeah, I think the key here is that we do have an ideal number, and we do want to drive higher terms.
Speaker Change: Yes, I think the key here is.
Speaker Change: We do have an ideal number and we do want to drive higher terms.
Speaker Change: And we're looking to turn in a couple of years, a full turn faster than we do today, but this really comes from our ability to improve our supply chain.
Speaker Change: So that we can shorten the length of time that it takes for us to receive product. So that we can make later decisions and to have more newness in our assortment and carry less inventory and be able to be faster and replenishment. So that will take some time yet.
Speaker Change: But we are definitely going to continue to reduce inventories and drive more newness and turn in our business over the next year.
Bernard Louis McCracken: And we're looking to turn in a couple of years a full turn faster than we do today. But this really comes from our ability to improve our supply chain so that we can shorten the length of time that it takes for us to receive products so that we can make later decisions and have more newness in our assortment and carry less inventory and be able to be faster at replenishment. So that will take some time yet, but we are definitely going to continue to reduce inventories and drive more newness and turn in our business over the next year. Yeah, I don't know if you caught that on the call, Eric, but I would draw your attention back to it.
Speaker Change: I don't know if you caught it in the call Eric I would draw your attention back to it.
Speaker Change: We are using we use our European business.
Speaker Change: To test concepts that.
Speaker Change: They've been they've been incredibly open minded to this.
Speaker Change: One of the concepts free test.
Speaker Change: But they are on label.
And it but you might find it somewhere else, but what it allows you to do is go out and test Alright allows you to fill holes in your assortment and as an underlying piece of that they start to leave open to buy open that you can fill later in the season and that gives you speed.
Got it.
Speaker Change: They can be guaranteed.
Speaker Change: In terms of the gross margin that it delivers.
Andrew J. McLean: We use our European business a lot to test concepts out, and they've been incredibly open-minded to this. One of the concepts we tested... We're starting to do that in our U.S. business, and that will be an incredibly powerful element that we bring to bear in terms of what we bring to market and when we bring it to market, meshing against the journey that our customers are on and their expectations at that moment. Okay, congrats and good luck for 2024. Thanks. Thanks, sir.
Speaker Change: You want to take the business in future years.
Speaker Change: That's something we're going to lean in to more off we're starting to do that in our U S business.
Speaker Change: And that will be an incredibly powerful element.
Speaker Change: We bring to bear in terms of what we bring to market when we bring to market matching.
Speaker Change: The journey of our customers and their expectations at that moment.
Speaker Change: Okay, Congrats and good luck.
Speaker Change: 24.
Speaker Change: Hey, Thanks, Thanks art.
Operator: Thank you. The next question will come from Alex Fuhrman with Craig Hallam Capital Group. Great. Thanks, guys, for taking my question and congratulations on everything you guys have accomplished in 2023 and so far this year. I was wondering if I could ask a little bit about the licensing business as well. Just thinking about your outlook for the full year of a low- to mid-single-digit increase in GSD, is that more or less consistent with what you're expecting to see in footwear and kids, or should those categories perhaps accelerate more over time in future years as your licensees start to explore other channels for those categories? Hey Alex, how's it going?
Speaker Change: Thank you. Our next question will come from Alex Fuhrman with Craig Hallum Capital Group.
Alex Joseph Fuhrman: Great. Thanks, guys for taking my question and congratulations on everything you guys have accomplished in 2023 and so far this year I was wondering if I could ask a little bit about the licensing business as well just thinking about your outlook for the full year.
Alex Joseph Fuhrman: A low to mid single digit increase in GSD that more or less consistent with what youre expecting to see in footwear and kids or should those categories, perhaps accelerate more overtime in future years.
Alex Joseph Fuhrman: As your license these start to explore other channels for those categories.
Hey, Alex how does it go.
Andrew J. McLean: Excellent. Thank you, Andrew. We're going to accelerate that, Alex. We stepped into it. Let's review why we stepped into licenses. I mean, one, it is obviously asset life, and it's a great driver of return on investment capital.
Alex Joseph Fuhrman: Excellent. Thank you Andrew.
Alex Joseph Fuhrman: We're going to celebrate that Alex we stepped into it.
Speaker Change: Let's review why we stepped into licenses.
Alex Joseph Fuhrman: It is obviously asset light.
Alex Joseph Fuhrman: It's a great driver of return on invested capital, we're a $1 billion dollar company an.
