Lands' End, Incorporated
Mar 21, 2017

Lands' End Announces Fourth Quarter and Fiscal 2016 Results

DODGEVILLE, Wis., March 21, 2017 (GLOBE NEWSWIRE) -- Lands' End, Inc. (NASDAQ:LE) today announced financial results for the fourth quarter and fiscal year ended January 27, 2017.

Fourth Quarter Fiscal 2016 Highlights:

Full Year Fiscal 2016 Highlights:

Jerome Griffith, Chief Executive Officer, stated, "We saw sequential improvement in our fourth quarter results, attributable to recent initiatives across merchandising, marketing and e-commerce. In order to drive long-term success, we need to strengthen our competitive position and develop and execute a strategic plan that leverages our iconic brand heritage, as well as our well-established e-commerce platform. To that end, we will create enhanced product assortments, develop and communicate a clear and consistent brand identity across channels, and better leverage our distribution channels. Overall, we will be focused on enhancing the business in ways that will drive growth, profitability and shareholder value over the long-term."

Balance Sheet and Cash Flow Highlights

Cash and cash equivalents were $213.1 million as of January 27, 2017, compared to $228.4 million as of January 29, 2016. Net cash provided by operations was $23.7 million for fiscal 2016, compared to net cash provided by operations of $35.9 million for the same period last year.

Inventory decreased 1.2% to $325.3 million as of January 27, 2017, from $329.2 million as of January 29, 2016.

The Company had $155.3 million of availability under its asset-based senior secured credit facility and had $490.0 million of Long-term debt, net as of January 27, 2017.

Conference Call

The company will host a conference call on Tuesday, March 21, 2017 at 8:00 a.m. ET to review its fourth quarter and fiscal year financial results and related matters. The call may be accessed through the Investor Relations section of the Company's website at http://investors.landsend.com.

About Lands' End, Inc.

Lands' End, Inc. (NASDAQ:LE) is a leading multi-channel retailer of clothing, accessories, footwear and home products. We offer products through catalogs, online at www.landsend.com and affiliated specialty and international websites, and through retail locations, primarily at Lands' End Shops at Sears® and standalone Lands' End Stores. We are a classic American lifestyle brand with a passion for quality, legendary service and real value, and seek to deliver timeless style for men, women, kids and the home.

