Lands' End, Incorporated
Mar 17, 2016

Lands' End Announces Fourth Quarter and Fiscal 2015 Results

DODGEVILLE, Wis., March 17, 2016 (GLOBE NEWSWIRE) -- Lands' End, Inc. (NASDAQ:LE) today announced financial results for the fourth quarter and fiscal year ended January 29, 2016.

Fourth Quarter Fiscal 2015 Highlights:

  
Full Year Fiscal 2015 Highlights:              


Federica Marchionni, Lands' End's Chief Executive Officer, stated, "While we made meaningful progress in the business throughout 2015, these efforts are not yet reflected in our financial performance. This past year was a transition year for Lands' End, during which we were intently focused on creating a solid foundation from which to grow over the long term. Over the course of 2015, we bolstered our team with a number of talented and experienced executives, updated our product assortment, revamped our catalogs and took steps to improve catalog productivity, and enhanced our branding efforts. As we look to 2016, we will continue to develop a product assortment that is both timeless and updated, with improved fit and quality.  We also remain focused on elevating our branding initiatives, further enhancing our e-commerce and distribution channels, as well as investing in our infrastructure to increase operational efficiencies and support the business.  Importantly, we believe that these steps will position us to deliver sequential improvement beginning in the second quarter of the year."

Balance Sheet and Cash Flow Highlights

Cash and cash equivalents were $228.4 million on January 29, 2016, compared to $221.5 million on January 30, 2015. Net cash provided by operations was $35.9 million for the 52 weeks ended January 29, 2016, compared to net cash provided by operations of $211.1 million for the same period last year.

Inventory increased 9.2% to $329.2 million on January 29, 2016, from $301.4 million on January 30, 2015.

The Company had $150.7 million of availability under its asset-based senior secured credit facility and had long-term debt of $500.8 million as of January 29, 2016.

Conference Call

The company will host a conference call on Thursday, March 17, 2016 at 8:00 a.m. EDT to review its fourth quarter 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 casual 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 Inlet® 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 subject to risks and uncertainties 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 efforts initiatives will be successful. Statements preceded or followed by, or that otherwise include, the words "believes," "expects," "anticipates," "intends," "project," "estimates," "plans," "forecast," "is likely to" and similar expressions or future or conditional verbs such as "will," "may," "would," "should" and "could" are generally forward-looking in nature and not historical facts. Such statements are based upon the current beliefs and expectations of our management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements.  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 new collections that are designed to attract new customers and drive demand from core customers; changes in customer preference for our branded merchandise; customers' use of our digital platform, including our e-commerce websites, and response to direct mail catalogs and digital marketing, including the success of initiatives that are intended to optimize catalog productivity; the success of our overall marketing strategies, including our brand awareness initiatives and our efforts to maintain 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; fluctuations and increases in the 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 model; if Sears Holdings sells or disposes of its retail stores 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 consumer 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 that have been executed in connection with the Separation or our failure to have necessary systems and services in place when certain of the transaction agreements expire; our agreements related to the Separation and 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; potential indemnification liabilities to Sears Holdings pursuant to the separation and distribution agreement; 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 increases in our expenses and administrative burden in relation to being a public company, in particular to maintain compliance with certain provisions of the Sarbanes-Oxley Act of 2002; 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 30, 2015.  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.

Contacts

ICR
Jean Fontana
(646) 277-1214
Jean.Fontana@icrinc.com

Lands' End, Inc.
Michele Casper
Vice President of Public Relations
(608) 935-4633
Michele.Casper@landsend.com

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

-Financial Tables Follow-

 
LANDS' END, INC.
Consolidated Balance Sheets
(Unaudited)
 