Andrew J. McLean: We're a billion and a half dollar company, and we are an iconic American brand that covers family variety in retail. But we can't be as good as we want to be in everything at a billion and a half dollars.
An iconic American brand that covers <unk>.
Alex Joseph Fuhrman: Emily variety in retail.
Alex Joseph Fuhrman: We can't be as good as we want to be and everything that $1 billion.
Andrew J. McLean: This, by doing licensing, this allows us to concentrate our efforts on our best bets and the solutions business that we see out there that we really wanted to lean into was swim and outerwear and women's and men's. And in doing that, we were able to accelerate those. We took the pressure off ourselves with kids and shoes by going to a partner who is experienced in those and has the bandwidth to really build them the way we want to build them and we've always envisioned. I'm not going to get that word out.
Alex Joseph Fuhrman: This by doing licensing this allows us to concentrate our efforts on our best that and.
Alex Joseph Fuhrman: In the solutions business that we see out there that we really wanted to lean into the swim outerwear and womens and mens.
Alex Joseph Fuhrman: And in doing that we were able to accelerate those.
Alex Joseph Fuhrman: We took the pressure off ourselves with kids and shoes by going to our partner.
Alex Joseph Fuhrman: Who is experienced didn't notice and has the bandwidth to really build them. The way we want to build them and we've always envisaged envisions I'm not going to get that where that Bob.
Andrew J. McLean: You know, we see tremendous growth opportunity, and that's the whole part that underpins this, which is we're starting relatively conservatively this year, but we see room to expand those licenses because they won't just be on our website. They'll be in points of distribution throughout wholesale, and I think that also has the added advantage of creating a physical manifestation of our brand that then creates a circularity between the wholesale channel, the licensee, and driving customers on their journey back to our website. So, there is a lot of opportunity in there. Great, that's really helpful. Thanks, Andrew. And then you talk a little bit about what your license business might look like on the club channel. I imagine that would be across other categories beyond just footwear and children.
Alex Joseph Fuhrman: We see tremendous growth opportunity and that's the whole part that underpins this which is.
Alex Joseph Fuhrman: Starting relatively conservatively this year, but we see room to expand those licenses because they won't just be on our website that will be in points of distribution throughout wholesale.
Alex Joseph Fuhrman: I think that also has an added advantage of creating a physical manifestation of our brand.
Alex Joseph Fuhrman: <unk> creates a circularity between the wholesale channel with a licensee and driving customers on their journey back to our website. So a lot of opportunity in there.
Speaker Change: Great. That's really helpful. Thanks, Andrew and then you talked a little bit about what your license business might look like in the club channel I imagine that would be across other categories beyond just but we're in children.
Speaker Change: Yes, I mean, we're in the we're in the club channel.
Andrew J. McLean: Yeah, I mean, we're in the we're in the club channel with everything. And I think that just sounds like there's going to be a lot on the club channel. We're really controlling that very tightly. And, you know, the clubs, it's like it tends to be they get behind.
Speaker Change: With everything.
Speaker Change: That just sounds like there's going to be in the club channel, we're really controlling that very tightly clubs.
Speaker Change: Tends to be they get behind.
Speaker Change: A few items that they kept behind them really heavily and that's a great place to be and actually I want to talk about the customer here. The customer you reached the club channels is very much a customer were interested in getting it.
Speaker Change: Our very much our traditional resolver, but we see the evolve our customer who tends to skew a bit younger as well and that gap has is reaching an older millennial and Gen X customers, who tend to be very much in there an upwardly mobile so by having a narrow but deep assortment that continually changes.
Andrew J. McLean: So by having a narrow but deep assortment that continually changes with the clubs that we control, we think we can reach new customers and really drive the business in a way that accelerates all our channels. Great, that's really helpful. Thank you very much. No worries. Thank you. This will conclude today's Lands End Four-Quarter Earnings Conference Call. We thank you for your participation. You may disconnect your line at this time and have a wonderful day. Thanks for watching!
Speaker Change: With the clubs that we control we think we can reach new customers and really drive that drive the business in a way that accelerates all of our channels.
Speaker Change: Great. That's really helpful. Thank you very much.
Speaker Change: No worries.
Thanks, Alex.
Speaker Change: This will conclude today's lands in fourth quarter earnings conference call.
Speaker Change: You for your participation you may disconnect. Your line at this time and have a wonderful day.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.