Forward-Looking Statements

Results are unaudited. This press release contains forward-looking statements, including statements about our strategies and our opportunities for growth. Forward-looking statements are based upon the current beliefs and expectations of our management and are subject to assumptions, uncertainties and significant risks that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, without limitation, information concerning our future financial performance, business strategy, plans, goals and objectives. There can be no assurance that any of our initiatives will be successful. The following additional factors, among others, could cause our actual results, performance, and achievements to differ from those described in the forward-looking statements: our ability to offer merchandise and services that customers want to purchase, including a product assortment with improved fit and quality, changes in customer preference from our branded merchandise; customers' use of our digital platform, including customer acceptance of our efforts to enhance our e-commerce websites; customer response to direct mail catalogs and digital/social media marketing efforts; the success of our efforts to improve catalog quality and optimize catalog productivity; the success of our overall marketing strategies, some of which, if successful, may not produce positive results in the short term; the success of our efforts to optimize promotions to drive sales and maximize gross margin dollars; our maintenance of a robust customer list; our dependence on information technology and a failure of information technology systems, including with respect to our e-commerce operations, or an inability to upgrade or adapt our systems; the success of our ERP implementation; the success of our efforts to grow and expand into new markets and channels; fluctuations and increases in costs of raw materials; impairment of our relationships with our vendors; our failure to maintain the security of customer, employee or company information; our failure to compete effectively in the apparel industry; the performance of our "store within a store" business; if Sears Holdings Corporation ("Sears Holdings") sells or disposes of its retail stores, including pursuant to the recapture rights granted to Seritage Growth Properties and other parties or if its retail business does not attract customers or does not adequately provide services to the Lands' End Shops at Sears; legal, regulatory, economic and political risks associated with international trade and those markets in which we conduct business and source our merchandise; our failure to protect or preserve the image of our brands and our intellectual property rights; increases in postage, paper and printing costs; failure by third parties who provide us with services in connection with certain aspects of our business to perform their obligations; our failure to timely and effectively obtain shipments of products from our vendors and deliver merchandise to our customers; reliance on promotions and markdowns to encourage customer purchases; our failure to efficiently manage inventory levels; unseasonal or severe weather conditions; the seasonal nature of our business; the adverse effect on our reputation if our independent vendors do not use ethical business practices or comply with applicable laws and regulations; assessments for additional state taxes; our exposure to periodic litigation and other regulatory proceedings, including with respect to product liability claims; incurrence of charges due to impairment of goodwill, other intangible assets and long-lived assets; our failure to retain our executive management team and to attract qualified new personnel; the impact on our business of adverse worldwide economic and market conditions, including economic factors that negatively impact consumer spending on discretionary items; the inability of our past performance generally, as reflected on our historical financial statements, to be indicative of our future performance; the impact of increased costs due to a decrease in our purchasing power following our separation from Sears Holdings ("Separation") and other losses of benefits associated with being a subsidiary of Sears Holdings; the failure of Sears Holdings or its subsidiaries to perform under various transaction agreements or our failure to have necessary systems and services in place when certain of the transaction agreements expire; potential indemnification liabilities to Sears Holdings pursuant to the separation and distribution agreement; our agreements related to the Separation and certain agreements related to our continuing relationship with Sears Holdings were negotiated while we were a subsidiary of Sears Holdings and we may have received better terms from an unaffiliated third party; our inability to engage in certain corporate transactions after the Separation; the ability of our principal shareholders to exert substantial influence over us; adverse effects of the Separation on our business; potential liabilities under fraudulent conveyance and transfer laws and legal capital requirements; declines in our stock price due to the eligibility of a number of our shares of common stock for future sale; our inability to pay dividends; stockholders' percentage ownership in Lands' End may be diluted in the future and other risks, uncertainties and factors discussed in the "Risk Factors" section of our Annual Report on Form 10-K for the fiscal year ended January 29, 2016 and other filings with the SEC. We intend the forward-looking statements to speak only as of the time made and do not undertake to update or revise them as more information becomes available, except as required by law.

-Financial Tables Follow-

LANDS' END, INC.
Consolidated Balance Sheets
(Unaudited)
 
(in thousands, except share data) January 27,
 2017
 January 29,
 2016
ASSETS    
Current assets    
Cash and cash equivalents $213,108  $228,368 
Restricted cash 3,300  3,300 
Accounts receivable, net 39,284  32,061 
Inventories, net 325,314  329,203 
Prepaid expenses and other current assets 26,394  23,618 
Total current assets 607,400  616,550 
Property and equipment, net 122,836  109,831 
Goodwill 110,000  110,000 
Intangible asset, net 257,000  430,000 
Other assets 17,155  15,145 
Total assets $1,114,391  $1,281,526 
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities    
Accounts payable $162,408  $146,097 
Other current liabilities 86,446  83,992 
Total current liabilities 248,854  230,089 
Long-term debt, net 490,043  493,838 
Long-term deferred tax liabilities 90,467  157,252 
Other liabilities 13,615  15,838 
Total liabilities 842,979  897,017 
Commitments and contingencies    
Stockholders' equity    
Common stock, par value $0.01- authorized: 480,000,000 shares; issued and outstanding: 32,029,359, 31,991,668, respectively 320  320 
Additional paid-in capital 343,971  344,244 
Retained earnings (60,453) 49,329 
Accumulated other comprehensive loss (12,426) (9,384)
Total stockholders' equity 271,412  384,509 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,114,391  $1,281,526 
         


LANDS' END, INC.
Consolidated Statements of Operations
(Unaudited)
 
  13 Weeks Ended 52 Weeks Ended
(in thousands except per share data) January 27,
2017
 January 29,
2016
 January 27,
2017
 January 29,
2016
REVENUES        
Net revenue $458,841  $473,543  $1,335,760  $1,419,778 
Cost of sales (excluding depreciation and amortization) 281,906  274,433  759,352  767,189 
Gross profit 176,935  199,110  576,408  652,589 
         