(in thousands, except share data) January 29,
 2016
 January 30,
 2015
ASSETS    
Current assets    
Cash and cash equivalents $228,368  $221,454 
Restricted cash 3,300  3,300 
Accounts receivable, net 32,061  30,073 
Inventories, net 329,203  301,367 
Prepaid expenses and other current assets 24,972  31,408 
Total current assets 617,904  587,602 
Property and equipment, net 109,831  101,223 
Goodwill 110,000  110,000 
Intangible assets, net 430,000  528,712 
Other assets 20,791  22,462 
TOTAL ASSETS $1,288,526  $1,349,999 
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities    
Accounts payable $146,097  $132,796 
Other current liabilities 83,992  107,553 
Total current liabilities 230,089  240,349 
Long-term debt 500,838  505,988 
Long-term deferred tax liabilities 157,252  181,045 
Other liabilities 15,838  18,424 
TOTAL LIABILITIES 904,017  945,806 
Commitments and contingencies    
Stockholders' equity    
Common stock, par value $0.01- authorized: 480,000,000 shares; issued and outstanding: 31,991,668, 31,956,521, respectively 320  320 
Additional paid-in capital 344,244  342,294 
Retained earnings 49,329  68,877 
Accumulated other comprehensive loss (9,384) (7,298)
Total stockholders' equity 384,509  404,193 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,288,526  $1,349,999 


LANDS' END, INC.
Consolidated and Combined Statements of Operations
(Unaudited)
     
  13 Weeks Ended 52 Weeks Ended
(in thousands except per share data) January 29, 
2016 
 January 30, 
2015 
 January 29,
2016
 January 30,
2015
REVENUES        
Net revenue: $ 473,543  $504,566  $1,419,778  $1,555,353 
Cost of sales (excluding depreciation and amortization) 274,433  282,358  767,189  819,422 
Gross profit 199,110  222,208  652,589  735,931 
         
Selling and administrative 151,040  153,476  545,301  573,335 
Depreciation and amortization 4,525  5,074  17,399  19,703 
Intangible asset impairment 98,300    98,300   
Other operating expense (income), net 39  3,205  (3,327) 3,250 
Operating (loss) income (54,794) 60,453  (5,084) 139,643 
Interest expense 6,211  6,170  24,826  20,494 
Other income, net (461) (561) (671) (1,408)
(Loss) income before income taxes (60,544) 54,844  (29,239) 120,557 
Income tax (benefit) expense (21,086) 21,749  (9,691) 46,758 
NET (LOSS) INCOME $(39,458) $33,095  $(19,548) $73,799 
NET (LOSS) INCOME PER COMMON SHARE ATTRIBUTABLE TO STOCKHOLDERS        
Basic: $(1.23) $1.04  $(0.61) $2.31 
Diluted: $(1.23) $1.03  $(0.61) $2.31 
         
Basic weighted average common shares outstanding 31,992  31,957  31,979  31,957 
Diluted weighted average common shares outstanding 31,992  32,053  31,979  32,016 
             

Use and Definition of Non-GAAP Financial Measures

1Adjusted Net income 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 and adjustments per diluted common share may not equal the Adjusted earnings per share due to rounding.

While Adjusted Net income1, Adjusted Earnings per share1 and Adjusted EBITDA2 are non-GAAP measurements, management believes that they are important indicators of operating performance, and useful to investors, because:


Reconciliation of Non-GAAP Financial Information to GAAP
(Unaudited)
   
  13 Weeks Ended
(in thousands except per share data) January 29, 2016 January 30, 2015
  Amount per Diluted
Common
Share
 Amount per Diluted
Common
Share
Net (loss) income $(39,458) $(1.23) $33,095  $1.03 
Intangible asset impairment, net of tax 62,017  1.94     
Product recall, net of tax     2,844  0.09 
Adjusted net income and earnings per share (1) $22,559  $0.71  $35,939  $1.12 


  52 Weeks Ended
(in thousands except per share data) January 29, 2016 January 30, 2015
  Amount per Diluted
Common
Share
 Amount per Diluted
Common
Share
Net (loss) income $(19,548) $(0.61) $73,799  $2.31 
Intangible asset impairment, net of tax 62,017  1.94     
Product recall, net of tax (2,063) (0.06) 2,844  0.09 
Adjusted net income and earnings per share (1)(3) $40,406  $1.26  $76,643  $2.39 


 13 Weeks Ended
 January 29, 2016 January 30, 2015
(in thousands)$'s % of
Net Sales
 $'s % of
Net Sales
Net (loss) income$(39,458)  (8.3)% $33,095   6.6 %
Income tax (benefit) expense(21,086)  (4.5)% 21,749   4.3 %
Other income, net(461)  (0.1)% (561)  (0.1)%
Interest expense6,211   1.3 % 6,170   1.2 %
Operating (loss) income(54,794)  (11.6)% 60,453   12.0 %
Intangible asset impairment98,300   20.8 %     %
Depreciation and amortization4,525   1.0 % 5,074   1.0 %
Product recall    % 4,713   0.9 %
Loss on disposal of property and equipment39    % 194    %
Adjusted EBITDA (2)$48,070   10.2 % $70,434   14.0 %