Selling and administrative 146,285  151,040  536,576  545,301 
Depreciation and amortization 5,584  4,525  19,003  17,399 
Intangible asset impairment 173,000  98,300  173,000  98,300 
Other operating expense (income), net 500  39  460  (3,327)
Operating loss (148,434) (54,794) (152,631) (5,084)
Interest expense 6,137  6,211  24,630  24,826 
Other expense (income), net 3,032  (461) 1,619  (671)
Loss before income taxes (157,603) (60,544) (178,880) (29,239)
Income tax benefit (62,782) (21,086) (69,098) (9,691)
NET LOSS $(94,821) $(39,458) $(109,782) $(19,548)
NET LOSS PER COMMON SHARE ATTRIBUTABLE TO STOCKHOLDERS        
Basic: $(2.96) $(1.23) $(3.43) $(0.61)
Diluted: $(2.96) $(1.23) $(3.43) $(0.61)
         
Basic weighted average common shares outstanding 32,029  31,992  32,021  31,979 
Diluted weighted average common shares outstanding 32,029  31,992  32,021  31,979 
             

Use and Definition of Non-GAAP Financial Measures

1Adjusted net income (loss) and Adjusted earnings per share - As a result of the intangible asset impairment and the impacts of product recall, the Company is presenting a reconciliation of Net income and Earnings per share determined in accordance with accounting principles generally accepted in the United States ("GAAP") to Adjusted Net income and Adjusted Earnings per share which excludes the impact of the intangible asset impairment and the product recall.

2Adjusted EBITDA - In addition to our Net income, for purposes of evaluating operating performance, we use an Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA"), which is adjusted to exclude certain significant items as set forth below. Our management uses Adjusted EBITDA to evaluate the operating performance of our business, as well as for executive compensation metrics, for comparable periods. Adjusted EBITDA should not be used by investors or other third parties as the sole basis for formulating investment decisions as it excludes a number of important cash and non-cash recurring items.

3The sum of net income (loss) and adjustments per diluted common share may not equal the Adjusted earnings per share due to rounding.

While Adjusted net income (loss)1, Adjusted earnings (loss) per share1 and Adjusted EBITDA2 are non-GAAP measurements, management believes that they are important indicators of operating performance, and useful to investors, because:

•  EBITDA excludes the effects of financings, investing activities and tax structure by eliminating the effects of interest, depreciation and income tax costs, and

•  Other significant items, while periodically affecting our results, may vary significantly from period to period and have a disproportionate effect in a given period, which affects comparability of results. We have adjusted our results for these items to make our statements more comparable and therefore more useful to investors as the items are not representative of our ongoing operations.

 
Reconciliation of Non-GAAP Financial Information to GAAP
(Unaudited)
 
  13 Weeks Ended
(in thousands except per share data) January 27, 2017 January 29, 2016
  Amount per Common
Share
 Amount per Common
Share
Net loss $(94,821) $(2.96) $(39,458) $(1.23)
Intangible asset impairment, net of tax 107,831  3.37  62,017  1.94 
Adjusted net income and earnings per share (1) $13,010  $0.41  $22,559  $0.71 


  52 Weeks Ended
(in thousands except per share data) January 27, 2017 January 29, 2016
  Amount per Common
Share
 Amount per Common
Share
Net loss $(109,782) $(3.43) $(19,548) $(0.61)
Intangible asset impairment, net of tax 107,831  3.37  62,017  1.94 
Product recall, net of tax (125)   (2,063) (0.06)
Adjusted net (loss) income and (loss) earnings per share (1)(3) $(2,076) $(0.06) $40,406  $1.26 


 13 Weeks Ended
 January 27, 2017 January 29, 2016
(in thousands)$'s % of
Net Sales
 $'s % of
Net Sales
Net loss$(94,821) (20.7)% $(39,458) (8.3)%
Income tax benefit(62,782) (13.7)% (21,086) (4.5)%
Other expense (income), net3,032  0.7% (461) (0.1)%
Interest expense6,137  1.3% 6,211  1.3%
Operating loss(148,434) (32.3)% (54,794) (11.6)%
Intangible asset impairment173,000  37.7% 98,300  20.8%
Depreciation and amortization5,584  1.2% 4,525  1.0%
Loss on disposal of property and equipment500  0.1% 39  %
Adjusted EBITDA (2)$30,650  6.7% $48,070  10.2%