 52 Weeks Ended
 January 29, 2016 January 30, 2015
(in thousands)$'s % of
Net Sales
 $'s % of
Net Sales
Net (loss) income$(19,548)  (1.4)% $73,799   4.8 %
Income tax (benefit) expense(9,691)  (0.7)% 46,758   3.0 %
Other income, net(671)   % (1,408)  (0.1)%
Interest expense24,826   1.7 % 20,494   1.3 %
Operating (loss) income(5,084)  (0.4)% 139,643   9.0 %
Intangible asset impairment98,300   6.9 %     %
Depreciation and amortization17,399   1.2 % 19,703   1.3 %
Product recall(3,371)  (0.2)% 4,713   0.3 %
Loss on disposal of property and equipment44    % 239    %
Adjusted EBITDA (2)$107,288   7.6 % $164,298   10.6 %


LANDS' END, INC. 
Consolidated and Combined Statements of Cash Flows 
for Fiscal Years Ended 
(Unaudited) 
      
(in thousands) January 29,
2016
 January 30,
2015
 
CASH FLOWS FROM OPERATING ACTIVITIES    
Net (loss) income $(19,548) $73,799 
Adjustments to reconcile net (loss) income to net cash used in operating activities:    
Depreciation and amortization 17,399  19,703 
Intangible asset impairment 98,300   
Product recall (3,371) 4,713 
Amortization of debt issuance costs 1,741  1,563 
Loss on disposal of property and equipment 44  239 
Stock-based compensation 2,395  2,118 
Deferred income taxes (22,670) 17,545 
Change in operating assets and liabilities:    
Inventories (29,819) 64,252 
Accounts payable 10,005  19,207 
Other operating assets 3,462  (9,342)
Other operating liabilities (22,047) 17,324 
Net cash provided by operating activities 35,891  211,121 
CASH FLOWS FROM INVESTING ACTIVITIES    
       
       
Purchases of property and equipment (22,224) (16,608)
Net cash used in investing activities (22,224) (16,608)
CASH FLOWS FROM FINANCING ACTIVITIES    
Contributions from / (distributions to) Sears Holdings, net   8,481 
Proceeds from issuance of long-term debt   515,000 
Payments on term loan facility (5,150) (3,862)
Debt issuance costs   (11,433)
Dividend paid to a subsidiary of Sears Holdings Corporation   (500,000)
Net cash (used in) provided by financing activities (5,150) 8,186 
Effects of exchange rate changes on cash (1,603) (3,656)
NET INCREASE IN CASH AND CASH EQUIVALENTS 6,914  199,043 
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 221,454  22,411 
CASH AND CASH EQUIVALENTS, END OF YEAR $228,368  $221,454 
SUPPLEMENTAL INFORMATION:    
Supplemental Cash Flow Data:    
Unpaid liability to acquire property and equipment $8,182  $4,157 
Income taxes paid $23,991  $19,842 
Interest paid $22,690  $18,726 
         

Financial information by segment is presented in the following tables for the 13 and 52 weeks ended January 29, 2016 and January 30, 2015.

  13 Weeks Ended 52 Weeks Ended
(in thousands) January 29,
2016
 January 30,
2015
 January 29,
2016
 January 30,
2015
Net revenue        
Direct $409,107  $431,753  $1,214,993  $1,320,642 
Retail 64,400  72,801  204,566  234,632 
Corporate/ other 36  12  219  79 
Total Net revenue $473,543  $504,566  $1,419,778  $1,555,353 


  13 Weeks Ended 52 Weeks Ended
(in thousands) January 29,
2016
 January 30,
2015
 January 29,
2016
 January 30,
2015
Adjusted EBITDA(2):        
Direct $56,620  $77,213  $141,936  $192,763 
Retail 387  3,059  (520) 7,161 
Corporate/ other (8,937) (9,838) (34,128) (35,626)
Total adjusted EBITDA(2) $48,070  $70,434  $107,288  $164,298