 52 Weeks Ended
 January 27, 2017 January 29, 2016
(in thousands)$'s % of
Net Sales
 $'s % of
Net Sales
Net loss$(109,782) (8.2)% $(19,548) (1.4)%
Income tax benefit(69,098) (5.2)% (9,691) (0.7)%
Other expense (income), net1,619  0.1% (671) %
Interest expense24,630  1.8% 24,826  1.7%
Operating loss(152,631) (11.4)% (5,084) (0.4)%
Intangible asset impairment173,000  13.0% 98,300  6.9%
Depreciation and amortization19,003  1.4% 17,399  1.2%
Product recall(212) % (3,371) (0.2)%
Loss on disposal of property and equipment672  0.1% 44  %
Adjusted EBITDA (2)$39,832  3.0% $107,288  7.4%
              

                                                                                      

LANDS' END, INC.
Consolidated and Combined Statements of Cash Flows
for Fiscal Years Ended
(Unaudited)
 
(in thousands) January 27,
2017
 January 29,
2016
CASH FLOWS FROM OPERATING ACTIVITIES    
Net loss $(109,782) $(19,548)
Adjustments to reconcile net loss to net cash provided by operating activities:    
Depreciation and amortization 19,003  17,399 
Intangible asset impairment 173,000  98,300 
Product recall (212) (3,371)
Amortization of debt issuance costs 1,712  1,741 
Loss on disposal of property and equipment 672  44 
Stock-based compensation 2,230  2,395 
Deferred income taxes (67,253) (22,670)
Change in operating assets and liabilities:    
Inventories 755  (29,819)
Accounts payable 16,951  10,005 
Other operating assets (12,356) 3,462 
Other operating liabilities (1,027) (22,047)
Net cash provided by operating activities 23,693  35,891 
CASH FLOWS FROM INVESTING ACTIVITIES    
Proceeds from sale of property and equipment 47   
Purchases of property and equipment (33,319) (22,224)
Net cash used in investing activities (33,272) (22,224)
CASH FLOWS FROM FINANCING ACTIVITIES    
Payments on term loan facility (5,150) (5,150)
Net cash used in financing activities (5,150) (5,150)
Effects of exchange rate changes on cash (531) (1,603)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (15,260) 6,914 
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 228,368  221,454 
CASH AND CASH EQUIVALENTS, END OF YEAR $213,108  $228,368 
SUPPLEMENTAL INFORMATION:    
Supplemental Cash Flow Data:    
Unpaid liability to acquire property and equipment $8,419  $8,182 
Income taxes paid $3,653  $23,991 
Interest paid $22,484  $22,690 
         

Financial information by segment is presented in the following tables for the 13 and 52 weeks ended January 27, 2017 and January 29, 2016.

  13 Weeks Ended 52 Weeks Ended
(in thousands) January 27, 2017 January 29, 2016 January 27, 2017 January 29, 2016
Net revenue        
Direct $398,489  $409,107  $1,149,149  $1,214,993 
Retail 60,314  64,400  186,390  204,566 
Corporate/ other 38  36  221  219 
Total Net revenue $458,841  $473,543  $1,335,760  $1,419,778 


  13 Weeks Ended 52 Weeks Ended
(in thousands) January 27, 2017 January 29, 2016 January 27, 2017 January 29, 2016
Adjusted EBITDA(2):        
Direct $37,065  $56,620  $78,582  $141,936 
Retail 1,503  387  (5,560) (520)
Corporate/ other (7,918) (8,937) (33,190) (34,128)
Total Adjusted EBITDA(2) $30,650  $48,070  $39,832  $107,288 


CONTACTS

Lands' End, Inc.
James Gooch
Chief Operating Officer and Chief Financial Officer
(608) 935-9341

Investor Relations:
ICR, Inc.
Jean Fontana
(646) 277-1214
Jean.Fontana@icrinc.com